The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Organization and Business Operations
The
Business
On
November 5, 2021 (the “Closing Date”), DocGo Inc., a Delaware corporation (formerly known as Motion Acquisition Corp) (prior
to the Closing Date, “Motion” and after the Closing Date, “DocGo”), consummated the previously announced business
combination (the “Closing”) pursuant to that certain Agreement and Plan of Merger dated March 8, 2021 (the “Merger
Agreement”), by and among Motion Acquisition Corp., a Delaware corporation (“Motion”), Motion Merger Sub Corp., a Delaware
corporation and a direct wholly owned subsidiary of Motion (“Merger Sub”), and Ambulnz, Inc., a Delaware corporation (“Ambulnz”).
In connection with the Closing, the registrant changed its name from Motion Acquisition Corp. to DocGo Inc.
As
contemplated by the Merger Agreement and as described in Motion’s definitive proxy statement/consent solicitation/prospectus filed
with the U.S. Securities and Exchange Commission (the “SEC”) on October 14, 2021 (the “Prospectus”), Merger Sub
was merged with and into Ambulnz, with Ambulnz continuing as the surviving corporation (the “Merger” and, together with the
other transactions contemplated by the Merger Agreement, the “Business Combination”). As a result of the Merger, Ambulnz
is a wholly-owned subsidiary of DocGo and each share of Series A preferred stock of Ambulnz, no par value (“Ambulnz Preferred Stock”),
Class A common stock of Ambulnz, no par value (“Ambulnz Class A Common Stock”), and Class B common stock of Ambulnz, no par
value (“Ambulnz Class B Common Stock,” together with Ambulnz Class A Common Stock, “Ambulnz Common Stock”) was
cancelled and converted into the right to receive a portion of merger consideration issuable as common stock of DocGo, par value $0.0001
(“Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement.
In
connection with the Business Combination, DocGo raised $158.0 million of net proceeds. This amount was comprised of $43.4 million of
cash held in Motion’s trust account from its initial public offering, net of DocGo’s transaction costs and underwriters’
fees of $9.6 million, and $114.6 million of cash in connection with the PIPE Financing. The transaction costs consisted of banking, legal,
and other professional fees, which were recorded as a reduction to additional paid-in capital.
The
Business
DocGo Inc. and its Subsidiaries (collectively,
the “Company”) is a healthcare transportation and mobile health services (“Mobile Health”) company that uses proprietary
dispatch and communication technology to provide quality healthcare transportation and healthcare services in major metropolitan cities
in the United States (“U.S.”) and the United Kingdom (“U.K.”). Mobile Health performs in-person care directly
to patients in the comfort of their homes, workplaces and other non-traditional locations.
Ambulnz, LLC was originally formed in Delaware
on June 17, 2015, as a limited liability company. On November 1, 2017, with an effective date of January 1, 2017, Ambulnz converted its
legal structure from a limited liability company to a C-corporation and changed its name to Ambulnz, Inc. Ambulnz is the sole owner of
Ambulnz Holdings, LLC (“Holdings”) which was formed in the state of Delaware on August 5, 2015, as a limited liability company.
Holdings is the owner of multiple operating entities incorporated in various states in the U.S. as well as within England and Wales, U.K.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2.
Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting
principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission
(“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements
prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information
included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying
notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.
The
Consolidated Balance Sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date,
but does not include all disclosures including notes required by U.S. GAAP.
The
Condensed Consolidated Financial Statements include the accounts and operations of the Company and its wholly owned subsidiaries. All
intercompany accounts and transactions are eliminated upon consolidation. Noncontrolling interests (“NCI”) on the Condensed
Consolidated Financial Statements represent a portion of consolidated joint ventures and a variable interest entity in which the Company
does not have direct equity ownership. Accounts and transactions between consolidated entities have been eliminated. Certain amounts
in the prior years’ consolidated statements of changes in stockholders’ equity and statements of cash flows have been reclassified
to conform to the current year presentation.
Pursuant
to the Business Combination, the merger between Motion and Ambulnz, Inc. was accounted for as a reverse recapitalization in accordance
with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, Motion was treated as the “acquired”
company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent
of Ambulnz, Inc. stock for the net assets of Motion, accompanied by a recapitalization. The net assets of Motion are stated at historical
cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the
Reverse Recapitalization are those of Ambulnz, Inc. The shares and corresponding capital amounts and earnings per share available for
common stockholders, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio (645.1452
to 1) established in the Business Combination. Further, Ambulnz, Inc. was determined to be the accounting acquirer in the transaction,
as such, the acquisition is considered a business combination under Accounting Standards Codification (“ASC”), Topic 805,
Business Combinations, (“ASC 805”) and was accounted for using the acquisition method of accounting.
Principles
of Consolidation
The
accompanying Condensed Consolidated Financial Statements include the accounts of DocGo Inc. and its subsidiaries. All significant intercompany
transactions and balances have been eliminated in these Condensed Consolidated Financial Statements.
The
Company holds a variable interest in MD1 Medical Care P.C. (“MD1”) which contracts with physicians and other health professionals
in order to provide services to the Company. MD1 is considered a variable interest entity (“VIE”) since it does not have
sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial
interest in a VIE must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities
of a VIE that most significantly impacts the VIE’s economic performance (power) and (2) the obligation to absorb losses of
the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant
to the VIE (benefits). The Company has the power and rights to control all activities of MD1 and funds and absorbs all losses of the
VIE and appropriately consolidates MD1.
Net
loss for the VIE was $163,178 as of June 30, 2022. The VIE’s total assets, all of which were current, amounted to $324,866 on June
30, 2022. Total liabilities, all of which were current for the VIE, was $913,150 on June 30, 2022. The VIE’s total stockholders’
deficit was $588,284 on June 30, 2022.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Foreign
Currency
The
Company’s functional currency is the U.S. dollar. The functional currency of our foreign operation is the respective local currency.
Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable
reporting date, except for equity accounts which are translated at historical rates. The Condensed Consolidated Statements of Operations
and Comprehensive Income are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized
cumulative translation adjustment is not material to the financial statements.
Use
of Estimates
The
preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities and expenses and the disclosure of contingent assets and liabilities in its financial statements and the reported amounts
of expenses during the reporting period. The most significant estimates in the Company’s financial statements relate to revenue
recognition related to the allowance for doubtful accounts, stock based compensation, calculations related to the incremental borrowing
rate for the Company’s lease agreements, estimates related to ongoing lease terms, software development costs, impairment of long-lived
assets, goodwill and indefinite-lived intangible assets, business combinations, reserve for losses within the Company’s insurance
deductibles, income taxes, and deferred income tax. These estimates and assumptions are based on current facts, historical experience
and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.
Actual
results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates
and actual results, the Company’s future results of operations will be affected.
Concentration
of Credit Risk and Off-Balance Sheet Risk
The
Company is potentially subject to concentration of credit risk with respect to its cash, cash equivalents and restricted cash, which
the Company attempts to minimize by maintaining cash, cash equivalents and restricted cash with institutions of sound financial quality.
At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company
believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds
are held. The Company has no financial instruments with off-balance sheet risk of loss.
Major
Customers
The
Company has one customer that accounted for approximately 30% of sales and 15% of net accounts receivable, and another customer that
accounted for 17% of sales and 12% of net accounts receivable for the period ended June 30, 2022. As of the period ended June 30, 2021,
one customer accounted for approximately 22% of sales and 11% of net accounts receivable, and another customer that accounted for 12%
of sales and 21% of net accounts receivable. The Company expects to maintain its relationships with these customers.
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.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non- emerging growth companies but any such an election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another
public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended
transition period, difficult or impossible because of the potential differences in accounting standards used.
