UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period
from to
Commission File Number 001-39618
DocGo Inc.
(Exact name of Registrant as specified in its Charter)
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Delaware |
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85-2515483 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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| |
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35 West 35th Street, Floor 6
New York, New York
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10001 |
| (Address of principal executive
offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (844)
443-6246
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each
class |
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Trading Symbol(s) |
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Name of each exchange on which
registered
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| Common
Stock, par value $0.0001 per share |
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DCGO |
|
The
Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities
Act. YES ☐ NO ☒
Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter
period that the Registrant was required to submit such
files). YES ☒ NO ☐
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
Accelerated filer |
☒ |
| Non-accelerated filer |
☐ |
Smaller reporting company |
☒ |
| Emerging growth company |
☒ |
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|
If an emerging growth company, indicate by check mark if the
Registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the Registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report. ☐
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). YES ☐ NO ☒
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of June 30,
2022, based on the closing price of the shares of common stock on
The Nasdaq Stock Market as of such date was $615,536,965. Shares of
common stock held by each executive officer and director and by
each person who is known to own 10% or more of the outstanding
common stock have been excluded in that such persons may be deemed
to be affiliates of the Registrant. This determination of affiliate
status is not necessarily a conclusive determination for other
purposes.
The number of shares of Registrant’s Common Stock outstanding as of
March 10, 2023 was 102,508,188.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for its 2023 Annual
Meeting of Stockholders are incorporated by reference into Part III
of this Annual Report on Form 10-K where indicated. The Registrant
expects to file such proxy statement with the Securities and
Exchange Commission within 120 days of the Registrant’s fiscal year
ended December 31, 2022.
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), regarding, among other things, the
plans, strategies, outcomes, and prospects, both business and
financial, of the Company. These statements are based on the
beliefs and assumptions of our management. Although the Company
believes that its plans, intentions and expectations reflected in
or suggested by these forward-looking statements are reasonable,
the Company cannot assure you that it will achieve or realize these
plans, intentions, outcomes or expectations. Forward-looking
statements are inherently subject to substantial risks,
uncertainties and assumptions, many of which are beyond our
control, and which may cause actual results to differ materially
from those contained in our forward-looking statements.
Accordingly, you should not place undue reliance on such
statements. All statements other than statements of historical fact
are forward-looking. Forward-looking statements include, but are
not limited to, statements concerning possible or assumed future
actions, business strategies, plans, goals, future events, future
revenues or performance, financing needs, business trends, results
of operations, objectives and intentions with respect to future
operations, services and products, including our transition to
non-COVID related services, geographic expansion, normalization
initiative, new and existing contracts, M&A activity, workforce
growth, leadership transition, cash position, share repurchase
program, our competitive position and opportunities, including our
ability to realize the benefits from our operating model, and
others. In some cases, these statements may be preceded by,
followed by or include the words “believes,” “estimates,”
“expects,” “projects,” “forecasts,” “may,” “might,” “will,”
“should,” “could,” “can,” “would,” “design,” “potential,” “seeks,”
“plans,” “scheduled,” “anticipates,” “intends” or the negative of
these terms or similar expressions.
Forward-looking statements are not guarantees of performance and
speak only as of the date the statements are made. While DocGo
believes that these forward-looking statements are reasonable,
there can be no assurance that DocGo will achieve or realize these
plans, intentions, outcomes or expectations. You should understand
that the following important factors, in addition to those
discussed under the heading “Risk Factors” and elsewhere in
this Annual Report on Form 10-K, could affect the future results
and prospects of DocGo and could cause those results or other
outcomes to differ materially from those expressed or implied in
the forward-looking statements in this Annual Report on Form
10-K.
We undertake no intent or obligation to publicly update or revise
any forward-looking statements, whether because of new information,
future events, or otherwise.
Risk Factors Summary
Risks Related to DocGo’s Business Strategy
| |
● |
DocGo’s
failure to successfully implement its business strategy could
adversely affect its business. |
| |
● |
DocGo
relies on its contractual relationships with healthcare provider
partners and other strategic partners. |
| |
● |
DocGo
incurs significant up-front costs in its client relationships and
any inability to maintain and grow these client relationships over
time or to recover these costs could adversely affect its
business. |
Risks Related to DocGo’s Business and Industry
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● |
The
COVID-19 pandemic has materially impacted DocGo’s
business. |
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● |
DocGo’s
faces a high level of competition in its industry and its revenue
could be adversely affected if it loses some or all of its business
under existing contracts. |
Risks Related to DocGo’s Limited Operating History
| |
● |
DocGo
has a limited operating history and has a history of losses and
expects its operating expenses to increase significantly in the
future, |
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● |
DocGo
may not be able to effectively manage its growth. |
| |
● |
DocGo’s
reduced disclosure requirements may make its Common Stock less
attractive to investors. |
Risks Related to Information Technology
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● |
DocGo
relies on data center providers, Internet infrastructure, bandwidth
providers, third-party hardware and software, other third parties
and its own systems, some of which contain open-source software, to
provide services to its clients. |
| |
● |
DocGo’s
proprietary software may not operate properly, or it may not be
able to implement its solution for clients or resolve technical
issues in a timely manner. |
| |
● |
Security
breaches, loss of data and other disruptions could compromise
sensitive business, customer or patient information or prevent
DocGo from accessing critical information and expose it to
liability. |
Risks Related to DocGo’s Operations
| |
● |
DocGo’s
success depends on its key management personnel as well as its
ability to successfully recruit, train and retain qualified
healthcare professionals and its labor costs are
significant. |
| |
● |
DocGo’s
inability to collect on its receivables or unfavorable payor mix
could adversely affect its business. |
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● |
DocGo
may not accurately assess the costs it will incur under new revenue
opportunities. |
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● |
DocGo
may not be able to successfully develop new offerings and
technologies, or its marketing efforts may not be
effective. |
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● |
DocGo
is required to make capital expenditures in order to remain
compliant and competitive. |
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● |
DocGo’s
international operations subject it to additional risks that could
adversely affect its business. |
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● |
DocGo
could be adversely affected by natural disasters, other
catastrophic events and cybersecurity incidents. |
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● |
Rising
inflation may negatively impact DocGo’s business and financial
results. |
Risks Related to DocGo’s Intellectual Property
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● |
DocGo’s
failure to protect or enforce its intellectual property rights,
including from claims of infringement, could adversely affect its
business. |
Risks Related to DocGo’s Legal and Regulatory
Environment
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● |
DocGo
could be subject to lawsuits for which it does not have sufficient
reserves. |
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● |
DocGo
is subject to a variety of federal, state and local laws and
regulatory regimes. |
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● |
Changes
in tax laws, unanticipated tax liabilities; accounting rules,
assumptions or judgements could adversely affect DocGo,
including its effective tax rate, ability to utilize its net
operating loss carryforwards and certain other tax
attributes. |
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● |
DocGo’s
internal control over financial reporting may not be
effective. |
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● |
DocGo
conducts business in a heavily regulated industry and any failure
to comply with these laws and government regulations, including
laws governing the transmission, security and privacy of health
information, or any changes to these laws, could negatively affect
DocGo. |
| |
● |
DocGo
must be properly enrolled in governmental healthcare programs to
receive reimbursement, and reductions in Medicare reimbursement
rates or state and federal efforts to reduce Medicaid spending
could have a material adverse effect on DocGo. |
|
|
● |
DocGo
has been and could become the subject of federal and state
investigations and compliance reviews, and its business practices
may be found to constitute illegal fee-splitting or corporate
practice of medicine. |
Risks Related to DocGo’s Indebtedness
| |
● |
DocGo’s
future indebtedness could reduce the funds that would otherwise be
available for other corporate purposes, and it may still be able to
incur substantially more debt. |
| |
● |
DocGo
may be forced to take various actions to satisfy its obligations
under its current and future indebtedness, and the terms of its
current and future indebtedness may restrict its
operations. |
Risk Relating to the Ownership of DocGo Common Stock
|
|
● |
Nasdaq
may delist DocGo’s securities from trading on its
exchange. |
| |
● |
The
market price and trading volume of Common Stock may be volatile and
you may not receive any return on your investment in DocGo’s Common
Stock. |
|
|
● |
Provisions
in DocGo’s organizational documents could delay or prevent a change
of control or limit stockholders’ ability to obtain a favorable
judicial forum for disputes with DocGo or its directors, officers,
employees or stockholders. |
PART I
Item 1. Business.
Our Company
DocGo, Inc. (“DocGo,”“we,” “us,” “our” and “the Company”) aims to
redefine access to healthcare. We strive to deliver high-quality,
cost-effective healthcare mobility solutions and unlock the
further promise and potential of telehealth treatment through our
“last-mile” care capabilities. We do so by leveraging our
proprietary technology platform powered by artificial intelligence
(“AI”), and our network of healthcare professionals, which has
provided service in 29 states and in the United Kingdom. We
often provide our services in collaboration with leading healthcare
organizations, via long-term relationships that are intended
to drive meaningful revenue, help provide efficient and effective
capital allocation and create low-risk opportunities for
significant growth.
Our mission is to provide high quality, highly accessible
healthcare for all, empowering the delivery of medical
transportation and mobile healthcare outside the traditional
“brick-and-mortar” facilities, with more accessible, affordable,
and efficient patient-centered care. Since our founding in 2015,
through more than 8 million patient interactions, we have
created a care delivery model that helps provide better care
outside of the physical walls of the healthcare system. We began by
developing a state-of-the-art, intuitive platform designed to drive
greater efficiency and improved access to patient care. Our
innovative technology can change the way healthcare facilities
manage patient transportation and eliminate many of the common
obstacles faced when scheduling service, ultimately freeing medical
professionals to focus more time and their valuable resources on
what they do best — providing patient care. Additionally,
in certain markets, our Mobile Health in-person care model
facilitates medical treatment directly to patients in the comfort
of their homes, workplaces, and other
non-traditional locations. Working under the guidance of
prescribing physicians, our network (which includes both company
employees and personnel from a variety of subcontracted labor
agencies and some independent contractors) of more than 5,000
medical clinicians including Emergency Medical Technicians
(“EMTs”), paramedics, licensed practical nurses (“LPNs”),
registered nurses (“RNs”) Advanced Practice Providers (“APPs”) and
support staff, provides a wide range of tests, procedures and
interventions that previously required a visit to a traditional
healthcare setting.
Our Segments
Mobile Health Solutions
The traditional healthcare model requires patients to interact with
many levels of healthcare providers — including
receptionists, nurses, lab technicians and
physicians — for even the most routine tests, procedures
and interventions. We recognized that a number of these services
could easily be performed by EMTs, paramedics and LPNs under the
guidance of physicians, but in the comfort of a patient’s home or
workplace. Our patient-centered approach helps limit the need for
individuals to seek routine treatment in more expensive and
environmentally exposed, less comfortable settings such as
emergency departments and urgent care clinics. In addition to
providing greater convenience to patients, our Mobile
Health solutions help reduce unnecessary burdens on
healthcare systems, by freeing up their finite,
in-person resources to address more urgent and critical
patient needs. DocGo’s Mobile Health clinical services, which we
expanded into the home and workplace in 2020, facilitate medical
care via a turnkey suite of integrated, “last-mile” solutions.
Through DocGo On-Demand and additional Mobile Health programs
including expanded population offerings, we provide holistic
health, social and shelter coordination services to underserved
communities. Our services and solutions include
on-site evaluation, diagnostics, triage, and treatment as
detailed in the following table:
As patients seek more
efficient, more convenient healthcare options, we believe our
virtual care-enabling solutions are poised for significant growth,
by delivering in-person patient care previously inaccessible
outside of the more traditional healthcare settings. We partner
with leading national health systems, insurance carriers, private
organizations and employers, state and local governments and
managed care organizations, to provide our Mobile Health solutions,
including NYC Health + Hospitals, New York City Department of
Homeless Services, Dollar General, and Mount Sinai Health System.
For the fiscal year ended December 31, 2022, we generated
approximately 74.0% of our revenues from the solutions provided by
our Mobile Health segment.
The success of our care
delivery model is reflected in our NPS, or Net Promoter Score,
which is one of the most widely accepted standards of customer
experience metrics. Scores are measured from a range of -100
to +100 with scores over 30 commonly viewed as good and over 50
considered excellent. Our Q4 mobile health NPS score was 76,
which is a testament to our customers’ strong perception regarding
the value of DocGo’s services.
Transportation Services
DocGo’s digitally-enabled medical mobility solutions are offered
under the Ambulnz brand. We help provide reliable, efficient access
to local clinical services, including primary and specialty care,
dialysis treatments for chronic care management, and transfers
between clinical settings. Every vehicle in our fleet is equipped
with our proprietary technology platform, which is integrated with
some of the nation’s largest electronic medical record (“EMR”)
systems.
This integration is designed to provide seamless transfer of
electronic patient information and discharge data to our healthcare
provider customers, which helps improve order speed and accuracy,
and helps eliminate a myriad of manual processes. Consequently, our
healthcare facility customers are better able to order, track and
manage transportation requests and patient movement, thereby
enhancing utilization of resources and cost. Our
ShareLinkTM technology is designed to provide our
healthcare partners and patients with real-time vehicle locations
and accurate estimated time of arrivals and helps deliver valuable
peace of mind. As of December 31, 2022, we had 381 ambulances in
service throughout the United States, and more than 300 in the
United Kingdom. For the fiscal year ended December 31, 2022, we
generated approximately 26.0% of our revenues from this
segment.
Human Capital Resources
We strive to hire the best talent across our industry, with a focus
on inspiring performance. As of December 31, 2022, we had over
3,200 employees, including healthcare professionals, field
management personnel and corporate support staff, as represented in
the table below. Healthcare professionals consist of EMTs,
paramedics, LPNs, RNs, APPs, clinicians and related support staff;
field management personnel includes supervisors and managers; and
corporate support staff includes software development, billing,
finance, sales, marketing, and executives.
| |
|
Full-time |
|
|
Part-time |
|
|
Total |
|
| Healthcare
Professionals |
|
|
1,570 |
|
|
|
1,180 |
|
|
|
2,750 |
|
| Field Management |
|
|
138 |
|
|
|
3 |
|
|
|
141 |
|
| Corporate
Support |
|
|
356 |
|
|
|
5 |
|
|
|
361 |
|
| Total |
|
|
2,064 |
|
|
|
1,188 |
|
|
|
3,252 |
|
None of our employees are represented by a labor union or subject
to any collective bargaining agreement. In addition to the
employees above, as of December 31, 2022, the Company engaged the
services of approximately 2,135 people, primarily in the healthcare
professional area, through a variety of subcontracted labor
agencies and some independent contractors.
Recruiting
We consider our employees to be our most valuable assets. Our
employee experience begins with identifying and attracting people
who embody our core values and share our vision to provide
high-quality patient care. We are committed to building a company
that our employees are proud to be a part of, and fostering an
environment in which our employees can grow, evolve and discover
their existing and untapped potential. We believe our focused
approach to recruiting and developing talent allows us to attract
strong candidates to continue growing and scaling our business.