Cash
and Cash Equivalents
Cash and cash equivalents include all highly liquid
investments with an original maturity of three months or less. The Company maintains most of its cash and cash equivalents with financial
institutions in the U.S. The accounts at financial institutions in the U.S. are insured by the Federal Deposit Insurance Corporation (“FDIC”)
and are in excess of FDIC limits. The Company had cash balances of approximately $797,000 and $803,000 with foreign financial institutions
on June 30, 2022 and December 31, 2021, respectively.
Restricted
Cash and Insurance Reserves
Cash
and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash in the Condensed
Consolidated Balance Sheets. Restricted cash is classified as either a current or non-current asset depending on the restriction period.
The Company is required to pledge or otherwise restrict a portion of cash and cash equivalents as collateral for its line of credit,
transportation equipment leases and a standby letter of credit as required by its insurance carrier (see Notes 8 and 13).
The
Company utilizes a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide
for the potential liabilities for certain risks, including workers’ compensation, automobile liability, general liability and professional
liability. Liabilities associated with the risks that are retained by the Company within its high deductible limits are not discounted
and are estimated, in part, by considering claims experience, exposure and severity factors and other actuarial assumptions. The Company
has commercial insurance in place for catastrophic claims above its deductible limits.
ARM
Insurance, Inc. a Vermont-based wholly-owned captive insurance subsidiary of the Company, charges the operating subsidiaries premiums
to insure the retained workers’ compensation, automobile liability, general liability and professional liability exposures. Pursuant
to Vermont insurance regulations, ARM Insurance, Inc. maintains certain levels of cash and cash equivalents related to its self-insurance
exposures.
The
Company also maintains certain cash balances related to its insurance programs, which are held in a self-depleting trust and restricted
as to withdrawal or use by the Company other than to pay or settle self-insured claims and costs. These amounts are reflected in “Restricted
cash” in the accompanying Condensed Consolidated Balance Sheets.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Fair
Value of Financial Instruments
ASC
820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting
guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement
that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The
accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:
Level
1: Quoted prices in active markets for identical assets or liabilities.
Level
2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level
3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash
flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment
or estimation.
Fair
value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of
June 30, 2022 and December 31, 2021. For certain financial instruments, including cash and cash equivalents, accounts receivable,
prepaid expenses and other current assets, restricted cash, accounts payable and accrued expenses, and due to seller, the carrying amounts
approximate their fair values as it is short term in nature. The notes payable are presented at their carrying value, which based on
borrowing rates currently available to the Company for loans with similar terms, approximates its fair values.
Accounts
Receivable
The
Company contracts with hospitals, healthcare facilities, businesses, state and local government entities, and insurance providers to
transport patients and to provide Mobile Health services at specified rates. Accounts receivable consist of billings for transportation
and healthcare services provided to patients. The billings will either be paid or settled on the patient’s behalf by health insurance
providers, managed care organizations, treatment facilities, government sponsored programs, businesses, or patients directly. Accounts
receivable are net of insurance provider contractual allowances, which are estimated at the time of billing based on contractual terms
or other arrangements. Accounts receivable are periodically evaluated for collectability based on past credit history with payors and
their current financial condition. Changes in the estimated collectability of accounts receivable are recorded in the results of operations
for the period in which the estimate is revised. Accounts receivable deemed uncollectible are offset against the allowance for uncollectible
accounts. The Company generally does not require collateral for accounts receivable.
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 Condensed Consolidated Statement of Operations and Comprehensive Income. The Company provides for depreciation and amortization using
the straight-line method over the estimated useful lives of the respective assets. A summary of estimated useful lives is as follows:
| Asset
Category |
|
Estimated
Useful Life |
| Buildings |
|
39 years |
| Office
equipment and furniture |
|
3 years |
| Vehicles |
|
5-8 years |
| Medical
equipment |
|
5 years |
| Leasehold
improvements |
|
Shorter of useful life of asset or lease term |
Expenditures
for repairs and maintenance are expensed as incurred. Expenditures that improve an asset or extend its estimated useful life are capitalized.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Software
Development Costs
Costs
incurred during the preliminary project stage, maintenance costs and routine updates and enhancements of products are expensed as incurred.
The Company capitalizes software development costs intended for internal use in accordance with ASC 350-40, Internal-Use Software.
Costs incurred in developing the application of its software and costs incurred to upgrade or enhance product functionalities are capitalized
when it is probable that the expenses would result in future economic benefits to the Company and the functionalities and enhancements
are used for their intended purpose. Capitalized software costs are amortized over its useful life.
Estimated
useful life of software development activities are reviewed annually or whenever events or changes in circumstances indicate that intangible
assets may be impaired and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades or
enhancements to the existing functionality.
Business
Combinations
The
Company accounts for its business combinations under the provisions of ASC 805-10, Business Combinations (“ASC 805-10”),
which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed,
including NCI, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible
assets acquired in a business combination must meet to be recognized and reported apart from goodwill.
Goodwill
represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination.
If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at
the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes
in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows:
(1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement
is accounted for within equity, or (2) if the contingent consideration is classified as a liability, the changes in fair value are recognized
in earnings. For transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain
purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions and immediately expenses acquisition-related
costs and fees associated with business combinations.
The
estimated fair value of net assets to be acquired, including the allocation of the fair value to identifiable assets and liabilities,
is determined using established valuation techniques. Management uses assumptions based on historical knowledge of the business and projected
financial information of the target. These assumptions may vary based on future events, perceptions of different market participants
and other factors outside the control of management, and such variations may be significant to estimated values.
Impairment
of Long-Lived Assets
The
Company evaluates the recoverability of the recorded amount of long-lived assets, primarily property and equipment and finite-lived intangible
assets, whenever events or changes in circumstance indicate that the recorded amount of an asset may not be fully recoverable. An impairment
is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. If an asset is
determined to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds
its fair value. Assets targeted for disposal are reported at the lower of the carrying amount or fair value less cost to sell. For the
periods ending June 30, 2022 and December 31, 2021, management determined that there was no impairment loss required to be recognized
for the carrying value of long-lived assets.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Goodwill
and Indefinite-Lived Intangible Assets
Goodwill
represents the excess of the purchase price of an acquired business over the fair value of amounts assigned to assets acquired and liabilities
assumed. Goodwill and indefinite-lived intangible assets, consisting primarily of operating licenses, are not amortized, but are evaluated
for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may
not be recoverable. In assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company makes assumptions
regarding the estimated future cash flows, including forecasted revenue growth, projected gross margin and the discount rate to determine
the fair value of these assets. If these estimates or their related assumptions change in the future, the Company may be required to
record impairment charges against these assets in the reporting period in which the impairment is determined.
The
Company tests goodwill for impairment at the reporting unit level, which is one level below the operating segment. The Company has the
option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the one-step
quantitative assessment. If as a result of the qualitative assessment, it is more-likely-than-not that the fair value of a reporting
unit is less than its carrying amount, a quantitative impairment test will be required. Otherwise, no further testing will be required.
If a quantitative impairment test is performed, the Company compares the fair values of the applicable reporting units with their aggregate
carrying values, including goodwill. Estimating the fair value of the reporting units requires significant judgment by management. If
the carrying amount of a reporting unit exceeds the fair value of the reporting unit, goodwill impairment is recognized.
Any
excess in carrying value over the estimated fair value is recorded as impairment loss and charged to the results of operations in the
period such determination is made. For the periods ended June 30, 2022 and 2021, management determined that there was no impairment loss
required to be recognized in the carrying value of goodwill or other intangible assets. The Company selected December 31 as its
annual testing date.