Compensation and Benefits
Ongoing evolution in the healthcare system and an aging population
mean EMTs, paramedics and nurses are more critical to medical care
than ever before, yet EMTs and paramedics remain the lowest paid
professionals in the chain of care. Most companies in the industry
pay an hourly wage only, and offer no benefits, often resulting in
low employee morale, high turnover, and ultimately a less efficient
business. We take pride in our high-quality medical professionals
and have created an attractive compensation model that demonstrates
their vital importance to our business and motivates them to
deliver exceptional care.
We offer a pay package which we believe is innovative within our
industry. In addition to base hourly wages, DocGo also offers
employees bonuses based on certain performance metrics, medical
insurance, paid time off, and an equity incentive plan for our
frontline clinicians with broad-based rank and file
participation — a program that provides the opportunity to
acquire an ownership stake in our company. This is in line with our
belief that all of our employees are partners in the business, and
we want everyone to “think like an owner,” with the best long-term
interests of the Company and its shareholders as a driver of
decision making. We believe that this approach makes us a more
attractive employer and supports a strong pipeline of top-tier
talent across all levels of our company.
Employee Engagement
We routinely monitor employee
satisfaction, and work to maintain an environment where employees
can contribute and thrive. DocGo has been recognized for its
excellent workplace culture and employee satisfaction. One measure
of this are the hundreds of positive reviews our employees have
given DocGo on leading recruitment websites. DocGo’s employee
rating on Indeed is currently 4.3 out of 5.0, and our employee
rating on Glassdoor is 4.8 out of 5.0 - ratings that are
significantly higher than our industry averages.
Training
We have also created a number of programs to foster the
professional development of our employees and to help attract
top-tier talent. To help our staff continue to build clinical
skills, we created a Medical Mentorship Program whereby EMTs and
paramedics can learn advanced medical techniques including
phlebotomy, mobile ultrasound, EKG training, point of care testing,
vaccine administration, and wound care. Once certified, our
employees can put these newly acquired skills to use while
providing our Mobile Health services.
Our staff of ten training coordinators runs a robust, in-person
onboarding program to help train employees and keep them up to date
in relevant procedures and protocols. We are an official American
Heart Association Training Site and offer all of our employees
in-house basic life support (BLS), advanced cardiovascular
life support (ACLS), and pediatric advanced life support (PALS)
training and certification.
We have also implemented a virtual training program for company
policy and procedures training, mandated OSHA training courses,
hazardous materials awareness, FEMA Incident Command Systems
training (100, 200, 700, 800), clinical skills, customer service,
diversity, HIPAA regulations, safety and compliance, on-site
traffic control, and annual documentation training.
Our drivers are additionally trained in emergency vehicle operator
course (EVOC) and Coaching the Emergency Vehicle Operator (CEVO) 4
driver training, vehicle maintenance incident reporting, transport
risk assessment, critical care transport orientation, and fatigue
abatement. Our system is utilized for credential tracking and
Continuous Quality Improvement, so that our staff maintains all
required credentials relevant to their positions with our
company.
Employees and their supervisors are automatically notified at
designated times of recertification deadlines. Course completion,
assignments, and other compliance requirements are tracked in this
system as well. Verification monitoring ensures that all employees
meet current state requirements. This tool verifies Office of
Inspector General (“OIG”) of the U.S. Department of Health and
Human Services (“HHS”) exclusions at the state and federal levels
and performs sanction screening for licensed personnel and 24/7
monitoring of state board licenses.
Our comprehensive training programs utilize a full range of
resources, including print materials, training modules, webinars,
seminars, and videos provided by the Centers for Disease Control
and Prevention, and federal, state, and local entities, medical
institutions, and public health agencies.
In December 2021, we launched DocGo EMS Academy, a full-service
program dedicated to recruiting and training EMS clinicians.
Combining classroom education with practical hands-on learning, the
programs are designed to help existing healthcare professionals
advance their careers and provide aspiring entry-level workers with
the opportunity to enter the healthcare industry. DocGo EMS Academy
is tailored to EMS workers, from EMTs to paramedics. This
comprehensive training program is available in select states and
offers free tuition for students who continue their employment with
DocGo, which we anticipate could assist us in our recruiting
efforts.
Merger with Motion Acquisition Corp.
On November 5, 2021 (the “Closing Date”), DocGo Inc., a Delaware
corporation (formerly known as Motion Acquisition Corp. “Motion”
prior to the Closing Date 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,
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, net of
transaction costs of $20.0 million. 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.
Competition
The U.S. healthcare industry is highly competitive, and we
compete with a broad and diverse set of companies spanning both of
our business segments. The competitive landscape is highly
fragmented for both medical mobility services and “last-mile”
healthcare solutions, ranging in each case from small, locally
owned and operated providers to large national organizations. While
we do not believe that any single competitor offers our full suite
of mobility solutions and “last-mile” healthcare services, numerous
companies offer components of medical mobility transportation
and/or telehealth services that compete with our solutions.
Success in the medical transportation industry is based primarily
on the ability to improve customer service, such as on-time
performance and efficient call intake; to provide comprehensive
clinical care; and to recruit, train and motivate employees,
particularly ambulance crews who have direct contact with patients
and healthcare personnel. Pricing, billing and reimbursement
expertise are also critical. Competitors within the industry vary
considerably in type and identity by market, with our primary
competitors being small, locally owned operators as well as local
fire departments and other local government providers. Larger
private provider competitors include Rural/Metro Corporation,
Falck, American Medical Response (AMR), Southwest Ambulance,
Paramedics Plus and Acadian Ambulance.
Competition in the mobile health industry is primarily based on
scale; ease of use, convenience and accessibility; brand
recognition; breadth, depth, and efficacy of telehealth services;
technology; clinical quality; customer support; cost; reputation;
and customer satisfaction and value. The major competitors include
much larger, national or regional telehealth providers such as
Dispatch Health, Teladoc, Amwell, and One Medical (acquired by
Amazon in February 2023) that generally provide telehealth on
behalf of self-insured employers and insurance plans. These
competitors, however, generally do not provide direct patient care
or “last-mile” care on behalf of the provider organization. We also
believe there are several smaller, private organizations providing
in-home or on-site care utilizing different, higher cost
healthcare providers. Non-traditional providers and others
such as payors may enter the space and/or develop innovative
technologies or business activities that could disrupt the
industry. Competition could also increase from large technology
companies, such as Apple, Amazon, Facebook, Verizon, or Microsoft,
who may develop their own telehealth solutions or acquire existing
industry participants, such as Amazon’s acquisition of One Medical
in February 2023, as well as from large retailers like Walmart, CVS
and others. Despite the significant growth of telehealth services
in recent years, we believe the market is still in its infancy
and new competitors with similar and novel models will enter the
market as it matures.
Intellectual Property
We own and use trademarks and service marks on or in connection
with our services, including both unregistered common law marks and
registered trademarks. We have registered “Ambulnz” and our
corporate logo in the United States and the United Kingdom. We have
registered “DocGo” word mark and design in the both the United
States and the United Kingdom and are in the process of registering
both in the EU. We are also the registered holder of a variety of
domain names that include “Ambulnz”, “DocGo” and similar
variations.
Our proprietary platform, mobile application, and associated
software code and firmware are protected as trade secrets and our
confidential information, as appropriate. We also license the use
of certain technology and other intellectual property rights owned
and controlled by others. We believe that our intellectual property
is a valuable asset to our business that affords us a competitive
advantage in the markets in which we operate. We maintain our
intellectual property and confidential business information in a
number of ways. For instance, we have a policy requiring all
companies we work with to execute confidentiality agreements upon
commencement of any business relationship with us. Our agreements
with customers include confidentiality and non-disclosure
provisions, as well.
We require our employees, independent contractors and consultants
to execute confidentiality and proprietary agreements in connection
with their employment or consulting relationships with us and to
assign to us inventions conceived during the term of their
employment or engagement while using our property or which relate
to our business.
Upon discovery of potential infringement of our intellectual
property, we assess and, when necessary, take action to protect our
rights as appropriate.
Regulation
Our operations are subject to comprehensive United States
federal, state and local rules and regulations and comparable
multiple levels of international regulation in the jurisdictions in
which we do business. The laws and regulations governing our
business and interpretations of those laws and regulations continue
to expand, are subject to frequent change and may become more
restrictive. Our ability to operate profitably will depend in part
upon our ability, and that of our healthcare provider partners, to
maintain all necessary licenses and to operate in compliance with
applicable laws and regulations. We therefore devote significant
resources to monitoring developments in healthcare regulation. As
the applicable laws and regulations change, we may be required to
make conforming modifications in our business processes from time
to time. In many jurisdictions where we operate, neither our
current nor our anticipated business model, in particular with
respect to our Mobile Health related services, has been the subject
of judicial or administrative interpretation. We cannot be assured
that a review of our business by courts or regulatory authorities
will not result in determinations that could limit or otherwise
adversely affect our operations or that the healthcare regulatory
environment will not change in a way that restricts our
operations.
False Claims Act
The federal False Claims Act is a means of policing false bills or
false requests for payment in the healthcare delivery system. Among
other things, the federal False Claims Act authorizes the
imposition of up to three times the government’s damages and
significant per claim civil penalties on any “person” (including an
individual, organization or company) who, among other acts:
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knowingly presents or causes to be presented to
the federal government a false or fraudulent claim for payment or
approval; |
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knowingly makes, uses or causes to be made or
used a false record or statement material to a false or fraudulent
claim; |
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knowingly makes, uses or causes to be made or
used a false record or statement material to an obligation to pay
the government, or knowingly conceals; |
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knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the federal
government; or |
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conspires to commit the above acts. |
In addition, amendments to the federal False Claims Act and Social
Security Act impose severe penalties for the knowing and improper
retention of overpayments collected from government payors. Under
these provisions, within 60 days of identifying and
quantifying an overpayment, a provider is required to notify the
Centers for Medicare and Medicaid Services (“CMS”), or the Medicare
Administrative Contractor of the overpayment and the reason for it
and return the overpayment. An overpayment impermissibly retained
could subject a party to liability under the federal False Claims
Act, exclusion from government healthcare programs, including
Medicare and Medicaid, and penalties under the federal Civil
Monetary Penalties Law discussed below.
The penalties for a violation of the federal False Claims Act range
from $5,500 to $11,000 (adjusted for inflation) for each false
claim, plus up to three times the amount of damages caused by each
false claim, which can be as much as the amounts received directly
or indirectly from the government for each such false claim. On
June 19, 2020, the U.S. Department of Justice (“DOJ”)
issued a final rule announcing adjustments to federal False Claims
Act penalties, under which the per claim range increases to a range
from $11,803 to $23,607 per claim, so long as the underlying
conduct occurred after November 2, 2015.
The federal government has used the statute to prosecute a wide
variety of alleged false claims and fraud allegedly perpetrated
against Medicare and state healthcare programs, including but not
limited to coding errors, billing for services not rendered, the
submission of false cost or other reports, billing for services at
a higher payment rate than appropriate, billing under a
comprehensive code as well as under one or more component codes
included in the comprehensive code, billing for care that is not
considered medically necessary and false reporting of risk-adjusted
diagnostic codes to Medicare Advantage (or Part C) Plans. The
Affordable Care Act, as currently structured, provides that claims
tainted by a violation of the federal Anti-Kickback Statute
are false for purposes of the federal False Claims Act. Some courts
have held that filing claims or failing to refund amounts collected
in violation of the Stark Law can form the basis for liability
under the federal False Claims Act. In addition to the provisions
of the federal False Claims Act, which provide for civil
enforcement through “qui tam” whistleblower lawsuits, the federal
government can also use several criminal statutes to prosecute
persons who are alleged to have submitted false or fraudulent
claims for payment to the federal government.
Federal Fraud and Abuse Laws
The federal Health Insurance Portability and Accountability
Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act (“HITECH”), and
their implementing regulations and related rules (collectively,
“HIPAA”), established several separate criminal penalties for
making false or fraudulent claims to insurance companies and other
non-governmental payors of healthcare services. Under HIPAA, these
two additional federal crimes are: “Healthcare Fraud” and “False
Statements Relating to Healthcare Matters.” The Healthcare Fraud
statute prohibits knowingly and recklessly executing a scheme or
artifice to defraud any healthcare benefit program, including
private payors. A violation of this statute is a felony and may
result in fines, imprisonment or exclusion from government
sponsored programs. The False Statements Relating to Healthcare
Matters statute prohibits knowingly and willfully falsifying,
concealing or covering up a material fact by any trick, scheme or
device or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for
healthcare benefits, items or services. A violation of this statute
is a felony and may result in fines or imprisonment. This statute
could be used by the government to assert criminal liability if a
healthcare provider knowingly fails to refund an overpayment. These
provisions are intended to punish some of the same conduct in the
submission of claims to private payors as the federal False Claims
Act covers in connection with governmental health programs.
In addition, the Civil Monetary Penalties Law imposes civil
administrative sanctions for, among other violations, inappropriate
billing of services to federally funded healthcare programs and
employing or contracting with individuals or entities who are
excluded from participation in federally funded healthcare
programs. Moreover, a person who offers or transfers to a Medicare
or Medicaid beneficiary any remuneration, including waivers of
co-payments and deductible amounts (or any part thereof), that the
person knows or should know is likely to influence the
beneficiary’s selection of a particular provider, practitioner or
supplier of Medicare or Medicaid payable items or services may be
liable for civil monetary penalties of up to $20,000 for each
wrongful act. Moreover, in certain cases, providers who routinely
waive co-payments and deductibles for Medicare and Medicaid
beneficiaries can also be held liable under the federal
Anti-Kickback Statute and federal False Claims Act, either of
which can impose additional penalties associated with the wrongful
act. One of the statutory exceptions to the prohibition is
non-routine, unadvertised waivers of co-payments or deductible
amounts based on individualized determinations of financial need or
exhaustion of reasonable collection efforts. The OIG emphasizes,
however, that this exception should only be used occasionally to
address special financial needs of a particular patient. Although
this prohibition applies only to federal healthcare program
beneficiaries, the routine waivers of co-payments and
deductibles offered to patients covered by commercial payors may
implicate applicable state laws related to, among other things,
unlawful schemes to defraud, excessive fees for services, tortious
interference with patient contracts and statutory or common law
fraud.
State Fraud and Abuse Laws
Various states in which we operate have also adopted similar fraud
and abuse laws as the federal laws and statutes described above.
The scope of these laws and the interpretations thereof vary from
state to state and are enforced by state courts and regulatory
authorities, each with broad discretion. Some state fraud and abuse
laws apply to items or services reimbursed by any payor, including
patients and commercial insurers, not just those reimbursed by a
federally funded healthcare program. A determination of liability
under such state fraud and abuse laws could result in fines and
penalties and restrictions on our ability to operate in these
jurisdictions.
Health Information Privacy and Security Laws
There are numerous U.S. federal and state laws and regulations
related to the privacy and security of personally identifiable
information (“PII”), including health information. In particular,
HIPAA establishes privacy and security standards that limit the use
and disclosure of protected health information (“PHI”), and require
the implementation of administrative, physical, and technical
safeguards to ensure the confidentiality, integrity and
availability of individually identifiable health information in
electronic form. HIPAA’s requirements to “covered entities” and to
their independent contractors, agents and other “business
associates” that create, receive, maintain or transmit PHI in
connection with providing services to covered entities. Although we
are a covered entity under HIPAA, we are also a business associate
of other covered entities when we are working on behalf of our
healthcare provider partners.
Violations of HIPAA may result in civil and criminal penalties. The
civil penalties range from $119 to $59,522 per violation, with a
cap of $1.8 million per year for violations of the same
standard during the same calendar year. However, a single breach
incident can result in violations of multiple standards. We must
also comply with HIPAA’s breach notification rule. Under the breach
notification rule, covered entities must notify affected
individuals without unreasonable delay in the case of a breach of
unsecured PHI, which may compromise the privacy, security or
integrity of the PHI. In addition, notification must be
provided to HHS and the local media in cases where a breach affects
more than 500 individuals. Breaches affecting fewer than 500
individuals must be reported to HHS on an annual basis. The
regulations also require business associates of covered entities to
notify the covered entity of breaches by the business
associate.
State attorneys general also have the right to prosecute HIPAA
violations committed against residents of their states. While HIPAA
does not create a private right of action that would allow
individuals to sue in civil court for a HIPAA violation, its
standards have been used as the basis for the duty of care in state
civil suits, such as those for negligence or recklessness in
misusing personal information. In addition, HIPAA mandates that HHS
conduct periodic compliance audits of HIPAA-covered entities and
their business associates for compliance. It also tasks HHS with
establishing a methodology whereby harmed individuals who were the
victims of breaches of unsecured PHI may receive a percentage of
the fine paid by the violator under the Civil Monetary Penalties
Law paid by the violator. In light of recent enforcement activity,
and statements from HHS, we expect increased federal and state
HIPAA privacy and security enforcement efforts.
HIPAA also requires HHS to adopt national standards establishing
electronic transaction standards that all healthcare providers must
use when submitting or receiving certain healthcare transactions
electronically.
Many states in which we operate and in which our customers reside
also have laws that protect the privacy and security of sensitive
and personal information, including health information. These laws
may be similar to or even more protective than HIPAA and other
federal privacy laws. For example, the laws of the State of
California, in which we operate, are more restrictive than
HIPAA. Where state laws are more protective than HIPAA, we
must comply with the state laws we are subject to, in addition to
HIPAA. In certain cases, it may be necessary to modify our
systems or planned operations to comply with these more stringent
state laws. Not only may some of these state laws impose fines and
penalties upon violators, but also some, unlike HIPAA, may afford
private rights of action to individuals who believe their personal
information has been misused. In addition, state laws are changing
rapidly, and there is discussion of a new federal privacy law or
federal breach notification law, to which we may be subject.
In recent years, there have been a number of well-publicized
data breaches involving the improper use and disclosure of PII and
PHI. Many states have responded to these incidents by enacting
laws requiring holders of personal information to maintain
safeguards and to take certain actions in response to a data
breach, such as providing prompt notification of the breach to
affected individuals and state officials. In addition, under HIPAA
and pursuant to the related contracts that we enter into with our
healthcare provider partners and other third parties, we must
report breaches of unsecured PHI to our contractual partners
following discovery of the breach. Notification must also be made
in certain circumstances to affected individuals, federal
authorities and others.
In addition to HIPAA, state health information privacy and state
health information privacy laws, we may be subject to other state
and federal privacy laws, including laws that prohibit unfair
privacy and security practices and deceptive statements about
privacy and security and laws that place specific requirements on
certain types of activities, such as data security and texting.
Anti-Kickback Statute
The federal Anti-Kickback Statute is a broadly worded prohibition
on the knowing and willful offer, payment, solicitation or receipt
of any form of remuneration in return for, or to induce,
(i) the referral of a person covered by Medicare, Medicaid or
other governmental programs, (ii) the furnishing or arranging
for the furnishing of items or services reimbursable under
Medicare, Medicaid or other governmental programs or (iii) the
purchasing, leasing or ordering or arranging or recommending
purchasing, leasing or ordering of any item or service reimbursable
under Medicare, Medicaid or other governmental programs. Certain
federal courts have held that the Anti-Kickback Statute can be
violated if “one purpose” of a payment is to induce referrals. In
addition, a person or entity does not need to have actual knowledge
of this statute or specific intent to violate it to have committed
a violation, making it easier for the government to prove that a
defendant had the requisite state of mind or “scienter” required
for a violation. Moreover, the government may assert that a claim
including items or services resulting from a violation of the
Anti-Kickback Statute constitutes a false or fraudulent claim
for purposes of the federal False Claims Act. Violations of the
Anti-Kickback Statute can result in exclusion from Medicare,
Medicaid or other governmental programs as well as civil and
criminal penalties, including fines of $104,330 per violation, plus
up to three times the amount of the unlawful remuneration, and
imprisonment of up to ten years. Civil penalties for such
conduct can further be assessed under the federal False Claims Act.
In addition to a few statutory exceptions, the OIG has published
safe harbor regulations that outline categories of activities that
are deemed protected from prosecution under the
Anti-Kickback Statute provided all applicable criteria are
met. The failure of a financial relationship to meet all of the
applicable safe harbor criteria does not necessarily mean that the
particular arrangement violates the Anti-Kickback Statute.
However, conduct and business arrangements that do not fully
satisfy each applicable safe harbor may result in increased
scrutiny by government enforcement authorities, such as the
OIG.
Federal Stark Law
Section 1877 of the Social Security Act, also known as the
physician self-referral law and commonly referred to as the Stark
Law, prohibits a physician who has a financial relationship, or who
has an immediate family member who has a financial relationship,
with entities providing certain designated health services from
referring Medicare patients to such entities for the furnishing of
designated health services, unless an exception applies. Although
uncertainty exists, federal agencies and at least one court have
taken the position that the Stark Law also applies to Medicaid.
Designated health services are defined to include, among others,
clinical laboratory services, physical therapy services,
occupational therapy services, radiology services including
ultrasound services, durable medical equipment and supplies,
parenteral and enteral nutrients, equipment, and supplies, home
health services, outpatient prescription drugs, inpatient and
outpatient hospital services and outpatient
speech-language pathology services. The types of financial
arrangements between a physician and an entity providing designated
health services that trigger the self-referral prohibitions of
the Stark Law are broad and include direct and indirect ownership
and investment interests and compensation arrangements. The Stark
Law prohibits any entity providing designated health services that
has received a prohibited referral from presenting, or causing to
be presented, a claim or billing for the services arising out of
the prohibited referral. Similarly, the Stark Law prohibits an
entity from “furnishing” a designated health service to another
entity in which it has a financial relationship when that entity
bills for the service. The Stark Law also prohibits
self-referrals within an organization by its own physicians,
although broad exceptions exist. The prohibition applies regardless
of the reasons for the financial relationship and the referral.
Unlike the federal Anti-Kickback Statute discussed above, the
Stark Law is a strict liability statute, which means proof of
specific intent to violate the law is not required.
If the Stark Law is implicated, the financial relationship must
fully satisfy a Stark Law exception. If an exception is not
satisfied, then the parties to the arrangement could be subject to
sanctions, including denial of payment for claims for services
provided in violation of the statute, mandatory refunds of amounts
collected for such services, civil penalties of up to $25,820 for
each violation and twice the dollar value of each such service as
well as possible exclusion from future participation in the
federally funded healthcare programs, including Medicare and
Medicaid. A person who engages in a scheme to circumvent the Stark
Law’s prohibitions may be fined up to $172,137 for each applicable
arrangement or scheme. Amounts collected on claims related to
prohibited referrals must be reported and refunded generally within
60 days after the date on which the overpayment was
identified. In addition, the government and some courts have taken
the position that claims presented in violation of the various
statutes, including the Stark Law, and failure to return
overpayments in a timely manner can form the basis for liability
under the federal False Claims Act discussed below based on the
contention that a provider impliedly certifies compliance with all
applicable laws, regulations and other rules when submitting claims
for reimbursement.
U.S. Corporate Practice of Medicine; Fee
Splitting
The laws and regulations relating to our operations vary from state
to state and many states prohibit general business corporations,
such as us, from practicing medicine, controlling physicians’
medical decisions or engaging in some practices such as splitting
professional fees with physicians. We contract with healthcare
providers, physicians or physician-owned professional associations
and professional corporations as part of our business. An important
aspect of our strategy is to form contractual relationships with
different third-party providers pursuant to which we provide
them or their patients with medical transportation and/or
telehealth services and they pay us for those services out of the
fees they collect from patients and third-party payors. In
certain instances, we also share a portion of our revenues with our
partners. These contractual relationships are subject to various
state laws that prohibit fee splitting or the practice of medicine
by lay entities or persons and are intended to prevent unlicensed
persons from interfering with or influencing the physician’s
professional judgment. In addition, various state laws also
generally prohibit the sharing of professional services income with
nonprofessional or business interests. Activities other than those
directly related to the delivery of healthcare may be considered an
element of the practice of medicine in many states. Under the
corporate practice of medicine restrictions of certain states,
decisions and activities such as scheduling, contracting, setting
rates and the hiring and management of non-clinical personnel may
implicate the restrictions on the corporate practice of
medicine.
State corporate practice of medicine and fee-splitting laws vary
from state to state and are not always consistent. In addition,
these requirements are subject to broad powers of interpretation
and enforcement by state regulators. Regulatory authorities or
other parties may assert that, despite these arrangements, we are
engaged in the corporate practice of medicine or that our
contractual arrangements with affiliated third parties constitute
unlawful fee splitting. In this event, failure to comply could lead
to adverse judicial or administrative action against us and/or our
healthcare provider partners, civil or criminal penalties, receipt
of cease-and-desist orders from state regulators, loss of licenses,
and the need to make changes to the terms of engagement with our
provider partners that interfere with our business.
International Regulation
We expect to continue to expand our operations internationally
through both organic growth and acquisitions. Our international
operations are subject to different, and sometimes more stringent,
legal and regulatory requirements, which vary widely by
jurisdiction, including anti-corruption laws such as the Foreign
Corrupt Practices Act (“FCPA”), and corresponding foreign laws,
including the U.K. Bribery Act 2010; regulation by the
U.S. Treasury’s Office of Foreign Assets Control (“OFAC”) and
economic sanctions laws; various privacy, insurance, tax, tariff
and trade laws and regulations; corporate governance, privacy, data
protection, data mining, data transfer, labor and employment,
intellectual property, consumer protection and investment laws and
regulations; discriminatory licensing procedures; required
localization of records and funds; and limitations on dividends and
repatriation of capital.
Other Regulations
Our operations are subject to various state hazardous waste and
non-hazardous medical waste disposal laws. These laws do not
classify as hazardous most of the waste produced from healthcare
services. Occupational Safety and Health Administration regulations
require employers to provide workers who are occupationally subject
to blood or other potentially infectious materials with prescribed
protections. These regulatory requirements apply to all healthcare
facilities, including primary care centers, and require employers
to make a determination as to which employees may be exposed to
blood or other potentially infectious materials and to have in
effect a written exposure control plan. In addition, employers are
required to provide or deploy hepatitis B vaccinations, personal
protective equipment and other safety devices, infection control
training, post-exposure evaluation and follow-up, waste
disposal techniques and procedures and work practice controls.
Employers are also required to comply with various
record-keeping requirements.
Some of our operations may be subject to compliance with certain
provisions of the federal Fair Debt Collection Practices Act and
comparable statutes in many states. Under the Fair Debt Collection
Practices Act, a third-party collection company is restricted in
the methods it uses to contact consumer debtors and elicit payments
with respect to placed accounts. Requirements under state
collection agency statutes vary, with most requiring compliance
similar to that required under the Fair Debt Collection Practices
Act. Many of the states in which we operate have comparable state
statutes as well.
See the section of this Annual Report on Form 10-K titled “Risk
Factors — Risks Related to DocGo’s Legal and Regulatory
Environment.”
Available Information
We file or furnish electronically with the SEC our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and amendments to those reports. We make available on our
website at www.DocGo.com, under “Investors,” free of charge, copies
of these reports, and amendments thereto, as soon as reasonably
practicable after filing or furnishing these reports with the
SEC.
Item 1A. Risk Factors.
Risks Related to DocGo’s
Business Strategy
DocGo’s failure to successfully implement its business
strategy could adversely affect its business.
DocGo’s future financial performance and success is dependent in
large part upon its ability to implement its business strategy
successfully. DocGo’s business strategy includes several
initiatives, including developing contractual relationships with
new healthcare provider partners and expanding its business with
existing partners; capitalizing on organic growth opportunities
such as growing complementary and integrated service offerings,
particularly with respect to its mobile health solutions; pursuing
selective acquisitions to expand its geographic presence, among
other things; and enhancing operational efficiencies and
productivity. DocGo may not be able to implement its business
strategy successfully or achieve the anticipated benefits of its
business plan, which could adversely affect its
long-term growth, profitability and ability to service its
debt obligations. Even if DocGo is able to implement some or all of
the initiatives of its business plan, one or more initiatives may
not be successful or if successful, may not achieve the anticipated
goals, results or outcomes, and DocGo’s operating results may not
improve to the extent it anticipates, or at all, or it could be
adversely affected.
Implementation of DocGo’s business strategy could also be
negatively impacted by a number of factors beyond its control,
including increased competition, government regulation, general
macroeconomic conditions, including an inflationary environment,
rising interest rates and recessionary fears, the geopolitical
environment, including the war in Ukraine and rising tensions in
the Taiwan Strait, and pandemic or endemics, including COVID-19,
and increased operating costs, including costs of labor, or other
expenses. In particular, DocGo’s future success is contingent on
DocGo’s ability to both penetrate new markets and to further
penetrate existing markets, which is subject to a number of
uncertainties, including our ability to obtain necessary licenses
in new markets, to establish and grow new customer relationships
and our ability to attract and retain skilled personnel, many of
which are beyond DocGo’s control. Expanding service offerings such
as DocGo’s mobile health solutions also carries unique risks,
including lack of market acceptance or the potential inability to
realize an appropriate return, if any, on the capital invested.
Government regulations in both DocGo’s domestic and international
markets can also delay or prevent expansion or the introduction of
new service offerings or require changes to some of DocGo’s current
service offerings, which could negatively impact the success of
DocGo’s strategies and financial results. In addition, to the
extent DocGo has misjudged the nature or extent of industry trends
or its competition, it may have difficulty in identifying new
provider partners, achieving any geographic expansion, introducing
new service offerings or achieving DocGo’s other strategic
objectives. As such, due to these and other known and unknown
risks, DocGo cannot assure you that its business strategy will be
successful, and any failure to effectively implement its business
strategy and otherwise grow the business could have a material
adverse effect on DocGo’s business, financial condition and results
of operations.