Line
of Credit
The
costs associated with the Company’s line of credit are deferred and recognized over the term of the line of credit as interest
expense.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates
its financial instruments to determine if such instruments contain features that qualify as embedded derivatives.
Related
Party Transactions
The
Company defines related parties as affiliates of the Company, entities for which investments are accounted for by the equity method,
trusts for the benefit of employees, principal owners (beneficial owners of more than 10% of the voting interest), management, and members
of immediate families of principal owners or management, other parties with which the Company may deal with if one party controls or
can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests.
Related
party transactions are recorded within operating expenses in the Company’s Condensed Consolidated Statement of Operations and Comprehensive
Income. For details regarding the related party transactions that occurred during the periods ended June 30, 2022 and 2021, refer to
Note 15.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 ambulance transport services. Net revenue from transportation services is derived from the transportation of patients based on billings to third party payors and healthcare facilities. |
| |
ii. |
Mobile
Health Services: These services include services performed at home and offices, COVID-19 testing and vaccinations, and event services
which include on-site healthcare support at sporting events and concerts. |
The
Company concluded that Transportation Services and any related support activities are a single performance obligation under ASC 606.
The transaction price is determined by the fixed rate usage-based fees or fixed fees which are agreed upon in the Company’s executed
contracts. For Mobile Health, the performance of the services and any related support activities are a single performance obligation
under ASC 606. Mobile Health services are typically billed based on a fixed rate (i.e., time and materials separately or combined) fee
structure taking into consideration staff and materials utilized.
As
the performance associated with such services is known and quantifiable at the end of a period in which the services occurred (i.e.,
monthly or quarterly), revenues are typically recognized in the respective period performed. The typical billing cycle for Transportation
Services and Mobile Health services is same day to 5 days with payments generally due within 30 days. For 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.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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.
In
the following table, revenue is disaggregated by as follows:
| | |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Primary Geographical Markets | |
| | |
| | |
| | |
| |
U.S. | |
$ | 106,314,813 | | |
$ | 59,946,797 | | |
$ | 221,368,244 | | |
$ | 107,308,709 | |
U.K. | |
| 3,204,491 | | |
| 2,239,200 | | |
| 6,042,612 | | |
| 4,246,682 | |
| Total revenue | |
$ | 109,519,304 | | |
$ | 62,185,997 | | |
$ | 227,410,856 | | |
$ | 111,555,391 | |
| | |
| | | |
| | | |
| | | |
| | |
| Major Segments/Service Lines | |
| | | |
| | | |
| | | |
| | |
| Transportation Services | |
$ | 22,175,233 | | |
$ | 28,936,421 | | |
$ | 49,987,743 | | |
$ | 47,740,979 | |
| Mobile Health | |
| 87,344,071 | | |
| 33,249,576 | | |
| 177,423,113 | | |
| 63,814,412 | |
| Total revenue | |
$ | 109,519,304 | | |
$ | 62,185,997 | | |
$ | 227,410,856 | | |
$ | 111,555,391 | |
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 Condensed Consolidated Statements of Operations and Comprehensive Income.
Earnings
per Share
Earnings per share represents the net income attributable
to stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock
of the Company during the reporting periods. Potential dilutive common stock equivalents consist of the incremental common stock issuable
upon exercise of warrants and the incremental shares issuable upon conversion of stock options. In reporting periods in which the Company
has a net loss, the effect is considered anti-dilutive and excluded from the diluted earnings per share calculation. On June 30, 2021,
the Company excluded from its calculation 39,446 shares because their inclusion would have been anti-dilutive.
Equity
Method Investment
On October 26, 2021, the Company acquired a
50% interest in RND Health Services Inc. (“RND”) for $655,876. The Company uses the equity method to account for
investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the
investee but does not exercise control. The Company’s carrying value in the equity method investee is reflected in the caption
“Equity method investment” on the Condensed Consolidated Balance Sheets. Changes in value of RND are recorded in
“Gain from on equity method investment” on the Condensed Consolidated Statements of Operations and Comprehensive Income.
The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such
as ownership interest, representation on the board of directors, and participation in policy-making decisions.
DocGo
Inc. and Subsidiaries
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
On November 1, 2021, the Company acquired a 20%
interest in National Providers Association, LLC (“NPA”) for $30,000. The Company uses the equity method to account for investments
in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee but does
not exercise control. The Company’s carrying value in the equity method investee is reflected in the caption “Equity method
investment” on the Condensed Consolidated Balance Sheets. Changes in value of NPA are recorded in “Loss from equity method
investment” on the Condensed Consolidated Statements of Operations and Comprehensive Income. The Company’s judgment regarding
its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on
the board of directors, and participation in policy-making decisions. Effective December 21, 2021, three members withdrew from NPA resulting
in the remaining two members obtaining the remaining ownership percentage. On December 31, 2021 and June 30, 2022, DocGo owned 50% of
NPA.
Under
the equity method, the Company’s investment is initially measured at cost and subsequently increased or decreased to recognize
the Company’s share of income and losses of the investee, capital contributions and distributions and impairment losses. The Company
performs a qualitative assessment annually and recognizes an impairment if there are sufficient indicators that the fair value of the
investment is less than carrying value.
Leases
The
Company categorizes leases at its inception as either operating or finance leases based on the criteria in FASB ASC 842, Leases,
(“ASC 842”). The Company adopted ASC 842 on January 1, 2019, using the modified retrospective approach, and has established
a Right-of-Use (“ROU”) Asset and a current and non-current lease liability for each lease arrangement identified. The lease
liability is recorded at the present value of future lease payments discounted using the discount rate that approximates the Company’s
incremental borrowing rate for the lease established at the commencement date, and the ROU asset is measured as the lease liability plus
any initial direct costs, less any lease incentives received before commencement. The Company recognizes a single lease cost, so that
the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis.
The
Company has lease arrangements for vehicles, equipment, and facilities. These leases typically have original terms not exceeding 10 years
and, in some cases contain multi-year renewal options, none of which are reasonably certain of exercise. The Company’s lease arrangements
may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as
a single lease component. The Company has incorporated residual value obligations in leases for which there is such occurrences. Regarding
short-term leases, ASC 842-10-25-2 permits an entity to make a policy election not to apply the recognition requirements of ASC 842 to
short-term leases. The Company has elected not to apply the ASC 842 recognition criteria to any leases that qualify as short-term leases.
Income
Taxes
Income
taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an
asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or the Company’s tax returns. Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of
available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts
for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes
the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing
authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of
the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties
accrued related to unrecognized tax benefits as income tax expense.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
Recently Issued Accounting Standards Not
Yet Adopted
In March 2022, the FASB issued ASU 2022-02, Financial
Instruments – Credit Losses Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), that eliminates
accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40 Receivables—Troubled Debt Restructurings
by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower
is experiencing financial difficulty. ASU 2022-02 also requires public business entities to disclose current-period gross write-offs by
year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit
Losses—Measured at Amortized Cost. This ASU only affects entities that already adopted ASU 2016-13, which is effective for fiscal
years beginning after December 15, 2022. The Company expects that this ASU will not have a material impact on the Company’s Condensed
Consolidated Financial Statements.