DocGo relies on its contractual relationships with its
healthcare provider partners.
DocGo significantly relies on its contractual relationships with
its healthcare provider partners and other strategic partners and
alliances to generate revenues, expand into new markets and further
penetrate existing markets. In recent years, DocGo has entered
into strategic business relationships with, among others,
healthcare providers and hospital systems, to take advantage of
commercial opportunities across its operations, but particularly in
its medical transportation services segment. The structure of
DocGo’s relationships with its healthcare provider partners is a
novel model in DocGo’s industry and because there is little
precedent for this approach, there can be no assurances that it
will be operationally or financially successful in the long
term.
DocGo’s contractual relationships with its healthcare provider
partners and its reliance on revenues generated pursuant to these
arrangements carry commercial and other risks and uncertainties
that are different from those underlying DocGo’s other revenue
streams, including the opportunity cost of not pursuing other
ventures independently or with other partners. For example,
strategic partners may have business or economic interests that are
inconsistent with those of DocGo and may take actions contrary to
DocGo’s interests. While DocGo typically manages
the day-to-day operations, DocGo’s partners have certain
consent rights, including certain decisions such as the annual
budget and the hiring and firing of key management personnel for
the venture, and they may not agree with decisions that DocGo
believes are appropriate or are otherwise in the venture’s or its
best interests. This structure can also lead to disputes with
partners, which could require DocGo’s management to commit
additional time and resources to resolve any disagreements or, in
some instances, may lead to arbitration or litigation. Contractual
relationships like these typically carry termination rights and one
or more of DocGo’s partners may choose to exit the relationship
prematurely and, in certain arrangements, the partner may have the
option to sell its interest in the venture to DocGo or acquire
DocGo’s stake at a predetermined price, even if the venture is
beneficial to DocGo and in DocGo’s interest to continue the
venture. If one of DocGo’s ventures or any of its strategic
partners is subject to a regulatory investigation or legal dispute
or is otherwise the subject of any negative publicity, DocGo may be
associated with the matter and be similarly harmed, regardless of
whether the specific partnership or DocGo itself had any connection
to the underlying matters. In addition, DocGo may, in certain
circumstances, be liable for the actions of its partners.
Contractual relationships such as these can also raise fraud and
abuse issues. For example, the Office of Inspector General (the
“OIG”) of the U.S. Department of Health and Human Services
(“HHS”) has taken the position that certain contractual
relationships between a party which makes referrals and a party
which receives referrals for a specific type of service may violate
the federal Anti-Kickback Statute if not appropriately
structured. Any of the foregoing risks or other risks related to
DocGo’s reliance on its strategic partners and other relationships
could have a material adverse effect on DocGo’s business, financial
condition and results of operations.
DocGo incurs significant up-front costs in its client
relationships and any inability to maintain and grow these client
relationships over time or to recover these costs could adversely
affect its business.
DocGo’s business strategy depends heavily on achieving economies of
scale because its initial up-front investment is costly and
the associated revenue is recognized on a ratable basis. DocGo
devotes significant resources to establish relationships with its
clients and implement its solutions. DocGo typically incurs higher
variable costs for labor and medical and other supplies in the
initial stages of a project, as the focus at that stage is on
ensuring that the projects are staffed and stocked properly, even
at the risk of temporarily overstaffing the project until revenue
achieves the anticipated scale. These risks are heightened when the
client is a large enterprise, such as DocGo’s healthcare provider
or government partners. Accordingly, DocGo’s results of operations
depend, in substantial part, on its ability to maintain and grow
its relationships with customers over time, allowing DocGo to build
economies of scale and recoup up-front costs. Additionally, as
DocGo’s business grows, its client acquisition costs could outpace
its build-up of recurring revenue, and DocGo may be unable to
successfully manage its total operating costs to achieve
profitability, or if achieved, to maintain profitability. If DocGo
fails to achieve appropriate economies of scale or if it fails to
manage or anticipate demand, its business, financial condition and
results of operations could be materially adversely affected.
The growth of DocGo’s business depends, in part, on its
ability to execute on its acquisition strategy.
A significant portion of DocGo’s historical growth has occurred
through acquisitions, such as its acquisitions in 2022 of
Government Medical Services, Ryan Brothers Ambulance, Exceptional
Ambulance and Community Ambulance Services, and it anticipates
continued growth through acquisitions in the future. DocGo’s growth
strategy is primarily focused on geographic expansion, often as
part of growing its relationship with an existing healthcare
provider partner, and DocGo expects acquisitions to be its primary
means of obtaining the infrastructure, licenses or other resources
necessary to enter new markets in the future. DocGo evaluates, and
expects to continue to evaluate on a regular basis, a variety of
possible acquisition transactions.
DocGo cannot predict the timing of any contemplated transactions,
and there can be no assurances that DocGo will be able to identify
suitable acquisition opportunities in the geographies into which it
expects to grow or, if it does, that any transaction can be
consummated on terms acceptable to it, if at all. DocGo also
competes for acquisitions with other potential acquirers, some of
which may have greater financial or operational resources than
DocGo. A significant change in DocGo’s business; macroeconomic
factors, including inflationary pressures, rising interest rates
and recessionary fears; unexpected decreases in cash flows,
tightening of the capital markets or any restrictions imposed by
DocGo’s debt obligations may limit its ability to obtain the
necessary capital for acquisitions or otherwise impede its ability
to complete an acquisition. Certain proposed acquisitions or
dispositions may also trigger regulatory review by governmental
agencies, including the U.S. Department of Justice (the “DOJ”)
and the U.S. Federal Trade Commission (the “FTC”), under their
respective regulatory authority. Any delay, prohibition or
modification required by regulatory authorities for competitive
purposes or otherwise could adversely affect the terms of a
proposed acquisition or could require DocGo to modify or abandon an
otherwise attractive acquisition opportunity. The failure to
identify suitable transaction partners and to consummate
transactions on acceptable terms, or at all, could adversely affect
DocGo’s business, financial condition and results of
operations.
DocGo’s acquisition strategy exposes it to significant risks
and additional costs.
Acquisitions involve risks that the businesses acquired will not
perform as expected or provide sufficient infrastructure and other
resources necessary to operate in a given geography, and DocGo’s
judgments regarding the values, strengths and weaknesses and
profitability of acquired businesses may prove to be wrong. DocGo
may be held liable for certain unforeseen
pre-acquisition liabilities of an acquired business,
including, among others, tax liabilities, environmental
liabilities, liabilities for regulatory violations and liabilities
for employment practices, and these liabilities could be
significant. In addition, an acquisition could result in the
impairment of client relationships and other acquired assets, such
as goodwill. DocGo may also incur costs and experience
inefficiencies to the extent an acquisition expands the services,
markets or geographies in which it operates. Acquisitions may
require that DocGo incur additional debt to finance the
transaction, which could be substantial and limit its operating
flexibility or, alternatively, acquisitions may require that DocGo
issue shares of its Common Stock as consideration, which could
dilute share ownership. Acquisitions can also involve
post-transaction disputes regarding a number of matters,
including a purchase price or working capital adjustment,
earn-out or other contingent payments, environmental
liabilities or other obligations. DocGo’s recent growth and its
acquisition strategy have placed, and will continue to place,
significant demands on management’s time, which may divert their
attention from DocGo’s day-to-day business operations and
may lead to significant due diligence and other expenses regardless
of whether DocGo pursues or consummates any potential acquisition.
DocGo also may not be able to manage its growth resulting from
acquisitions due to the number, diversity and geographic disparity
of the businesses it may acquire or for other reasons. These and
other risks related to acquisitions could adversely affect DocGo’s
business, financial condition and results of operations.
Any inability to successfully integrate acquisitions or
realize their anticipated benefits could adversely affect DocGo’s
business.
Acquisitions require that DocGo integrate separate companies that
have historically operated independently or as part of another,
larger organization, and that have different systems, processes and
cultures. DocGo may not be able to successfully integrate any
business it has acquired or may acquire, or may not be able to do
so in a timely, efficient or cost-effective manner. Risks
related to the successful integration of an acquired business
include:
|
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diverting the attention of DocGo’s
management and that of the acquired business; |
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● |
merging or linking different
accounting and financial reporting systems and systems of internal
controls and, in some instances, implementing new controls and
procedures; |
|
● |
merging computer, technology and
other information networks and systems, including enterprise
resource planning systems and billing systems; |
|
● |
assimilating personnel, human
resources, billing and collections, and other administrative
departments and potentially contrasting corporate cultures; |
|
● |
disrupting relationships with or
losses of key clients and suppliers of DocGo’s business or the
acquired business; |
|
● |
interfering with, or loss of
momentum in, DocGo’s ongoing business or that of the acquired
company; |
|
● |
failure to retain DocGo’s key
personnel or that of the acquired company; and |
|
● |
delays or cost-overruns in the
integration process. |
DocGo’s inability to manage its growth through acquisitions,
including its inability to manage the integration process, and to
realize the anticipated benefits of an acquisition could have a
material adverse effect on its business, financial condition and
results of operations.
Risks Related to DocGo’s
Business and Industry
The COVID-19 pandemic has materially impacted DocGo’s
business.
The COVID-19 pandemic and related direct and indirect impacts have
adversely affected, and may continue to adversely affect, the DocGo
healthcare transportation segment, and has also heightened various
risks related to DocGo’s business.
For example, should there be an outbreak of COVID-19 among
DocGo’s employees in one or more of its markets, in response, DocGo
may need to significantly reduce or cease operations in that
market. DocGo’s cost structure has also been adversely impacted by
the pandemic. A number of DocGo’s suppliers have been negatively
impacted by the COVID-19 pandemic and there have been
significant disruptions in its supply chains, particularly with
respect to the personal protective equipment, or PPE, that DocGo’s
healthcare professionals require to do their jobs. At times,
sufficient levels of PPE have not been available and these
shortages have limited DocGo’s ability to meet demand and provide
its services to customers in a timely manner. Further, the demand
for PPE in the healthcare industry and the public at large caused
by the pandemic has significantly increased the cost of PPE and
DocGo may not be able to recover these increased costs in the rates
it charges for its services, which could adversely affect DocGo’s
profitability. Limitations on the availability or increases in the
price of PPE have and could in the future continue to adversely
affect DocGo’s business and results of operations.
However, the pandemic also significantly increased the demand for
DocGo’s remote and mobile testing and vaccination services during
the second half of 2020 and throughout 2021 and the first half of
2022 and many of these contracts were on a short-term basis,
often spanning only a number of weeks or months. Much of
DocGo’s revenue, employee and operations growth has occurred during
recent years, which has been partially driven by significant
COVID-related impacts. For example, the Company estimates that mass
COVID testing relating revenue for 2022 was approximately $75
million. DocGo’s ability to forecast its future operating results
is limited and subject to a number of uncertainties, including its
ability to predict revenue and expense levels, and plan for and
model future growth. Moreover, at least with respect to
COVID-19-related testing and vaccination, particularly as the
pandemic reaches endemic stages and demand subsides, there can be
no assurances that DocGo will be able to find alternative revenue
streams to compensate for the loss. We have witnessed a significant
reduction in COVID testing activity since the second half of 2022
and expect that this activity will continue to decline.
The pandemic has adversely affected many industries as well as the
economies and financial markets of many countries, including the
United States, causing a significant deceleration of economic
activity. This slowdown has reduced production, decreased demand
for a broad variety of goods and services, diminished trade levels,
and led to widespread corporate downsizing, causing a sharp
increase in unemployment. There has also been disruption to and
extreme volatility in the global capital markets, which could
increase the cost of, or entirely restrict access to, capital. The
long-term impact of this pandemic on the U.S. and world
economies remains uncertain, and even at times when the pandemic is
largely contained, these adverse impacts could worsen, impacting
all segments of the global economy, and result in a significant
recession or worse.
The degree to which COVID-19 impacts DocGo’s business operations,
strategy, financial condition and results of operations will depend
on future developments, which are highly uncertain, continuously
evolving and unpredictable, including, but not limited to, the
severity of any new outbreaks, resurgences and variants, actions
taken to contain resurgences or variants or to address their
impact, and other effects. As the COVID-19 pandemic reaches endemic
stages, the future impacts to DocGo of COVID-19 remain uncertain,
but such impacts could have a material adverse impact on our
business, strategy and financial condition.
The high level of competition in DocGo’s industry could
adversely affect its business.
The medical transportation industry is highly competitive. In its
healthcare transportation segment, DocGo competes with governmental
entities, including cities and fire districts, hospitals, local and
volunteer private providers, as well as other regional and local
private companies. The industry also includes several large
national and regional providers such as Rural/Metro Corporation,
Falck, American Medical Response (AMR), Southwest Ambulance,
Paramedics Plus and Acadian Ambulance. Key competitive factors in
the medical transportation services industry include the ability to
improve customer service, such as on-time performance and
efficient call intake; to provide comprehensive clinical care; and
to recruit, train and motivate employees, particularly ambulance
crews who have direct contact with patients and healthcare
personnel. Pricing, billing and reimbursement expertise are also
very important.
While the mobile health/telehealth market is in an early stage of
development, it is also competitive and DocGo expects it to become
increasingly competitive in the future, which could make it
difficult for DocGo to succeed. The major competitors in the
industry include much larger, national or regional telehealth
providers such as Dispatch Health, Teladoc, Amwell, and One Medical
(acquired by Amazon in February 2023) that generally provide
telehealth on behalf of self-insured employers and insurance
plans. These competitors, however, generally do not provide direct
patient care or last-mile care on behalf of the provider
organization. DocGo also believes there are several smaller,
private organizations providing in-home or in-site care
utilizing different, higher cost healthcare providers.
Non-traditional providers and others such as large health
systems or payors, some of which may be DocGo customers or
partners, may enter the space using consumer-grade video
conferencing platforms such as Zoom and Twilio or develop
innovative technologies or business activities that could be
disruptive to the industry. Competition could also increase from
large technology companies such as Apple, Amazon, Facebook,
Verizon, or Microsoft, who may develop their own telehealth
solutions or acquire existing industry participants, such as
Amazon’s acquisition of One Medical in February 2023, as well as
from large retailers like Walmart, which see an opportunity in the
surge in interest in telehealth in connection with the
COVID-19 pandemic. Competition in the telehealth industry is
primarily based on scale; ease of use, convenience and
accessibility; brand recognition; breadth, depth, and efficacy of
telehealth services; technology; clinical quality; customer
support; cost; reputation; and customer satisfaction and value.