3. Property and Equipment, net
Property and equipment, net, as of June 30, 2022
and December 31, 2021 are as follows:
| | |
June 30,
2022 | | |
December 31,
2021 | |
| | |
| | |
| |
| Office equipment and furniture | |
$ | 2,292,194 | | |
$ | 1,977,808 | |
| Buildings | |
| 527,284 | | |
| 527,284 | |
| Land | |
| 37,800 | | |
| 37,800 | |
| Transportation equipment | |
| 14,027,121 | | |
| 13,772,251 | |
| Medical equipment | |
| 4,285,584 | | |
| 3,949,566 | |
| Leasehold improvements | |
| 603,073 | | |
| 616,446 | |
| | |
| 21,773,056 | | |
| 20,881,155 | |
| Less: Accumulated depreciation | |
| (9,543,059 | ) | |
| (8,147,266 | ) |
| Property and equipment, net | |
$ | 12,229,997 | | |
$ | 12,733,889 | |
The Company recorded depreciation expense of $729,560
and $570,351 for the three months ended June 30, 2022 and 2021, respectively.
The Company recorded depreciation expense of $1,441,438
and $1,099,192 for six months ended June 30, 2022 and 2021, respectively. The Company wrote off $45,645 of fully depreciated assets for
the six months ended June 30, 2022.
4. Acquisition of Businesses
LJH Ambulance Acquisition
On November 20, 2020, AF WI LNZ, LLC, a subsidiary
of Ambulnz-FMC North America LLC (“FMC NA”), a subsidiary of Holdings, entered into the Share Purchase Agreement (the “Agreement”)
with LJH Ambulance (“LJH”). LJH was in the business of providing medical transportation services. The purchase price consisted
of $465,000 cash consideration. The Company also agreed to pay the Seller 50% of all proceeds from accounts receivable that
were outstanding as of the Agreement signing date that are actually received by the Company after the Agreement closing date. The LJH
transaction closed on January 12, 2022 with the outstanding acquisition payable balance of $282,518 being paid off on March 4, 2022.
GMS Acquisition
On June 3, 2022, Holdings, entered into a Management Service Agreement
(the “Agreement”) with Government Medical Services, LLC (“GMS”), a provider of medical services. On July 6, 2022
(the “Closing Date”), Holdings acquired GMS in exchange for $19 million in cash consideration. Holdings also agreed to pay
GMS an additional $3 million upon GMS meeting certain performance conditions within a year of the Closing Date.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
Century Acquisition
On August 13, 2019, Ambulnz-FMC North America LLC, a subsidiary of
Holdings, acquired 100% of the outstanding shares of common stock of Century Ambulance Service, Inc. (“Century”). Century
was in the business of providing ambulette transportation services in New York City, Nassau and Suffolk Counties in New York State as
a Medicaid Common Carrier ambulette service.
The aggregate purchase price payable by Ambulnz
FMC-North America LLC was $400,000, consisting of $200,000 paid upon entering into the agreement with the remaining $200,000 to be paid
upon the transfer of relevant regulatory approvals including the licenses to operate in New York City, Nassau and Suffolk Counties in
New York State. The purchase price was allocated to the licenses acquired to operate the acquired business in New York State. The remaining
$209,474 purchase price payment was paid off on July 1, 2022.
5. Goodwill
The Company recorded goodwill in connection with
its acquisitions. The changes in the carrying value of goodwill for the period ended June 30, 2022 are as noted in the tables below:
| | |
Carrying Value | |
| Balance at December 31, 2021 | |
$ | 8,686,966 | |
| Goodwill acquired during the period | |
| - | |
| Balance at June 30, 2022 | |
$ | 8,686,966 | |
6. Intangibles
Intangible assets consist of the following as
of June 30, 2022 and December 31, 2021:
| | |
June 30, 2022 |
| | |
Estimated
Useful Life
(Years) | |
Gross
Carrying
Amount | | |
Additions | | |
Accumulated
Amortization | | |
Net
Carrying
Amount | |
| Patents | |
15 years | |
$ | 48,668 | | |
$ | 6,795 | | |
$ | (8,072 | ) | |
$ | 47,391 | |
| Computer software | |
5 years | |
$ | 294,147 | | |
| - | | |
| (248,416 | ) | |
| 45,731 | |
| Operating licenses | |
Indefinite | |
$ | 8,375,514 | | |
| - | | |
| - | | |
| 8,375,514 | |
| Internally developed software | |
4-5 years | |
$ | 6,013,513 | | |
| 1,009,635 | | |
| (5,076,383 | ) | |
| 1,946,765 | |
| | |
| |
$ | 14,731,842 | | |
$ | 1,016,430 | | |
$ | (5,332,871 | ) | |
$ | 10,415,401 | |
| | |
December 31, 2021 |
| | |
Estimated
Useful Life
(Years) | |
Gross
Carrying
Amount | | |
Additions | | |
Accumulated
Amortization | | |
Net
Carrying
Amount | |
| Patents | |
15 years | |
$ | 19,275 | | |
$ | 29,393 | | |
$ | (6,367 | ) | |
$ | 42,301 | |
| Computer software | |
5 years | |
| 132,816 | | |
| 161,331 | | |
| (219,388 | ) | |
| 74,759 | |
| Operating licenses | |
Indefinite | |
| 8,375,514 | | |
| - | | |
| - | | |
| 8,375,514 | |
| Internally developed software | |
4-5 years | |
| 2,146,501 | | |
| 3,867,012 | | |
| (3,828,038 | ) | |
| 2,185,475 | |
| | |
| |
$ | 10,674,106 | | |
$ | 4,057,736 | | |
$ | (4,053,793 | ) | |
$ | 10,678,049 | |
The Company recorded amortization expense of $645,715
and $457,960 for the three months ended June 30, 2022 and 2021, respectively.
The Company recorded amortization expense of $1,279,078
and $879,984 for the six months ended June 30, 2022 and 2021, respectively.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
Future amortization expense at June 30, 2022 for
the next five years and in the aggregate are as follow:
| | |
Amortization
Expense | |
| 2022, remaining | |
$ | 729,885 | |
| 2023 | |
| 822,295 | |
| 2024 | |
| 272,757 | |
| 2025 | |
| 180,535 | |
| 2026 | |
| 3,698 | |
| Thereafter | |
| 30,717 | |
| Total | |
$ | 2,039,887 | |
7. Accrued Liabilities
Accrued liabilities consist of the following as
of June 30, 2022 and December 31, 2021:
| | |
June 30,
2022 | | |
December 31,
2021 | |
| Accrued bonus | |
$ | 3,730,768 | | |
$ | 7,260,456 | |
| Accrued lab fees | |
| 3,479,852 | | |
| 4,885,539 | |
| Accrued payroll | |
| 7,031,788 | | |
| 3,539,301 | |
| Medicare advance | |
| - | | |
| 975,415 | |
| FICA/Medicare liability | |
| 739,629 | | |
| 739,629 | |
| Accrued general expenses | |
| 6,787,508 | | |
| 3,497,418 | |
| Accrued subcontractors | |
| 8,041,022 | | |
| 9,564,833 | |
| Accrued fuel and maintenance | |
| 320,565 | | |
| 450,842 | |
| Accrued workers compensation | |
| 5,426,284 | | |
| 2,259,571 | |
| Other current liabilities | |
| 578,023 | | |
| 736,021 | |
| Accrued legal fees | |
| 2,438,884 | | |
| 1,143,629 | |
| Credit card payable | |
| 82,196 | | |
| 58,223 | |
| Total accrued liabilities | |
$ | 38,656,519 | | |
$ | 35,110,877 | |
8. Line of Credit
On May 13, 2021, the Company entered into a revolving
loan and security agreement with a bank (the “Lender”), with a maximum revolving advance amount of $12,000,000. Each Revolving
Advance carried interest at a per annum rate equal to the Wall Street Journal Prime Rate, 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 elapsed (“Contract
Rate”). The revolving loan had a maturity date of May 12, 2022 (“Maturity Date”). This loan was secured by all assets
of entities owned 100% by DocGo Inc. This loan was subject to certain financial covenants such as a Fixed Charge Coverage Ratio and Debt
to Effective Tangible Net Worth, as defined in the agreement. The Company decided not to renew the agreement on the Maturity Date, therefore,
the balance was $0 as of June 30, 2022.
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 (5.5% at June 30, 2022), as the same may change from time to time, plus one percent (1.00%), but in no
event less than five percent (5.00%) per annum, calculated on the basis of a 360-day year for the actual number of days in the applicable
period. The agreement is subject to certain financial covenants such as an unused fee, whereas the Company shall pay to the subsidiary
of one of its members an unused fee in the amount of 0.5% of the average daily amount by which the Revolving Commitment Amount ($12 million)
exceeds the principal balance of the aggregate outstanding advances. All accrued and unpaid interest and unused fee shall be due and payable
on the first anniversary of the date of the agreement (“Revolving Credit Maturity Date”). This loan is secured by all assets
of entities owned 100% by DocGo Inc. As of December 31, 2021, the outstanding balance of the line of credit was zero. On January
26, 2022, the Company drew $1,000,000 to fund operations and meet short-term obligations. As of June 30, 2022, the outstanding balance
of the line of credit was $1,000,000.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
9. Notes Payable
The Company has various loans with finance companies
with monthly installments aggregating $60,499, inclusive of interest ranging from 2.5% through 7.5%. The notes mature at various times
through 2051 and are secured by transportation equipment.
The following table summarizes the Company’s
notes payable:
| | |
June 30,
2022 | | |
December 31,
2021 | |
| Equipment and financing loans payable, between 2.5% and 7.5% interest and maturing between January 2022 and May 2051 | |
$ | 1,615,290 | | |
$ | 1,903,288 | |
| Loan received pursuant to the Payroll Protection Program | |
| - | | |
| - | |
| Total notes payable | |
| 1,615,290 | | |
| 1,903,288 | |
| Less: current portion of notes payable | |
$ | 566,426 | | |
$ | 600,449 | |
| Total non-current portion of notes payable | |
$ | 1,048,864 | | |
$ | 1,302,839 | |
Interest expense was $43,508 and $61,324 for the
periods ended June 30, 2022 and December 31, 2021, respectively.
Future minimum annual maturities of notes payable
as of June 30, 2022 are as follows:
| | |
Notes
Payable | |
| 2022, remaining | |
| 270,596 | |
| 2023 | |
| 483,842 | |
| 2024 | |
| 320,070 | |
| 2025 | |
| 244,683 | |
| 2026 | |
| 146,099 | |
| Thereafter | |
| 150,000 | |
| Total maturities | |
$ | 1,615,290 | |
| Current portion of notes payable | |
| (566,426 | ) |
| Long-term portion of notes payable | |
$ | 1,048,864 | |
10. Business Segment Information
The Company conducts business as two operating
segments, Transportation Services and Mobile Health services. In accordance with ASC 280, Segment Reporting, operating segments
are components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker,
who is the chief executive officer, in deciding how to allocate resources and assessing performance. The Company’s business operates
in two operating segments because the Company’s entities have two main revenue streams, and the Company’s chief operating
decision maker evaluates the Company’s financial information and resources and assesses the performance of these resources by revenue
stream.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
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 | |
| Three Months Ended June 30, 2022 | |
| | |
| | |
| |
| Revenues | |
$ | 22,175,233 | | |
$ | 87,344,071 | | |
$ | 109,519,304 | |
| Income (loss) from operations | |
| (19,493,937 | ) | |
| 26,951,694 | | |
$ | 7,457,757 | |
| Total assets | |
$ | 198,330,033 | | |
$ | 133,525,355 | | |
$ | 331,855,388 | |
| Depreciation and amortization expense | |
$ | 1,819,937 | | |
$ | 217,834 | | |
$ | 2,037,771 | |
| Stock compensation | |
$ | 511,990 | | |
$ | 1,487,629 | | |
$ | 1,999,619 | |
| Long-lived assets | |
$ | 28,216,054 | | |
$ | 3,116,310 | | |
$ | 31,332,364 | |
| | |
| | | |
| | | |
| | |
| Three Months Ended June 30, 2021 | |
| | | |
| | | |
| | |
| Revenues | |
$ | 28,936,421 | | |
| 33,249,576 | | |
$ | 62,185,997 | |
| Income (loss) from operations | |
| (598,737 | ) | |
| 857,496 | | |
| 258,759 | |
| Total assets | |
$ | 94,500,701 | | |
$ | 28,634,083 | | |
$ | 123,134,784 | |
| Depreciation and amortization expense | |
$ | (1,756,843 | ) | |
$ | (140,208 | ) | |
$ | (1,897,051 | ) |
| Stock compensation | |
$ | 360,600 | | |
$ | 9,400 | | |
$ | 370,000 | |
| Long-lived assets | |
$ | 25,939,839 | | |
$ | 1,905,129 | | |
$ | 27,844,968 | |
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
| | |
Transportation
Services | | |
Mobile Health
Services | | |
Total | |
| Six Months Ended June 30, 2022 | |
| | |
| | |
| |
| Revenues | |
$ | 49,987,743 | | |
$ | 177,423,113 | | |
$ | 227,410,856 | |
| Income (loss) from operations | |
| (28,822,314 | ) | |
| 46,374,636 | | |
$ | 17,552,322 | |
| Total assets | |
$ | 198,330,033 | | |
$ | 133,525,355 | | |
$ | 331,855,388 | |
| Depreciation and amortization expense | |
$ | 3,807,258 | | |
$ | 431,534 | | |
$ | 4,238,792 | |
| Stock compensation | |
$ | 879,809 | | |
$ | 2,542,747 | | |
$ | 3,422,556 | |
| Long-lived assets | |
$ | 28,216,054 | | |
$ | 3,116,310 | | |
$ | 31,332,364 | |
| Six Months Ended June 30, 2021 | |
| | | |
| | | |
| | |
| Revenues | |
$ | 47,740,979 | | |
| 63,814,412 | | |
$ | 111,555,391 | |
| Income (loss) from operations | |
| (4,000,937 | ) | |
| 2,385,739 | | |
| (1,615,198 | ) |
| Total assets | |
$ | 94,500,701 | | |
$ | 28,634,083 | | |
$ | 123,134,784 | |
| Depreciation and amortization expense | |
$ | 3,354,519 | | |
$ | 140,208 | | |
$ | 3,494,727 | |
| Stock compensation | |
$ | 752,134 | | |
$ | 9,400 | | |
$ | 761,534 | |
| Long-lived assets | |
$ | 25,939,839 | | |
$ | 1,905,129 | | |
$ | 27,844,968 | |
Long-lived assets include property, plant and
equipment, goodwill and intangible assets.
Geographic Information
Revenues by geographic location are included in
Note 2.
11. Equity
Preferred Stock
In November 2021, the Company’s Series A
preferred stock was cancelled and converted into the right to receive a portion of merger consideration issuable as common stock of DocGo,
par value $0.0001 (the “Common Stock”), pursuant to the terms and conditions set forth in the Merger Agreement. The Company’s
Condensed Consolidated Statements of Changes in Stockholders’ Equity reflect the 2020 shares as if the Merger occurred in 2020.
Prior to the reverse merger, on May 23, 2019,
the Series A preferred stock was formed, and 40,000 shares were authorized. Each share of Series A preferred stock was convertible
into Class A common stock at a conversion price of $3,000 per share, subject to adjustment as defined in the articles of incorporation.