DocGo may not be successful in maintaining or growing its
competitive position in one or more of its existing markets or in
those into which it may expand. Some of DocGo’s competitors may
have access to greater financial or other resources than it does,
which may afford them greater power, efficiency, financial
flexibility, geographical reach or capital resources for growth. In
addition, some of DocGo’s competitors are vertically integrated and
can leverage this structure to their advantage. DocGo may fail to
identify optimal service or geographic markets, focus its attention
on suboptimal service or geographic markets or fail to execute an
appropriate business model in certain service or geographic
markets. DocGo’s competitors may develop new services or
technologies that are superior to DocGo’s, develop more efficient
or effective methods of providing services or adapt more quickly,
efficiently or effectively than DocGo to new technologies and
opportunities. DocGo’s competitors may be positioned to provide
better services or influence customer requirements, or more quickly
respond to changing customer requirements, and thereby establish
stronger customer relationships. DocGo’s competitors may offer
their services at lower prices because, among other things, they
may possess the ability to provide similar services more
efficiently, as part of a bundle with other services or generally
at a lower cost. These pricing pressures could require DocGo to
lower its prices to at or below its costs, requiring DocGo to
sacrifice margins or incur losses. Alternatively, DocGo may choose
to forgo entering certain markets or exit other markets, which
could limit its growth and competitive reach. Any failure by DocGo
to compete or to generally maintain and improve its competitive
position could adversely affect its business, financial condition
and results of operations.
DocGo’s revenue could be adversely affected if it loses some
or all of its business under existing contracts.
A significant portion of DocGo’s revenue growth has historically
resulted from increases in the business and related fees it
collects under existing contracts and the addition of new
contracts. DocGo’s contracts with healthcare providers and other
customers generally have terms of one to three years, and most
of its contracts are terminable by either of the parties upon
notice of as little as 30 days. Even if DocGo has an existing
contract with a healthcare provider, the contract does not create
any exclusive relationship and even if DocGo is given preferred
status, the customer often still does business with one or more of
DocGo’s competitors. For example, execution under DocGo’s medical
transportation services contracts requires that an ambulance or
other necessary fleet vehicle be available and within a certain
proximity and the time of need and, if one is not available, the
customer can and will seek alternative options. Furthermore,
certain of DocGo’s contracts will expire during each fiscal period,
and DocGo may be required to seek renewal of these contracts
through a formal bidding process. Even if DocGo is successful in
renewing the contract, the contract may contain terms that are not
as favorable to DocGo as its current contracts. There can be no
assurances that DocGo will successfully retain its existing
contracts and any loss of contracts or reduction in services
provided thereunder or under any renewal could have a material
adverse effect on DocGo’s business, financial condition and results
of operations.
DocGo’s reliance on government contracts could adversely
affect its business.
In recent years, DocGo’s government contract work has represented a
substantial portion of its overall revenue, representing
approximately 64% and 65% of DocGo’s revenue for the years
ended December 31, 2022 and 2021, respectively, and
maintaining and continuing to grow this revenue stream is an
important part of DocGo’s growth strategy. However, government
contract work is subject to significant risks and uncertainties.
For example, only eligible parties can bid on and service most
government contracts, which requires DocGo to comply with various
statutes, rules, regulations and other governmental policies,
including those related to wages, benefits, overtime, working
conditions, equal employment opportunity, affirmative action and
drug testing. If DocGo fails to comply with any of these
requirements, it may be suspended or barred from government work or
subject to various administrative sanctions and civil and criminal
penalties and fines. Government contract work subjects DocGo to
government audits, investigations, and proceedings, which could
also lead to DocGo being barred from government work or subjected
to fines if it is determined that a statute, rule, regulation,
policy or contractual provision has been violated. Audits can also
lead to adjustments to the amount of contract costs DocGo believes
are reimbursable or to the ultimate amount DocGo may be paid under
the agreement.
In addition, government contracts typically include strict
provisions relating to service level agreements (“SLAs”), involving
specific operating performance metrics with which the provider must
comply. Failure to comply with these SLAs could result in DocGo
receiving reduced revenues from these contracts, DocGo being
removed from the project in favor of another provider or DocGo’s
programs ceasing entirely.
Additionally, governments are typically under no obligation to
maintain funding at any specific level, and funds for government
programs can be eliminated with little or no notice. Given the
currently uncertain general economic outlook, whereby a recession
could lead to a reduction in a government’s tax revenues, as well
as potential changes in the controlling political party in these
municipalities, who might be less favorably inclined toward
government spending on health care and other social services, the
long-term outlook for funding for certain government programs is
uncertain. As a result, contracts with government agencies may only
be partially funded or may be terminated, and DocGo may not realize
all of the potential revenue from those contracts. Government
contracts typically can be paused or canceled entirely at any time,
in whole or in part, at the government’s convenience or the
government can default with little or no prior notice. Under these
circumstances, the contractor typically receives payment only for
the lesser of the work completed or the amount authorized under the
contract, but not the anticipated revenue and profit that could
have been earned had the contract been completed. A temporary
stoppage or delay or the complete cancellation of a project can
create inefficiencies, such as leaving portions of DocGo’s fleet
idle for a significant period of time, cause DocGo to lose some or
all of its investment in the project or result in financial and
other damages that DocGo may not be able to recover from the
government. The timing of project awards, including expansions of
existing projects, is also unpredictable and can involve complex
and lengthy negotiations and competitive bidding processes. Other
risks associated with government contracting include more extended
collection cycles and heightened or unlimited indemnification
obligations. Any failure to maintain and grow DocGo’s government
contract revenues for one or more of these or any other reasons
could adversely affect DocGo’s business, financial condition and
results of operations.
A significant portion of DocGo’s recent revenue growth is
derived from a small number of large customers.
A significant portion of DocGo’s revenues and income growth in 2022
was derived from a from a limited number of customers. For the year
ended December 31, 2022, one customer accounted for approximately
35% of total sales, while no other customer accounted for as much
as 10% of total revenue. This customer is a public benefit
corporation, operating and provisioning services on behalf of a
variety of municipal agencies. DocGo’s services for this customer
are provided under several different contracts, spanning a variety
of projects. These contracts are not guaranteed and are terminable
at will by the customer. However, termination of any one of those
particular contracts does not necessarily indicate a greater
likelihood of termination of any of the customer’s other contracts,
as these contracts are awarded on a per project basis, with each
project running independently of the others. DocGo cannot assure
you that this customer or other large customers will continue to do
business with it on terms or at rates currently in effect, if at
all, or will not elect to do business with DocGo’s competitors or
otherwise perform their own services themselves. The loss of one of
DocGo’s top customers, if not offset by revenues from new or other
existing customers, could have a material adverse effect on DocGo’s
business, financial condition and results of operations.
DocGo may enter into a large-scale deployment of resources in
response to a national emergency as a subcontractor to FEMA or
other similar entities, which may adversely affect DocGo’s
business.
DocGo does not believe that a FEMA deployment would adversely
affect its ability to service its customers, and DocGo is not
contractually obligated to respond to FEMA requests. However, if
management elects to participate in response to a national
emergency, any significant FEMA deployment would require
significant management attention and could reduce DocGo’s ability
to pursue other opportunities, including to pursue geographic
expansion and its growth strategies, which could have an adverse
effect on DocGo’s business, financial condition and results of
operations.
Risks Related to DocGo’s
Limited Operating History
DocGo’s limited operating history may make it difficult to
evaluate its business, which may be unsuccessful.
DocGo has a limited operating history since its inception in 2015.
As such, there is limited information on which to base an
evaluation of its business and prospects. DocGo’s operations are
subject to all of the risks inherent in the establishment of a
recently formed business, including adding management personnel,
managing general expenditures, and managing the timing of payments
to vendors and cash receipts from customers, and its success may be
limited by unexpected expenses, difficulties, inefficiencies,
complications and delays, including the need for additional
financing, challenges with the successful commercialization of its
services and its geographic expansion, market and customer
acceptance of its services and technologies, unexpected issues with
federal or state regulatory authorities, competition from larger
operations, uncertain intellectual property protection,
fluctuations in expenses and dependence on corporate partners and
collaborators. Any failure to successfully address these and other
risks and uncertainties commonly associated with early-stage
companies could seriously harm DocGo’s business and prospects, and
it may not succeed given the challenges it faces in the markets in
which it operates or may choose to expand into in the future.
Additionally, DocGo’s strategy of providing healthcare
transportation services with significant reliance on a mobile
platform is novel, the telehealth industry is nascent and still
evolving and there are no well-established companies offering
the “last-mile” telehealth solutions that DocGo offers, all of
which carry its own unique risks, including market and consumer
acceptance and adoption. Any evaluation of DocGo’s business and its
prospects must be considered in light of these factors and the
other risks and uncertainties frequently encountered by companies
in this early stage of development. No assurance can be given that
DocGo will be able to successfully navigate these issues or
implement any of its growth strategies in a timely or effective
manner, which could negatively impact DocGo’s business, financial
condition and results of operations.
Much of DocGo’s revenue, employee and operations growth has
occurred during the past three years, which has been partially
driven by significant COVID-related impacts. The Company estimates
that COVID testing related revenue for 2021 was approximately $110
million and $75 million in 2022. However, as the COVID-19 pandemic
has reached endemic levels and demand for COVID-related products
has subsided, DocGo’s COVID testing-related revenues have declined,
and at the end of 2022 represented an insignificant proportion of
the Company’s overall revenues. DocGo’s future growth will be
driven by its ability to continue to replace these
COVID-testing-related revenues with other revenue streams. DocGo’s
ability to forecast its future operating results is limited and
subject to a number of uncertainties, including its ability to
predict revenue and expense levels, and plan for and model future
growth.
DocGo has a history of losses, expects its operating expenses
to increase significantly in the foreseeable future and may not
achieve or sustain profitability.
From inception to 2021, DocGo recorded a net loss each fiscal year.
Fiscal year 2021 was the first year in which DocGo recorded net
income, and DocGo recorded net income of $22.8 million in fiscal
year 2022. Prior to 2021, when DocGo recorded $19.2 million in net
income, DocGo had experienced a net loss in each year since
inception, including a net loss of $14.8 million for the
fiscal year ended December 31, 2020. As of
December 31, 2022, DocGo had an accumulated deficit of
$36.6 million. While DocGo has recently been able to generate
revenues and believes its business strategy provides for
predictable revenue streams in future periods, its revenues may not
increase in future periods, and it may resume incurring net losses
for some time as it continues to grow. Even if DocGo generates net
income in a given year, there remains the likelihood that the
Company could incur net losses in any given quarter, given the
fluctuating nature of revenues and expenses, particularly given the
significant costs that are incurred during the beginning stages of
new projects, coupled with marketing and personnel costs incurred
for developing potential new business lines. It is difficult for
DocGo to predict its future results of operations, and it expects
its operating expenses to increase significantly over the next
several years as it continues to expand its operations and
infrastructure, acquire additional vehicles, hire additional
personnel, make and integrate future acquisitions and invest in
technology and research and development. In addition to the costs
to grow its business, DocGo also expects to incur significant
additional legal, accounting and other expenses as a public
company. If DocGo fails to increase its revenue to offset the
increases in its operating expenses, DocGo may not achieve or
sustain profitability in the future.
If DocGo is unable to effectively manage its growth, its
financial performance and future prospects will be adversely
affected.
Since DocGo’s inception in 2015, it has experienced rapid growth in
the United States and more recently, internationally in the
United Kingdom, and it expects to continue to grow in the
future. For example, DocGo’s revenues have grown from
$30.9 million in the year ended December 31, 2017 to
$440.5 million in the year ended December 31, 2022, and
DocGo’s employee base has grown to nearly 3,000 employees
(exclusive of independent contractors and agency employees) in just
over seven years. This growth has placed, and may continue to
place, significant strain on DocGo’s management, its operational
and financial infrastructure and its controls and procedures, which
may not be adequate to support this growth or sustain further
expansion in the future.
DocGo’s ability to effectively manage its growth has required, and
will continue to require, it to expand and improve its operational
and financial infrastructure, including its controls and
procedures, and to retain, attract, train, motivate and manage
employees, including qualified medical professionals, operations
personnel and financial and accounting staff. Additionally, DocGo
has needed to, and will continue to need to, integrate new
technologies and acquisitions into its existing business and
establish consistent policies across regions and functions.
Achieving these goals has required DocGo to commit substantial
financial, operational and technical resources, and DocGo expects
these demands to persist, and very likely to increase, as it
continues to grow in the future.
The expansion and increasing complexity of DocGo’s business has
placed significant strain on its operations, personnel and systems
and further growth in the future could restrict DocGo’s ability to
develop and improve its operational, financial and management
controls and enhance its reporting systems and procedures. If DocGo
is not able to effectively manage this expansion in its operations
and attract, train and retain additional qualified personnel in an
efficient manner, DocGo’s operations and services will be adversely
affected and its customers may choose one or more of its
competitors. Additionally, DocGo’s failure to maintain or upgrade
its technology infrastructure effectively to support its growth or
otherwise maintain its technological competitive advantage could
result in unanticipated system disruptions, slow response times, or
an unsatisfactory customer experience, any of which could cause
DocGo to no longer be in compliance with the minimum service levels
required by certain customer contracts. An inability to maintain
effective management, financial and reporting systems, controls and
procedures could adversely affect DocGo’s ability to provide timely
and accurate financial information or result in a misstatement of
account balances or disclosures. If DocGo is unable to effectively
manage its recent or future growth, its operations, business,
financial condition and results of operations could be adversely
affected.
DocGo is currently an “emerging growth company” and it cannot
be certain if the reduced disclosure requirements applicable to
emerging growth companies will make the Common Stock less
attractive to investors.
DocGo is currently an “emerging growth company” as defined in the
JOBS Act. As an emerging growth company, DocGo is only required to
provide two years of audited financial statements and only
two years of related selected financial data and management
discussion and analysis of financial condition and results of
operations disclosure. In addition, DocGo is not required to obtain
auditor attestation of its reporting on internal control over
financial reporting, has reduced disclosure obligations regarding
executive compensation and is not required to hold
non-binding advisory votes on executive compensation. In
addition, the JOBS Act provides that an emerging growth company can
take advantage of an extended transition period to comply with new
or revised accounting standards. This allows an emerging growth
company to delay the adoption of these accounting standards until
they would otherwise apply to private companies. DocGo has elected
to take advantage of such extended transition period. DocGo cannot
predict whether investors will find its Common Stock to be less
attractive as a result of its reliance on these exemptions. If some
investors find its Common Stock to be less attractive as a result,
there may be a less active trading market for the Common Stock and
the price of the Common Stock may be more volatile than the
historical trading market.
DocGo will remain an emerging growth company until the earliest of:
(i) the end of the fiscal year in which DocGo has total annual
gross revenue of $1.07 billion; (ii) the last day of
DocGo’s fiscal year following the fifth anniversary of the Initial
Public Offering (or December 31, 2025); (iii) the date on
which DocGo issues more than $1.0 billion in non-convertible
debt during the preceding three-year period; or (iv) the
end of the fiscal year in which the market value of the Common
Stock held by non-affiliates exceeds $700 million as of
the last business day of its most recently completed second
fiscal quarter.