Series A preferred stockholders had voting rights
equivalent to the number of common stock shares issuable upon conversion. The Series A preferred stockholders were entitled to a non-cumulative
dividend equal to 8% of the original issue price as defined in the agreement when declared by the board of directors.
The holders of the Series A preferred stock had
preferential liquidation rights and rank senior to the holders of common stock. If a liquidation were to occur, the holders of the Series
A preferred stock would have been paid an amount equal to $3,000 per share, subject to adjustment as defined in the articles of incorporation,
plus all accrued and unpaid dividends thereon. After the payment of the Series A preferred stockholders, the common stockholders would
have been paid out on a pro-rata basis.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
Common Stock
On November 1, 2017, Ambulnz, Inc. converted its
legal structure from a limited liability company to a corporation and converted its membership units into shares of common stock at a
rate of 1,000 shares per membership unit. The total authorized number of shares of common stock converted was 100,000 shares, comprised
of 35,597 shares of Class A common stock and 64,402 shares of Class B common stock.
Prior to the reverse merger, on May 23, 2019,
the Ambulnz, Inc amended and restated its articles of incorporation and the total authorized common stock increased to 154,503 shares,
comprised of 78,000 shares of Class A common stock and 76,503 shares of Class B common stock. The Class A common stockholders had voting
rights equivalent to one vote per share of common stock and the Class B common stockholders have no voting rights. Dividends may be paid
to the common stockholders out of funds legally available, when declared by the board of directors.
Share Repurchase Program
On May 24, 2022, the Company was authorized to
purchase up to $40 million of the Company’s common stock under a share repurchase program (the “Program”). During the
second quarter of 2022, the Company repurchased 70,000 shares of its common stock for $498,000. These shares were subsequently cancelled.
The Program does not obligate the Company to acquire any specific number of shares and will expire on November 24, 2023. Under the Program,
shares may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under
plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as part of accelerated
share repurchases, block trades and other methods. The timing, manner, price and amount of any common stock repurchases under the Program
are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and
market conditions.
Preacquisition Warrants
On February 15, 2018, the Company issued warrants
to purchase 1,367 shares of Class B common stock at a purchase price of $0.01 per share to an investor in conjunction with a capital investment.
The warrants had no expiration date. The fair value on the date of issuance was $5,400 per share, for a total fair value of $7,381,800.
On May 23, 2019, the warrants were exchanged for warrants to purchase 2,461 shares of Series A preferred stock at a purchase price of
$0.01 per share. The exchanged warrants have no expiration date, and had a fair value on the date of issuance of $3,000 per share for
a total fair value of $7,383,000. These warrants were cashless exercised in November 2021 for 1,587,700 shares of common DocGo Inc. common
stock.
On June 5, 2019, the Company issued warrants to
purchase 667 shares of Series A preferred stock at a purchase price of $3,000 per share to an investor in conjunction with a capital investment.
The warrants would have expired on June 6, 2029. The fair value on the date of issuance was $2,078 per warrant for a total fair value
of $1,386,026. These warrants were cashless exercised in November 2021 for 229,807 shares of common DocGo Inc. common stock.
12. Stock Based Compensation
Stock Options
In 2021, the Company established the DocGo Inc.
Equity Incentive Plan (the “Plan”), which replaced Ambulnz, Inc’s 2017 Equity Incentive Plan. The Company reserved 16,607,894
shares of common stock for issuance under the Plan. The Company’s stock options generally vest on various terms based on continuous
services over periods ranging from three to five years. The stock options are subject to time vesting requirements through 2032 and are
nontransferable. Stock options granted have a maximum contractual term of 10 years. On June 30, 2022, approximately 3.0 million employee
stock options on a converted basis had vested.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
The fair value of each stock option grant is estimated
on the date of grant using the Black-Scholes option-pricing model. Before the Company’s shares of stock were publicly traded, management
took the average of several publicly traded companies that were representative of the Company’s size and industry in order to estimate
its expected stock volatility. The expected term of the options represented the period of time the instruments are expected to be outstanding.
The Company based the risk-free interest rate on the rate payable on the U.S. Treasury securities corresponding to the expected term of
the awards at the date of grant. Expected dividend yield was zero based on the fact that the Company had not historically paid and does
not intend to pay a dividend in the foreseeable future.
The Company utilized contemporaneous valuations
in determining the fair value of its shares at the date of option grants. Prior to the Merger, each valuation utilized both the discounted
cash flow and guideline public company methodologies to estimate the fair value of its shares on a non-controlling and marketable basis.
The December 31, 2020 valuations also included an approach that took into consideration a pending non-binding letter of intent from Motion
Acquisition Corp. The March 11, 2021 valuation report relied solely on the fair value of the Company’s shares implied by the March
8, 2021 Merger Agreement with Motion Acquisition Corp.
A discount for lack of marketability was applied
to the non-controlling and marketable fair value estimates determined above. The determination of an appropriate discount for lack of
marketability was based on a review of discounts on the sale of restricted shares of publicly traded companies and put-based quantitative
methods. Factors that influenced the size of the discount for lack of marketability included (a) the estimated time it would take for
a Company stockholder to achieve marketability, and (b) the volatility of the Company’s business.
The following assumptions were used to compute
the fair value of the stock option grants during the period ended June 30, 2022 and 2021:
| | |
Period Ended
June 30, 2022 | |
| | |
2022 | | |
2021 | |
| Risk-free interest rate | |
| 0.71 | % | |
| 0.06 | % |
| Expected term (in years) | |
| 4 | | |
| .5
- 2 | |
| Volatility | |
| 60 | % | |
| 65 | % |
| Dividend yield | |
| 0 | % | |
| 0 | % |
The following table summarizes the Company’s
stock option activity under the Plan for the period ended June 30, 2022:
| |
|
Options
Shares |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Life in Years |
|
|
Aggregate
Intrinsic
Value |
|
| Balance as of December 31, 2021 |
|
|
8,422,972 |
|
|
$ |
6.21 |
|
|
|
8.77 |
|
|
$ |
24,706,020 |
|
| Granted/ Vested during the year |
|
|
2,028,281 |
|
|
|
4.67 |
|
|
|
9.24 |
|
|
|
- |
|
| Exercised during the year |
|
|
(613,074 |
) |
|
|
1.88 |
|
|
|
6.57 |
|
|
|
- |
|
| Cancelled during the year |
|
|
(417,876 |
) |
|
|
7.70 |
|
|
|
9.05 |
|
|
|
- |
|
| Balance as of June 30, 2022 |
|
|
9,420,303 |
|
|
|
6.52 |
|
|
|
8.55 |
|
|
$ |
13,284,689 |
|
| Options vested and exercisable at June 30, 2022 |
|
|
2,971,140 |
|
|
$ |
5.76 |
|
|
|
7.42 |
|
|
$ |
8,778,770 |
|
The aggregate intrinsic value in the above table
is calculated as the difference between fair value of the Company’s common stock price and the exercise price of the stock options.
The weighted average grant date fair value per share for stock option grants during the periods ended June 30, 2022 and December 31,
2021 was $7.15 and $2.80, respectively. On June 30, 2022 and December 31, 2021, the total unrecognized compensation related to unvested
stock option awards granted was $22,868,377 and $20,792,804, respectively, which the Company expects to recognize over a weighted-average
period of approximately 3.58 years.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED 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 expense in the Condensed Consolidated Statement of Operations and
Comprehensive Income on a straight-line basis over the vesting period for RSUs. The vesting period for employees and members of the Board
of Directors ranges from one to four years.
Activity under RSUs was as follows:
| |
|
RSUs |
|
|
Weighted-
Average
Grant Date
Fair Value
Per RSU |
|
| Balance as of December 31, 2021 |
|
|
50,192 |
|
|
$ |
9.97 |
|
| Granted |
|
|
146,853 |
|
|
|
7.15 |
|
| Vested as of June 30, 2022 |
|
|
(8,258 |
) |
|
|
9.97 |
|
| Forfeited |
|
|
- |
|
|
|
- |
|
| Balance as of June 30, 2022 |
|
|
188,787 |
|
|
|
7.78 |
|
| Vested and unissued at June 30, 2022 |
|
|
- |
|
|
|
|
|
| Non-vested at June 30, 2022 |
|
|
188,787 |
|
|
|
7.78 |
|
The total grant-date fair value of RSUs granted
during the period ended June 30, 2022 was $1,049,999.
For the period ended June 30, 2022, the Company
recorded stock-based compensation expense related to RSUs of $82,305.
As of June 30, 2022, the Company had $1,467,949
in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 3.2 years.
13. Leases
Operating Leases
The Company is obligated to make rental payments
under non-cancellable operating leases for office, dispatch station space, and transportation equipment, expiring at various dates through
2026. Under the terms of the leases, the Company is also obligated for its proportionate share of real estate taxes, insurance and maintenance
costs of the property. The Company is required to hold certain funds in restricted cash and cash equivalents accounts under some of these
agreements.
Certain leases for property and transportation
equipment contain options to purchase, extend or terminate the lease. Determining the lease term and amount of lease payments to include
in the calculation of the right-of-use (ROU) asset and lease obligations for leases containing options requires the use of judgment to
determine whether the exercise of an option is reasonably certain and whether the optional period and payments should be included in the
calculation of the associated ROU asset and lease obligation. In making such judgment, the Company considers all relevant economic factors
that would require whether to exercise or not exercise the option.
The Company’s lease agreements generally
do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount
rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates,
which were used to discount its real estate lease liabilities. The Company used estimated borrowing rates of 6% on January 1, 2019, for
all leases that commenced prior to that date, for office spaces and transportation equipment.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
Lease Costs
The table below comprise lease expenses for the
periods ended June 30, 2022 and 2021:
| | |
Three Months Ended | | |
Six Months Ended | |
| Components of total lease cost: | |
June 30,
2022 | | |
June 30,
2021 | | |
June 30,
2022 | | |
June 30,
2021 | |
| Operating lease expense | |
$ | 428,728 | | |
$ | 446,564 | | |
$ | 891,353 | | |
$ | 937,939 | |
| Short-term lease expense | |
| 273,601 | | |
| 125,745 | | |
| 528,697 | | |
| 193,795 | |
| Total lease cost | |
$ | 702,329 | | |
$ | 572,309 | | |
$ | 1,420,050 | | |
$ | 1,131,734 | |
Lease Position as of June 30, 2022
Right-of-use lease assets and lease liabilities
for the Company’s operating leases were recorded in the Condensed Consolidated Balance Sheets as follows:
| | |
June 30,
2022 | | |
December 31,
2021 | |
| Assets | |
| | |
| |
| Lease right-of-use assets | |
$ | 3,812,085 | | |
$ | 4,195,682 | |
| Total lease assets | |
$ | 3,812,085 | | |
$ | 4,195,682 | |
| | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Lease liability - current portion | |
$ | 1,421,036 | | |
$ | 1,461,335 | |
| Noncurrent liabilities: | |
| | | |
| | |
| Lease liability, net of current portion | |
| 2,651,849 | | |
| 2,980,946 | |
| Total lease liability | |
$ | 4,072,885 | | |
$ | 4,442,281 | |
Lease Terms and Discount Rate
| Weighted average remaining lease term (in years) - operating leases | |
| 3.97 | |
| Weighted average discount rate - operating leases | |
| 6.00 | % |
Undiscounted Cash Flows
Future minimum lease payments under the operating
leases at June 30, 2022 are as follows:
| | |
Operating
Leases | |
| 2022, remaining | |
$ | 891,985 | |
| 2023 | |
| 1,338,089 | |
| 2024 | |
| 897,548 | |
| 2025 | |
| 894,740 | |
| 2026 | |
| 483,775 | |
| 2027 and thereafter | |
| 14,625 | |
| Total future minimum lease payments | |
| 4,520,762 | |
| Less effects of discounting | |
| (447,877 | ) |
| Present value of future minimum lease payments | |
$ | 4,072,885 | |
Operating lease expense was approximately $428,728
and $446,564 for the three months ended June 30, 2022 and 2021, respectively.
Operating lease expense was approximately $891,353
and $937,939 for the six months ended June 30, 2022 and 2021, respectively.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
For the three months ended June 30, 2022, the
Company made $428,728 of fixed cash payments related to operating leases and $851,307 related to finance leases.
For the three months
ended June 30, 2021, the Company made $446,564 of fixed cash payments related to operating leases
and $652,891 related to finance leases.
For the six months ended June 30, 2022, the Company
made $891,353 of fixed cash payments related to operating leases and $1,473,882 related to finance leases.
For the six months
ended June 30, 2021, the Company made $937,939 of fixed cash payments related to operating leases
and $1,254,392 related to finance leases.
Finance Leases
The Company leases vehicles under a non-cancelable
finance lease agreements with a liability of $7,931,349 and $10,139,410 as of June 30, 2022 and December 31, 2021, respectively. This
includes accumulated depreciation expense of $8,837,761 and $7,095,242 as of June 30, 2022 and December 31, 2021, respectively.
Depreciation expense for the vehicles under non-cancelable
lease agreements amounted to $662,495 and $710,645 for the three months ended June 30, 2022 and 2021, respectively.
Depreciation expense for the vehicles under non-cancelable
lease agreements amounted to $1,518,276 and $1,357,457 for the six months ended June 30, 2022 and 2021, respectively.
Gain on Lease Remeasurement
In June 2022, the Company reassessed its finance
lease estimates relating to vehicle milage and residual value. As a result, the Company determined to purchase the vehicles at the end
of the leases which resulted in a gain of $1.4 million recorded as gains from lease accounting on the Unaudited Condensed Consolidated
Statement of Operations and Comprehensive Income (Loss).
Lease Payments
The table below presents lease payments for the
periods ended June 30, 2022 and 2021:
| | |
Three Months Ended | | |
Six Months Ended | |
| Components of total lease payment: | |
June 30,
2022 | | |
June 30,
2021 | | |
June 30,
2022 | | |
June 30,
2021 | |
| Finance lease payment | |
$ | 851,307 | | |
$ | 652,891 | | |
$ | 1,473,882 | | |
$ | 1,254,392 | |
| Short-term lease payment | |
| - | | |
| - | | |
| | | |
| - | |
| Total lease payments | |
$ | 851,307 | | |
$ | 652,891 | | |
$ | 1,473,882 | | |
$ | 1,254,392 | |
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
Lease Position as of June 30, 2022
Right-of-use lease assets and lease liabilities
for the Company’s finance leases were recorded in the Condensed Consolidated Balance Sheets as follows:
| | |
June 30,
2022 | | |
December 31,
2021 | |
| Assets | |
| | |
| |
| Lease right-of-use assets | |
$ | 8,408,399 | | |
$ | 9,307,113 | |
| Total lease assets | |
$ | 8,408,399 | | |
$ | 9,307,113 | |
| | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Lease liability - current portion | |
$ | 2,655,037 | | |
$ | 3,271,990 | |
| Noncurrent liabilities: | |
| | | |
| | |
| Lease liability, net of current portion | |
| 5,276,312 | | |
| 6,867,420 | |
| Total lease liability | |
$ | 7,931,349 | | |
$ | 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 June
30, 2022:
| Weighted average remaining lease term (in years) - finance leases | |
| 4.14 | |
| Weighted average discount rate - finance leases | |
| 6.01 | % |
Undiscounted Cash Flows
Future minimum lease payments under the finance
leases at June 30, 2022 are as follows:
| | |
Finance
Leases | |
| 2022, remaining | |
| 1,634,535 | |
| 2023 | |
| 2,660,174 | |
| 2024 | |
| 1,930,614 | |
| 2025 | |
| 1,628,715 | |
| 2026 | |
| 826,735 | |
| 2027 and thereafter | |
| 133,586 | |
| Total future minimum lease payments | |
| 8,814,359 | |
| Less effects of discounting | |
| (883,010 | ) |
| Present value of future minimum lease payments | |
$ | 7,931,349 | |
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
14. Other Income
As of June 30, 2022, the Company recognized other
income of $11,387, net of $19,660 from realized foreign exchange loss offset by rental income of $31,047.