Further, there is no guarantee that the exemptions available under
the JOBS Act will result in significantly lower compliance costs.
To the extent that DocGo chooses not to use exemptions from various
reporting requirements under the JOBS Act, or if it is no longer an
emerging growth company, it will incur additional compliance costs,
which may impact DocGo’s financial condition.
Risks Related to Information Technology
DocGo relies on data center providers, Internet
infrastructure, bandwidth providers, third-party computer hardware
and software, other third parties and DocGo’s own systems for
providing services to DocGo’s clients and consumers, and any
failure or interruption in the services provided by these third
parties or DocGo’s own systems could expose DocGo to disputes,
litigation and negatively impact DocGo’s relationships with
clients, adversely affecting DocGo’s brand and DocGo’s business.
Such disputes and litigation could cause DocGo to incur significant
additional legal and other expenses.
DocGo serves its clients and consumers from two geographically
dispersed data centers, one in the United States and one in the
United Kingdom. While DocGo controls and has access to its servers,
DocGo does not control the operation of these facilities. The
owners of DocGo’s data center facilities have no obligation to
renew their agreements with DocGo on commercially reasonable terms,
or at all. If DocGo is unable to renew these agreements on
commercially reasonable terms, or if one of DocGo’s data center
operators is acquired, DocGo may be required to transfer its
servers and other infrastructure to new data center facilities, and
DocGo may incur significant costs and possible service interruption
in connection with doing so. Problems faced by DocGo’s third-party
data center locations with the telecommunication network providers
with whom DocGo or they contract, or with the systems by which
DocGo’s telecommunications providers allocate capacity among their
clients, including us, could adversely affect the experience of our
clients and consumers. DocGo’s third-party data center operators
could decide to close their facilities without adequate notice. In
addition, any financial difficulties, such as bankruptcy faced by
DocGo’s third-party data center operators or any of the service
providers with whom DocGo or they contract may have negative
effects on our business, the nature and extent of which are
difficult to predict.
Additionally, if DocGo’s data centers are unable to keep up with
DocGo’s growing needs for capacity, this could have an adverse
effect on DocGo’s business. For example, a rapid expansion of
DocGo’s business could affect the service levels at DocGo’s data
centers or cause such data centers and systems to fail. Any changes
in third-party service levels at DocGo’s data centers or any
disruptions or other performance problems with DocGo’s solution
could adversely affect DocGo’s reputation and may damage DocGo’s
clients’ and consumers’ stored files or result in lengthy
interruptions in DocGo’s services. Interruptions in DocGo’s
services may reduce DocGo’s revenue, cause us to issue refunds to
clients for prepaid and unused subscriptions, as well as penalties
related to service level credits and uptime, subject to potential
liability or adversely affect client renewal rates.
In addition, our ability to deliver DocGo’s Internet-based services
depends on the development and maintenance of the infrastructure of
the Internet by third parties. This includes maintenance of a
reliable network backbone with the necessary speed, data capacity,
bandwidth capacity and security. Our services are designed to
operate without interruption in accordance with DocGo’s service
level commitments. However, DocGo has experienced, including during
the period immediately following the beginning of the COVID-19
pandemic, and expect that DocGo may experience in the future
interruptions and delays in services and availability from time to
time. In the event of a catastrophic event with respect to one or
more of DocGo’s systems, DocGo may experience an extended period of
system unavailability, which could negatively impact DocGo’s
relationship with clients and customers. To operate without
interruption, both DocGo and its service providers must guard
against:
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damage from fire,
power loss, natural disasters and other force majeure events
outside DocGo’s control; |
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communications
failures; |
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software and hardware
errors, failures and crashes; |
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security breaches,
computer viruses, hacking, denial-of-service attacks, and similar
disruptive problems; and |
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other potential
interruptions. |
DocGo also relies on computer hardware purchased and software
licensed from third parties in order to offer its services. These
licenses are generally commercially available on varying terms.
However, it is possible that this hardware and software may not
continue to be available on commercially reasonable terms, or at
all. Any loss of the right to use any of this hardware or software
could result in delays in the provisions of DocGo’s services until
equivalent technology is either developed by DocGo or, if available
from third parties, is identified, obtained and integrated.
DocGo exercises limited control over third-party vendors, which
increases DocGo’s vulnerability to problems with technology and
information services they provide. Interruptions in DocGo’s network
access and services may in connection with third-party technology
and information services reduce DocGo’s revenues, cause DocGo to
issue refunds to clients, subject DocGo to potential liability and
adversely affect client renewal rates. Although DocGo maintains a
security and privacy damages insurance policy, the coverage under
DocGo’s policies may not be adequate to compensate DocGo for all
losses that may occur related to the services provided by DocGo’s
third-party vendors. In addition, DocGo may not be able to continue
to obtain adequate insurance coverage at an acceptable cost, if at
all.
DocGo’s ability to rely on these services of third-party vendors
could be impaired as a result of the failure of such providers to
comply with applicable laws, regulations and contractual covenants,
or as a result of events affecting such providers, such as power
loss, telecommunication failures, software or hardware errors,
computer viruses, cyber incidents and similar disruptive problems,
fire, flood and natural disasters. Any such failure or event could
adversely affect DocGo’s relationships with its clients and damage
its reputation. This could materially and adversely impact DocGo’s
business, financial condition and operating results.
DocGo’s proprietary software may not operate properly, which
could damage DocGo’s reputation, give rise to claims against DocGo
or divert application of DocGo’s resources from other purpose, any
of which could harm DocGo’s business, financial condition and
results of operations.
DocGo’s platform provides consumers the ability to, among other
things, register for DocGo’s services; complete, view and edit
medical history; request a visit (either scheduled or on demand);
and conduct a visit (via video or phone). Proprietary software
development is time-consuming, expensive and complex, and may
involve unforeseen difficulties. DocGo encounters technical
obstacles from time to time, and it is possible that DocGo may
discover additional problems that prevent its proprietary
applications from operating properly or in accordance with its
contractual obligations to its customers. If DocGo’s solution does
not function reliably or fails to achieve client expectations in
terms of performance, clients could assert claims against DocGo or
attempt to cancel their contracts with DocGo. This could damage
DocGo’s reputation, lead to a loss of revenues and impair its
ability to attract or maintain clients.
Moreover, data services are complex and those DocGo offers have in
the past contained, and may in the future develop or contain,
undetected defects or errors. Material performance problems,
defects or errors in DocGo’s existing or new software-based
products and services may arise in the future and may result from
interface of our solution with systems and data that DocGo did not
develop and the function of which is outside of DocGo’s control or
undetected in our testing. These defects and errors, and any
failure by DocGo to identify and address them, could result in loss
of revenue or market share, diversion of development resources,
harm to DocGo’s reputation and increased service and maintenance
costs. Defects or errors may discourage existing or potential
clients from purchasing our solution from DocGo. Correction of
defects or errors could prove to be impossible or impracticable.
The costs incurred in correcting any defects or errors may be
substantial and could have a material adverse effect on DocGo’s
financial condition and results of operations.
DocGo invested in and implemented upgraded information systems and
processes in 2022. While DocGo expects these investments to provide
incremental advantages, DocGo cannot assure you that all
enhancements will be completed in a timely manner, within DocGo’s
budget or that such enhancements will be sufficient to meet the
expectations of DocGo’s current and prospective customers.
If DocGo cannot implement its solution for clients or resolve
any technical issues in a timely manner, DocGo may lose clients and
its reputation may be harmed.
DocGo’s clients utilize a variety of data formats, applications and
information systems and our solution must support clients’ data
formats and integrate with complex enterprise applications and
information systems. If DocGo’s enterprise software does not
currently support a client’s required data format or appropriate
integrate with a client’s applications and information systems,
then DocGo must configure its enterprise software to do so, which
increases DocGo’s expenses. Additionally, DocGo does not control
its clients’ implementation schedules. As a result, if DocGo’s
clients do not allocate the internal resources necessary to meet
their implementation responsibilities, or if DocGo faces
unanticipated implementation difficulties, the implementation may
be delayed. If the client implementation process is not executed
successfully or if execution is delayed, DocGo could incur
significant costs, clients could become dissatisfied and decide not
to increase utilization of DocGo’s solution or not to implement
DocGo’s solution beyond an initial term of commitment or, in some
cases, revenue recognition could be delayed. In addition,
competitors with more efficient operating models with lower
implementation costs could jeopardize DocGo’s client
relationships.
DocGo’s clients depend on DocGo’s support services to resolve any
technical issues relating to DocGo’s solution and services, and
DocGo may be unable to respond quickly enough to accommodate
short-term increases in member demand for support services,
particularly as DocGo increases the size of its client, member and
patient bases. DocGo may also be unable to modify the format of its
support services to compete with changes in support services
provided by competitors. It is difficult to predict member demand
for technical support services, and if member demand increases
significantly, DocGo may be unable to provide satisfactory support
services to its consumers. Further, if DocGo is unable to address
consumers’ needs in a timely fashion or further develop and enhance
its solution, or if a client or member is not satisfied with the
quality of work performed by DocGo or with the technical support
services rendered, then DocGo could incur additional costs to
address the situation or be required to issue credits or refunds
for amounts related to unused services, and DocGo’s profitability
may be impaired and clients’ dissatisfaction with DocGo’s solution
could damage its ability to expand the number of software-based
products and services purchased by such clients. These clients may
not renew their contracts, seek to terminate their relationship
with DocGo or renew on less favorable terms. Moreover, negative
publicity related to DocGo’s client relationships, regardless of
its accuracy, may further damage its business, by affecting its
reputation or ability to compete for new business with current or
prospective clients. If any of these were to occur, DocGo’s revenue
may decline and its business, financial condition and results of
operations could be adversely affected.
DocGo’s reliance on third-party software could adversely
affect its business.
DocGo’s success depends in part on its integrations and
relationships with third-party software providers,
particularly with the development and expansion of DocGo’s
offerings and technologies. DocGo also relies on
third-party encryption and authentication technologies
licensed from third parties that are designed to securely transmit
electronic medical records and other personal patient information.
DocGo uses third-party software internally as well, including
for communication purposes. If these third parties cease to provide
access to the software that DocGo uses, if it is not available on
terms that DocGo believes to be reasonable, or it is not available
in the most current version, DocGo may be required to seek
comparable software from other sources, which may be more expensive
or inferior, or may not be available at all. Some of DocGo’s
technology partners may also take actions which disrupt the utility
of the software to DocGo or the interoperability of DocGo’s
platform with their own products or services, or exert strong
business influence on DocGo’s ability to and the terms on which it
operates and distributes its platform. Additionally,
third-party services and products are constantly evolving, and
DocGo may not be able to modify its operations or platform to
assure its compatibility with that of other third parties following
development changes. DocGo’s third-party licenses are
typically non-exclusive and its competitors may obtain the
right to use any of the technology covered by these licenses to
compete directly with it. If any of DocGo’s technology partners
limits access or modifies their products, standards or terms of use
in a manner that degrades the functionality or performance of
DocGo’s platform, that is otherwise unsatisfactory or adverse to
DocGo, or that gives preferential treatment to competitive products
or services, DocGo’s business, financial condition and results of
operations could be adversely affected.
Some of DocGo’s software and systems contain open-source
software, which may pose particular risks to DocGo’s proprietary
software, technologies, products and services in a manner that
could harm its business.
DocGo uses software licensed to DocGo by third-party developers
under “open source” licenses in connection with the development or
deployment of its proprietary software and expects to continue to
use open-source software in the future. Some open-source licenses
contain express requirements, which may be triggered under certain
circumstances, that licensees make available source code for
modifications or derivative works created or prohibit such
modifications or derivative works from being licensed for a fee.
Although DocGo monitors its use of any open-source software to
avoid subjecting its platform to such requirements, the terms of
many open-source licenses have not been interpreted by U.S. or
foreign courts, and there is a risk that these licenses could be
construed in a way that could impose unanticipated conditions or
restrictions on DocGo’s ability to develop or use its proprietary
software. DocGo may face claims from third parties demanding the
release or license of the open-source software or derivative works
that DocGo developed from such software (which could include its
proprietary source code) or otherwise seeking to enforce the terms
of applicable open-source licenses. These claims could result in
litigation and could require DocGo to publicly release portions of
its proprietary source code or cease distributing or otherwise
using the implicated solutions unless and until DocGo can
re-engineer them.
In addition, DocGo’s use of open-source software may present
greater risks than use of other third-party commercial software, as
open-source licensors generally do not provide support, warranties,
indemnification or other contractual protections regarding
infringement claims or the quality of the code. To the extent that
DocGo’s platform depends upon the successful operation of
open-source software, any undetected errors or defects in
open-source software that DocGo uses could prevent the deployment
or impair the functionality of its systems and injure its
reputation. In addition, the public availability of such software
may make it easier for others to compromise its platform. Any of
these risks could be difficult to eliminate or manage and, if not
addressed, could have an adverse effect on DocGo’s business,
financial condition and results of operations.
Security breaches, loss of data and other disruptions could
compromise sensitive business, customer or patient information or
prevent DocGo from accessing critical information and expose it to
liability, which could adversely affect DocGo’s
business.
DocGo is highly dependent on information technology networks and
systems, including on-site systems, managed data center
systems and cloud-based computing center systems, to securely
process, transmit and store sensitive data and information, such as
protected health information (“PHI”) and other types of personal
data or personally identifiable information (“PII”) relating to its
employees, customers, patients and other confidential or
proprietary business information. Computer malware, viruses,
spamming, and phishing attacks have become more prevalent, have
occurred on DocGo’s systems in the past, and may occur on DocGo’s
systems in the future. Various other factors may also cause system
failures, including power outages, catastrophic events, inadequate
or ineffective redundancy, issues with upgrading or creating new
systems or platforms, flaws in third-party software or
services, errors or intentional acts by DocGo’s employees or
third-party service providers, or breaches in the security of
these systems or platforms. These and other issues can create
system disruptions, shutdowns or unauthorized access to or
disclosure or modifications of such sensitive data or information,
including PHI or PII. DocGo also utilizes
third-party service providers for important aspects of the
collection, storage, processing and transmission of this sensitive
information and therefore is dependent on these third parties to
similarly manage cybersecurity risks.
Because of the sensitivity of PHI, other PII and other sensitive
information that DocGo and its service providers collect, store,
transmit, and otherwise process, the security of DocGo’s technology
platform and other aspects of its services, including those
provided or facilitated by DocGo’s third-party service
providers, are important to DocGo’s operations and business
strategy. DocGo takes certain administrative, physical and
technological safeguards to address these risks, such as by
requiring contractors and other third-party service providers
who handle this PHI, other PII and other sensitive information to
enter into agreements that contractually obligate them to use
reasonable efforts to safeguard such PHI, other PII, and other
sensitive information. DocGo is also in the process of upgrading
its systems to be ISO 27001 and Service Organization Controls (SOC)
2 compliant. Measures taken to protect DocGo’s systems, those of
its contractors or third-party service providers, or the PHI,
other PII, or other sensitive information DocGo or contractors or
third-party service providers process or maintain, may not
adequately protect DocGo from the risks associated with the
collection, storage, processing and transmission of such sensitive
information. Additionally, updates or upgrades to systems,
including those currently underway with respect to ISO 27001 and
SOC 2 compliance, are time-consuming and costly, and they may
not be effective in preventing data breaches or operate as
designed, and they could create new inefficiencies or
vulnerabilities. DocGo may also be required to expend significant
capital and other resources to address problems caused by security
breaches. Despite DocGo’s implementation of security measures,
cyberattacks are becoming more sophisticated and frequent. As a
result, DocGo or its third-party service providers may be
unable to anticipate these techniques or to implement adequate
protective measures. If DocGo is unable to earn and maintain
necessary certifications, including ISO 27001 and SOC 2 compliance,
it could result in reputational harm and customer churn, and
adversely affect DocGo’s ability to provide its services.
A security breach or privacy violation that leads to disclosure or
unauthorized use or modification of, or that prevents access to or
otherwise impacts the confidentiality, security, or integrity of,
patient information, including PHI or other PII, or other sensitive
information that DocGo or its contractors or
third-party service providers maintain or otherwise process,
could harm DocGo’s reputation, compel it to comply with breach
notification laws, cause it to incur significant costs for
remediation, fines, penalties, notification to individuals,
measures intended to repair or replace systems or technology and to
prevent future occurrences, cause potential increases in insurance
premiums, and require DocGo to verify the accuracy of database
contents, resulting in increased costs or loss of revenue. If DocGo
is unable to prevent or mitigate such security breaches or privacy
violations or implement satisfactory remedial measures, or if it is
perceived that DocGo has been unable to do so, its operations or
the functionality of its innovative technology could be disrupted;
it may be unable to provide access to its systems; it could lose
customers; it could see negative repercussions to its reputation,
adverse impacts on customers, loss of customer and investor
confidence, financial loss; and it could be subject to governmental
investigations or other actions, regulatory or contractual
penalties, and other claims and liabilities. In addition, security
breaches and other inappropriate access to, or acquisition or
processing of, information can be difficult to detect, and any
delay in identifying such incidents or in providing any
notification of such incidents may lead to increased harms.
Any such breach or interruption of DocGo’s systems or those of any
of its third-party service providers could compromise DocGo’s
networks or data security processes and sensitive information could
be made inaccessible or could be accessed by unauthorized parties,
publicly disclosed, lost or stolen. Any such interruption in
access, improper access, disclosure or other loss of information
could result in legal claims or proceedings, liability under laws
and regulations that protect the privacy of member information or
other personal information, such as the Health Insurance
Portability and Accountability Act of 1996, as amended by
the Health Information Technology for Economic and Clinical Health
Act of 2009 (“HITECH”), and their implementing
regulations and related rules (collectively, “HIPAA”), and
regulatory penalties. Unauthorized access, loss or dissemination
could also disrupt DocGo’s operations, including its ability to
perform its services, access customer and patient health
information, collect, process, and prepare company financial
information, and provide information about DocGo’s current and
future services. Any such breach could also compromise DocGo’s
trade secrets and other proprietary information, which could
adversely affect DocGo’s business and competitive position. While
DocGo maintains insurance covering certain data security and
privacy damages and claim expenses, it may not carry insurance or
maintain coverage sufficient to compensate for all liabilities and
even if covered, it would not address the reputational damage that
could result from a security incident.
As of the date of this filing, DocGo has not been impacted by any
security breaches to its technology platform, including its
on-site systems, managed data center systems and
cloud-based computing center systems.
Risks Related to DocGo’s Operations
DocGo’s success depends on its key management
personnel.
DocGo’s success depends to a significant degree upon the
contributions of certain key management personnel. The loss of any
of DocGo’s key personnel could affect its ability to run its
business effectively. DocGo’s success will depend on its ability to
retain its current management and to develop, attract, and retain
qualified personnel in the future. Competition for senior
management personnel is intense with increasingly aggressive
compensation packages, and DocGo cannot assure you that it can
retain its key personnel or that its succession planning will prove
effective. The loss of a member of senior management requires the
remaining executive officers and the Board of Directors of DocGo
(the “Board”) to divert immediate and substantial attention to
seeking a replacement. The inability to fill vacancies in DocGo’s
key personnel positions, including executive positions, on a timely
basis could adversely affect its ability to implement its business
strategy, which would negatively impact its results of
operations.
DocGo’s labor costs are significant and any inability to
control those costs could adversely affect its
business.
Labor expenses (which includes both directly employed personnel as
well as subcontracted labor) are DocGo’s largest cost, representing
approximately 69% and 60% of its 2022 and 2021 revenues,
respectively. DocGo competes, in a highly competitive labor market,
with other healthcare providers to attract healthcare
professionals, including EMTs, paramedics and nurses, to support
its operations. In some markets in which DocGo operates, the lack
of availability of clinical personnel has become a significant
operating issue that all healthcare providers face. This labor
shortage has, and could continue in the future, require DocGo to
increase wages and benefits to recruit and retain qualified
personnel or to identify and contract with more expensive temporary
personnel. DocGo also depends on the available labor pool of
technology-skilled workers in certain of the markets in which
it operates.
If DocGo’s labor costs increase, and it is unable to raise rates to
offset these increased costs, DocGo’s results of operations and
cash flows will likely be adversely affected. In particular,
because a significant percentage of DocGo’s revenue consists of
fixed, prospective payments, its ability to pass along increased
labor costs is limited. If labor costs rise at an annual rate
greater than its revenues, DocGo’s results of operations and cash
flows will likely be adversely affected.
Any union activity that may occur within DocGo’s workforce in the
future could contribute to increased labor costs. Certain proposed
changes in federal labor laws and the National Labor Relations
Board’s modification of its election procedures could increase the
likelihood of employee unionization attempts. Although none of
DocGo’s employees are currently represented by a collective
bargaining agreement, to the extent a significant portion of its
employee base unionizes, it is possible DocGo’s labor costs could
increase materially. DocGo’s failure to recruit and retain
qualified healthcare professionals, or to control labor costs,
could have a material adverse effect on DocGo’s business, financial
condition and results of operations.
DocGo’s inability to successfully recruit, train and retain
qualified healthcare professionals could adversely affect its
business.
The pool of qualified healthcare professionals, including EMTs,
paramedics, LPNs and nurses, available to staff DocGo’s broad
spectrum of contracts and customer needs is limited and DocGo
invests significant resources to attract, train and retain these
professionals. There is a relatively high rate of turnover in
healthcare professional positions and, with DocGo’s expansion, its
requirements in these positions have increased significantly. A
significant number of employees have joined DocGo in
recent years as it has grown, and DocGo’s success is dependent
on its ability to maintain and instill its culture, align its
talent with its business needs, engage its employees and inspire
them to be open to change, to innovate and to maintain a
customer-driven focus when delivering its services. As such,
DocGo’s ability to recruit, train and retain a sufficient number of
qualified healthcare professionals has a direct impact on its
operations.
DocGo has, from time to time, experienced, and it expects to
continue to experience, difficulty in hiring and retaining
healthcare professionals with appropriate qualifications, a
difficulty that is amplified by the scope of the geographic and
demographic diversity of the markets in which DocGo operates or may
expand into in the future. In the U.S., this difficulty is
exacerbated by the currently tight labor market. Moreover, DocGo’s
customers, including the healthcare providers with which it
partners, have increasingly demanded a greater degree of
specialized skills, training and experience in the healthcare
professionals providing services under their contracts, which also
decreases the number of healthcare professionals who may be
qualified to staff certain of DocGo’s contracts. DocGo competes
with other companies to recruit and retain these qualified
healthcare professionals, including DocGo’s direct competitors,
government and private emergency and first responders as well as
healthcare providers, including DocGo’s partners and customers.
Competition to fill these positions can be even greater in certain
geographic regions, including more rural or economically depressed
areas. In addition, the COVID-19 pandemic has significantly
increased the demand for healthcare professionals in all regards,
which makes it more difficult for DocGo to attract and retain the
necessary qualified professionals. If DocGo is unable to attract,
train and retain highly qualified healthcare professions, or if
turnover rates are higher than it anticipates, it could have an
adverse effect on DocGo’s business, financial condition and results
of operations.
DocGo’s employees may work in challenging
environments.
DocGo operates in a highly regulated environment with constantly
evolving legal and regulatory frameworks. Consequently, the Company
is subject to heightened risk of legal claims or other regulatory
enforcement actions. Although the Company has implemented policies
and procedures designed to ensure compliance with existing laws and
regulations, there can be no assurance that our team members,
contractors, or agents will not violate our policies and
procedures. Moreover, a failure to maintain effective control
processes could lead to violations, unintentional or otherwise, of
laws and regulations and may put our employees and others in close
proximity to potentially harmful environments or situations. These
potentially harmful environments or situations may result in
injuries to DocGo’s employees, which could result in liability to
DocGo or delay the completion or commencement of DocGo’s
services.
Unsafe work sites also have the potential to lead to claims,
litigation or other liability, or increase employee turnover,
increase costs, damage DocGo’s reputation and brand and raise its
operating and insurance costs. Any of the foregoing could result
in, among other things, financial losses, litigation or other
liability or reputational harm, which could have a material adverse
effect on DocGo’s business, financial condition and results of
operations.
DocGo’s inability to collect on its customer receivables or
unfavorable shifts in payor mix could adversely affect its
business.
The general practice in DocGo’s industry is to provide healthcare
services in advance of payment and, in many cases, prior to any
assessment of the patient’s insurance coverage and his or her
ability to pay in the event insurance coverage is not available.
DocGo ultimately bills a number of different payors, including
private insurance, Medicare and Medicaid, the healthcare provider
or facility and self-pay patients. These different payors
typically have different billing, coding, documentation and other
compliance requirements that DocGo must satisfy and any procedural
deficiencies or incorrect or incomplete information could result in
delays or partial or complete non-payment for the services
DocGo has rendered. Changes in payor mix, particularly those that
increase the percentage of patients covered by lower paying
government programs as compared to private insurance or that
increase the percentage of self-pay patients, can reduce the
amount DocGo receives for its services and adversely affect DocGo’s
ability to collect on its receivables. The ability to bill and
collect on certain accounts may also be limited by statutory,
regulatory and investigatory initiatives, such as restrictions on
charges for out-of-network services or by private lawsuits,
including those directed at healthcare charges and collection
practices for uninsured and underinsured patients. Other factors
that can adversely affect DocGo’s billing and collection efforts
include general macroeconomic conditions, disputes between payors
as to which party is responsible for payment, variation in coverage
for similar services among various payors and the ability of
individual patients to pay. These and other risks and uncertainties
that impact DocGo’s ability to timely bill and collect on its
receivables or the amount DocGo can charge for its services could
adversely affect DocGo’s business, financial condition or results
of operations.
DocGo may not accurately assess the costs it will incur under
new revenue opportunities.
DocGo must accurately assess the costs it will incur in providing
its services in order to realize adequate profit margins and
otherwise meet its financial and strategic objectives, particularly
with respect to the expansion of its mobile health business.
However, increasing pressures from healthcare payors to restrict or
reduce reimbursement rates at a time when the costs of providing
medical services continue to increase, in particular due to labor
shortages and other factors, make assessing the costs associated
with the pricing of new contracts, maintenance of existing
contracts, and pricing new services that DocGo has not previously
offered, more difficult. Starting new contracts and service
offerings has typically resulted in a temporary negative impact to
cash flow as DocGo absorbed various expenses before it was able to
bill and collect revenue associated with the new contracts or
services. In addition, integrating new contracts, particularly
those in new geographic locations, could prove more costly, and
could require more management time than DocGo anticipates. Any
failure to accurately predict costs or the timing of payments from
customers or to negotiate an adequate profit margin could have a
material adverse effect on DocGo’s business, financial condition
and results of operations.
If DocGo is unable to successfully develop new offerings and
technologies, or adapt to rapidly changing technology and industry
standards or changes to regulatory requirements, DocGo’s business
could be adversely affected.
Technology, including the mobile technologies DocGo utilizes on its
innovative platform, is characterized by rapid change, changing
consume requirements, short product lifecycles, and evolving
industry standards and changing regulatory requirements. DocGo’s
continued success and growth depend in part upon its ability to
enhance its solutions with next-generation technologies and to
develop or to acquire and market new services to access new
consumer populations. As DocGo’s operations grow, DocGo must
continuously improve and upgrade its systems and infrastructure
while maintaining or improving the reliability and integrity of its
infrastructure as the cost of technology increases. DocGo’s future
success also depends on its ability to adapt its systems and
infrastructure to meet rapidly evolving consumer trends and demands
while continuing to improve the performance, features, and
reliability of its solutions in response to competitive services
and offerings. DocGo may not be able to maintain its existing
systems or replace or introduce new technologies and systems as
quickly as DocGo would like or in a cost-effective manner.
There is no guarantee that DocGo will possess the resources, either
financial or personnel, for the research, design, and development
of new applications or services, or that DocGo will be able to
utilize these resources successfully and avoid technological or
market obsolescence. Further, there can be no assurance that
technological advances by one or more of DocGo’s competitors or
future competitors will not resolute in DocGo’s present or future
applications and services becoming uncompetitive or obsolete. If
DocGo is unable to enhance its offerings and network capabilities
to keep pace with rapid technological and regulatory change, or if
new technologies emerge that are able to deliver competitive
offerings at lower prices, more efficiently, more conveniently, or
more securely than DocGo’s offerings, its business, financial
condition, and results of operations could be adversely
affected.
DocGo’s success will also depend on the availability of its mobile
apps in app stores and in “super-app” environments, and the
creations, maintenance and development of relationships with key
participants in related industries, some of which may also be
DocGo’s competitors. In addition, if accessibility of various apps
is limited by government actions, the full functionality of devices
may not be available to its members. Moreover, third-party
platforms, services, and offerings are constantly evolving, and
DocGo may not be able to modify its platform to assures its
compatibility with those third parties. If DocGo loses such
interoperability, DocGo experiences difficulties or increased costs
in integrating its offerings into alternative devices or systems,
or manufacturers or operating systems elect not to include DocGo’s
offerings, make changes that degrade the functionality of its
offerings, or give preferential treatment to competitive products,
the growth of DocGo’s business, financial condition, and results of
operations could be materially adversely affected. This risk may be
exacerbated by the frequency with which individuals change or
upgrade their devices. In the event individuals choose devices that
do not already include or supports DocGo’s platform or do not
install DocGo’s mobile apps when they change or upgrade their
devices, member engagement may be harmed.
DocGo’s marketing efforts to help grow its business,
including its recent rebrand, may not be effective.