15. Related Party Transactions
Historically, the Company has been involved in
transactions with various related parties.
Ely D. Tendler Strategic & Legal Services
PLLC provides commission 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 commission payments to Ely D. Tendler Strategic & Legal Services
PLLC totaling $234,255 and $127,093 for the three months ended June 30, 2022 and 2021, respectively, and $443,408 and $290,218 for the
six months ended June 30, 2022 and 2021, respectively.
Included in accounts payable were $99,585 and
$85,133 due to this related party as of June 30, 2022 and December 31, 2021, respectively.
16. Income Taxes
As a result of the Company’s history
of net operating losses (“NOL”), the Company had historically provided for a full valuation allowance against its
deferred tax assets for assets that were not more-likely-than-not to be realized. The Company’s income tax (expense) benefit
for the three months ended June 30, 2022 and 2021 were $(321,660) and $1,107, respectively, and $(761,839) and $(8,923) for the six
months ended June 30, 2022 and 2021, respectively. The Company’s effective tax rate was 4.14% and 1.10% for the three months ended June
30, 2022 and 2021, respectively, and 4.30% and 0.47% for the six months ended June 30, 2022 and 2021, respectively. In determining
the quarterly provision for income taxes, we use an estimated annual effective tax rate adjusted for discrete items. This rate is
based on our expected annual income, statutory tax rates, and best estimates of nontaxable and nondeductible income and expense
items.
17. 401(K) Plan
The Company has established a 401(k) plan in January
2022 that qualifies as a deferred compensation arrangement under Section 401 of the Internal Revenue Code. All U.S. employees that complete
two months of service with the Company are eligible to participate in the plan. The Company did not make any employer contributions to
this plan as of June 30, 2022.
18. Legal Proceedings
From time to time, the Company may be involved
as a defendant in legal actions that arise in the normal course of business. In the opinion of management, the Company has adequate legal
defense on all legal actions, and the results of any such proceedings would not materially impact the Condensed Consolidated Financial
Statements of the Company. The Company provides disclosure and records loss contingencies in accordance with the loss contingencies accounting
guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and
can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated,
the Company discloses the possible loss in the Condensed Consolidated Financial Statements.
DocGo Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(CONTINUED)
As of June 30, 2022 and December 31, 2021, the
Company recorded a liability of $1,000,000, which represents an amount for an agreed settlement, under the terms of a memorandum
of understanding, of various class-based claims, both actual and potential, under Federal and California state law, as described in detail
below. The settlement is subject to court approval.
Stephanie
Zamora, Jascha Dlugatch, et al. v. Ambulnz Health, LLC, et al. was filed in the Los Angeles Superior Court on October 11,
2018, and the complaint alleged wage and hour violations pursuant to California’s Private Attorneys’ General Act of 2004
(“PAGA”). On February 24, 2020, this case was consolidated with Jascha Dlugatch, et. al. v. Ambulnz Health,
LLC (the “Consolidated Compliant”), another lawsuit filed in the Los Angeles Superior Court. On May 6,
2021, the parties attended mediation and settled the claims pled in the Consolidated Complaint on a class-wide and PAGA basis in
exchange for a proposed $1 million payment by Ambulnz Health, inclusive of administrative costs and fees. The parties are working on
preparing all documents to obtain court approval of their settlement and anticipate obtaining preliminary approval of their
settlement in the near future, subject to Court calendars and pandemic related backlogs.
19. Risk and Uncertainties
COVID-19 Risks, Impacts and Uncertainties
On January 30, 2020, the World Health Organization
(“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 Outbreak”) and
the risks to the international community as the virus spreads globally. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic,
based on the rapid increase in exposure globally.
The spread of COVID-19 and the related country-wide
shutdowns and restrictions had a mixed impact on the Company’s business. In the ambulance transportation business, which predominantly
comprises of non-emergency medical transportation, the Company saw a decline in volumes from historical and expected levels, as elective
surgeries and other procedures were postponed. In some of the Company’s larger markets, such as New York and California, there were
declines in trip volume. In addition, the Company experienced lost revenues associated with sporting, concerts and other events, as those
events were cancelled or had a significantly restricted (or entirely eliminated) the number of permitted attendees. Both ambulance transports
and event-related revenues have since recovered to pre-COVID levels or higher.
There are two areas where the Company has experienced
positive business impacts from COVID-19. In April and May 2020, the Company participated in an emergency project with Federal Emergency
Management Agency (“FEMA”) in the New York City area. This engagement resulted in incremental transportation revenue. In addition,
in response to the need for widespread COVID-19 testing and available Emergency Medical Technicians (“EMT”) and Paramedics,
the Company formed a new subsidiary, Rapid Reliable Testing, LLC (“RRT”), with the goal to perform COVID-19 tests at nursing
homes, municipal sites, businesses, schools and other venues. RRT is part of the Mobile Health segment.
Medicare
Accelerated Payments
Medicare accelerated payments of approximately
$2,397,024 were received by the Company in April 2020. Effective October 8, 2020, CMS is no longer accepting new applications for accelerated
payments. Accordingly, the Company does not expect to receive additional Medicare accelerated payments. Payments under the Medicare Accelerated
and Advance Payment program are advances that must be repaid. Effective October 1, 2020, the program was amended such that providers are
required to repay accelerated payments beginning one year after the payment was issued. After such one-year period, Medicare payments
owed to providers will be recouped according to the repayment terms. The repayment terms specify that for the first 11 months after repayment
begins, repayment will occur through an automatic recoupment of 25% of Medicare payments otherwise owed to the provider. At the end of
the eleven-month period, recoupment will increase to 50% for six months. At the end of the six months (or 29 months from the receipt of
the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, as applicable. In such event,
if payment is not received within 30 days, interest will accrue at the annual percentage rate of four percent (4%) from the date the letter
was issued and will be assessed for each full 30-day period that the balance remains unpaid. There were no Medicare accelerated payments
reflected within accrued liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2022, compared to $975,415 as of December
31, 2021. The Company’s estimate of the current liability is a function of historical cash receipts from Medicare and the repayment
terms set forth above.
20. Subsequent Events
On July 6, 2022, Holdings acquired Government
Medical Services, LLC (“GMS”) in exchange for $19 million in cash. GMS is engaged in the business of providing licensed healthcare
clinicians.
On July 13, 2022, the Company acquired Exceptional
Medical Transportation, LLC (“Exceptional”) in exchange for $6.4 million in cash. Exceptional is in the business of providing
medical transportation services.
On July 20, 2022, Ambulnz Community Partners LTD,
a subsidiary of the Company located in United Kingdom, entered into a financing agreement to acquire six ambulances. The total purchase
price was approximately £0.6 million GBP (approximately $0.7 million), payable in 60 monthly installment payments starting on August
26, 2022.