Promoting awareness of DocGo’s brand, innovative technology and
services is important to its ability to grow its business, to
attract and retain customers and to gain market acceptance of its
products and services, and these efforts can be costly. DocGo
believes that much of the growth in its business is in part
attributable to its marketing initiatives. DocGo’s marketing
initiatives may become increasingly expensive and generating a
meaningful return on those initiatives may be difficult. Even if
DocGo successfully increases revenue as a result of its paid
marketing efforts, it may not offset the additional marketing
expenses it incurs. Any factor that diminishes DocGo’s reputation
or that of its brands, including adverse publicity or failing to
meet the expectations of customers, could make it substantially
more difficult for DocGo to attract new customers. If these
marketing efforts are not successful, DocGo’s business, financial
condition and results of operations could be adversely
affected.
DocGo’s insurance coverage, including the reserves DocGo
establishes with respect to its insurable losses, could adversely
affect its business.
In connection with DocGo’s insurance programs, management
establishes reserves for losses and related expenses within its
self-insured retention limits, which represent estimates
involving actuarial and statistical projections, at a given point
in time, of DocGo’s expectations of the ultimate resolution and
administration costs of losses it has incurred in respect of its
liability risks. Insurance reserves inherently are subject to
uncertainty. DocGo’s reserves are based on historical claims,
demographic factors, industry trends, severity and exposure factors
and other actuarial assumptions. DocGo uses these actuarial
estimates to determine appropriate reserves, and DocGo’s reserves
could be significantly affected if current and future occurrences
differ from historical claim trends and expectations. While DocGo
monitors claims closely when it estimates reserves, the complexity
of the claims and the wide range of potential outcomes may hamper
timely adjustments to the assumptions DocGo uses in these
estimates. Actual losses and related expenses may deviate,
individually and in the aggregate, from the reserve estimates
reflected in DocGo’s Consolidated Financial Statements. If DocGo
determines that its estimated reserves are inadequate, it would be
required to increase reserves at the time of the determination,
which would reduce DocGo’s earnings in the period in which the
deficiency is determined and could have a material adverse effect
on DocGo’s business, financial condition and results of
operations.
Some of DocGo’s insurance coverage is through
third-party insurers. To the extent DocGo holds policies to
cover certain groups of claims or relies on insurance coverage
obtained by third parties to cover such claims, DocGo may still be
responsible for losses. This could occur for a variety of reasons,
including if DocGo or such third parties did not obtain sufficient
insurance limits, did not buy an extended reporting period policy,
where applicable, or the issuing insurance company is unable or
unwilling to pay such claims. Furthermore, for DocGo’s losses that
are insured or reinsured through commercial insurance companies, it
is subject to the “credit risk” of those insurance companies. In
addition, professional liability insurance is expensive and
insurance premiums may increase significantly in the future,
particularly as DocGo expands the geographies in which it does
business. As a result, adequate professional liability insurance
may not be available to it in the future at acceptable costs or at
all. While DocGo believes its commercial insurance company
providers are creditworthy, there can be no assurance that such
insurance companies will remain so in the future, and any failure
of DocGo’s insurance coverage to adequately cover any losses could
have a material adverse effect on DocGo’s business, financial
condition and results of operations.
DocGo is required to make capital expenditures in order to
remain competitive.
DocGo’s capital expenditure requirements primarily relate to
maintaining, growing and upgrading its vehicle fleet and medical
equipment to serve its customers and remain competitive. The aging
of DocGo’s ambulance fleet requires DocGo to make regular capital
expenditures, including to lease newer replacement ambulances to
maintain its current level of service. DocGo’s net capital
expenditures totaled $3.2 million and $4.7 million in
the years ended December 31, 2022 and 2021, respectively,
representing acquisitions of property and equipment, less the
proceeds from disposals of property and equipment. In addition,
changing competitive conditions or the emergence of any significant
advances in medical technology could require DocGo to invest
significant capital in additional equipment or capacity in order to
remain competitive. DocGo may also commit significant capital to
acquiring new infrastructure to expand into new geographies. If
DocGo is unable to fund any such investment, due to macroeconomic
factors such as rising inflation, lack of access to the capital
markets, rising interest rates or otherwise, or otherwise fails to
invest in new ambulances, medical equipment or other
infrastructure, its business, financial condition or results of
operations could be materially and adversely affected.
DocGo’s international operations subject it to additional
risks that could adversely affect its business.
DocGo currently provides healthcare transportation services in the
United Kingdom and intends to further expand its operations
and services internationally, which subjects DocGo to regulatory,
macroeconomic, geopolitical and other events and uncertainties in
these foreign jurisdictions. In addition to the risks discussed
elsewhere herein that are common to DocGo’s operations more
generally, DocGo faces additional risks specific to its
international operations, including but not limited to:
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geopolitical, social,
macroeconomic and financial instability, including wars, civil
unrest, acts of terrorism and other conflicts, such as the war in
Ukraine and rising tensions in the Taiwan Strait; pandemics and
endemics; and an inflationary environment, rising interest rates
and recessionary fears; |
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difficulties and
increased costs in developing, staffing and simultaneously managing
a large number of varying foreign operations, including as a result
of distance, language, cultural differences and labor shortages and
expenses; |
|
● |
restrictions and
limitations on the transfer or repatriation of funds; |
|
● |
fluctuations in
currency exchange rates; |
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● |
costs and challenges
associated with complying with varying legal and regulatory
environments in multiple foreign jurisdictions, including privacy
laws such as the E.U. General Data Protection
Regulation; |
|
● |
laws and business
practices that favor local competitors or prohibit foreign
ownership of certain businesses; |
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● |
potential for
privatization and other confiscatory actions; and |
|
● |
other dynamics in
international jurisdictions, any of which could result in
substantial additional legal or compliance costs, liabilities or
obligations for DocGo or could require it to significantly modify
its current business practices or even exit a given
market. |
Foreign operations bring increased complexity and the costs of
managing or overseeing foreign operations, including adapting and
localizing services or systems to specific regions and countries
can be material. Further, international operations carry inherent
uncertainties regarding the effect of local or domestic actions,
such as the unpredictable impact of the United Kingdom’s exit
from the European Union (Brexit) and the uncertainty regarding how
the agreements reached will operate, any of which could be
material. International operations also carry financial risks such
as those related to fluctuations in foreign currency exchange rates
and disparate tax laws. These and other risks related to DocGo’s
existing or future foreign operations, or the associated costs or
liabilities, could have a material adverse effect on DocGo’s
business, financial condition and results of operations.
DocGo’s business could be materially and adversely affected
by natural disasters, other catastrophic events, acts of war or
terrorism, cybersecurity incidents, and/or other acts by third
parties.
DocGo and its customers depend on the ability of its business to
run smoothly, including the ability of its fleet of ambulances,
which are often needed in times of emergency, to transport
patients. Any material disruption caused by natural disasters,
including, fires, floods, hurricanes, volcanoes, and earthquakes
(in each case, including due to climate change or otherwise) power
loss or shortages; environmental disasters; telecommunications or
business information systems failures; acts of war or terrorism;
viral outbreaks and other similar epidemics; cybersecurity
incidents; and other actions by third parties and other similar
disruptions could cause DocGo to lose critical data and services
and otherwise adversely affect DocGo’s ability to conduct business.
Even with disaster recovery arrangements, DocGo’s services could be
interrupted and DocGo’s insurance coverage may not compensate it
for losses that may occur in the wake of such events. If any
disruption results in the destruction of some or all of DocGo’s
fleet, significant disruption to DocGo’s business, contributes to a
general decrease in local, regional or global macroeconomic
activity or otherwise impairs DocGo’s ability to meet customer
demands, or if DocGo is not able to develop or execute on an
adequate recovery plan in such circumstances, DocGo’s business,
financial condition and results of operations could be materially
adversely affected.
Rising inflation may negatively impact DocGo’s business and
financial results.
The inflation rate in the U.S., as measured by the Consumer Price
Index (CPI) has generally trended up since early 2021. This data is
reported monthly, showing year-over-year changes in prices across a
basket of goods and services. For 2021, inflation increased from
the 1.4%-2.6% range in the first quarter, to 4.2% in April, and was
in the 5.0%-6.0% range through the end of the third quarter of
2021, before increasing to the 6.0%-7.0% range in the fourth
quarter. For the full year, the inflation rate was 4.7% in 2021,
the highest annual rate since the 5.4% rate recorded in 1990. The
inflation rate continued to increase in early 2022, reaching
approximately 9.1% in June 2022, 8.2% in September 2022, and
declining to 6.5% in December 2022. In an attempt to dampen
inflation, the U.S. Federal Reserve implemented seven interest rate
increases in 2022, raising its benchmark rate (the “federal funds
rate”) from near 0.00% at the beginning of the year to a level of
4.25% to 4.50% as of the end of December 2022, and as of the date
of the filing of this Annual Report, it has so far implemented one
interest rate increase in 2023, to the current level of 4.50% -
4.75%. Looking into 2023, DocGo anticipates a moderation of the
inflation rate, as a result of these recent rate increases, but
DocGo expects that inflation will remain well above the levels seen
in the previous 10 years, when the annual inflation rate ranged
from 0.1% to 2.4%. If inflation is above the levels that the
Company anticipates, gross margins could be below plan and DocGo’s
business, operating results and cash flows may be adversely
affected.
Risks Related to DocGo’s
Intellectual Property
DocGo’s failure to protect or enforce its intellectual
property rights could impair our ability to protect our technology
and our brand.
DocGo’s success depends in part on its ability to enforce and
protect its intellectual property rights and technology, including
its code, information, data, processes and other forms of
information, know-how and technology. DocGo relies on a
combination of copyrights, trademarks, service marks, trade secret
laws and contractual restrictions to establish and protect its
intellectual property and other proprietary rights. DocGo also
enters into confidentiality and invention assignment agreements
with its employees and consultants and enters into confidentiality
agreements with certain of its third-party providers and
strategic partners. These laws, procedures and restrictions provide
only limited protection and any of our intellectual property rights
may be challenged, invalidated, circumvented, infringed, or
misappropriated.
Some of DocGo’s intellectual property protections do not prevent
competitors or others from independently developing technologies
that are substantially equivalent or superior to DocGo’s offerings.
Further, it may still be possible for competitors and other
unauthorized third parties to copy DocGo’s technology and use its
proprietary information to create or enhance competing platforms,
solutions and services. DocGo also enters into strategic
relationships, joint development and other similar agreements with
third parties where intellectual property arising from such
relationships may be jointly owned or may be transferred or
licensed to the counterparty. These arrangements may limit DocGo’s
ability to protect, maintain, enforce or commercialize such
intellectual property rights, including requiring agreement with or
payment to the joint development partners before protecting,
maintaining, licensing or initiating enforcement of such
intellectual property rights, and may allow such joint development
partners to register, maintain, enforce or license such
intellectual property rights in a manner that may affect the value
of the jointly owned intellectual property or DocGo’s ability to
compete in the market. As DocGo expands its international
activities, its exposure to unauthorized use, copying, transfer and
disclosure of proprietary information will likely increase as the
laws of some countries do not provide the same level of
intellectual property protection as do the laws of the
United States, and effective intellectual property protections
may not be available or may be limited and harder to enforce in
some jurisdictions.
DocGo may be required to spend significant resources in order to
establish, monitor and protect its intellectual property rights.
DocGo may not always detect infringement of its intellectual
property rights, and defending or enforcing its intellectual
property rights, even if successfully detected, prosecuted,
enjoined, or remedied, could result in the expenditure of
significant financial and managerial resources. Any enforcement
efforts, and litigation in particular, could be costly,
time-consuming and distracting to management and could result
in the impairment or loss of portions of DocGo’s intellectual
property. DocGo’s efforts to enforce its intellectual property
rights may also be met with defenses, counterclaims and
countersuits attacking the validity and enforceability of its
intellectual property rights. An adverse determination of any
litigation proceedings could put DocGo’s patents at risk of being
invalidated or interpreted narrowly and could put DocGo’s related
pending patent applications at risk of not issuing. DocGo’s
inability to protect its proprietary technology against
unauthorized copying or use, as well as any costly litigation or
extensive enforcement activities, could impair the functionality of
DocGo’s platform, delay introductions of enhancements to the
platform, result in DocGo’s substituting inferior or more costly
technologies, harm DocGo’s reputation or brand and otherwise have a
material adverse effect on its business, financial condition and
results of operations.
Claims by others that DocGo infringed their proprietary
technology or other intellectual property rights could adversely
affect DocGo’s business.
In recent years, there has been significant litigation in the
United States involving patents and other intellectual property
rights. Companies in the internet and technology industries are
increasingly bringing and becoming subject to suits alleging
infringement of proprietary rights, particularly patent rights, and
our competitors and other third parties may hold or have pending
patent applications, which could be related to our business. These
risks have been amplified by the increase in third parties, which
DocGo refers to as non-practicing entities, whose sole primary
business is to assert such claims. Regardless of the merits of any
other intellectual property litigation, DocGo may be required to
expend significant management time and financial resources on the
defense of such claims, and any adverse outcome of any such claim
could have a material adverse effect on DocGo’s business, financial
condition, and results of operations.
Given the competitive landscape and pervasiveness of litigation in
DocGo’s industry, from time to time, third parties may assert
claims of infringement of intellectual property rights against
DocGo. In addition, third parties have previously sent DocGo
correspondence regarding various allegations of intellectual
property infringement. DocGo incorporates technology from third
parties into its platform and, as such, it cannot be certain that
these licensors are not infringing the intellectual property rights
of others or that the suppliers and licensors have sufficient
rights to the technology in all jurisdictions in which DocGo may
operate. As DocGo gains an increasingly higher public profile,
DocGo expects the possibility of these and other types of
intellectual property rights claims against it will grow. Although
DocGo believes that it has meritorious defenses, there can be no
assurance that DocGo will be successful in defending against these
and future allegations or in reaching a business resolution that is
acceptable to DocGo.
Many potential litigants, including some of DocGo’s competitors and
non-practicing entities, have the ability to dedicate substantial
resources to assert their intellectual property rights. Any claim
of infringement by a third party, even those without merit, could
be costly, time-consuming and a significant distraction to
management. Furthermore, because of the substantial amount of
discovery required in connection with intellectual property
litigation, DocGo could risk compromising its confidential
information during this type of litigation. In addition, in some
instances, DocGo may agree to indemnify our clients against certain
third-party claims, which may include claims that DocGo’s solutions
infringe the intellectual property rights of such third parties.
DocGo’s business could be adversely affected by any significant
disputes between DocGo and its clients as to the applicability or
scope of DocGo’s indemnification obligations to them. With respect
to any intellectual property rights litigation or indemnification
obligation, DocGo may need to negotiate a license to continue
operations if found to be in violation of a third party’s rights,
and these licenses may not be available on favorable or
commercially reasonable terms, or at all. DocGo may be required to
pay substantial damages, royalties or other fees in connection with
a claimant securing a judgment against it, DocGo may be subject to
an injunction or other restrictions that prevent it from using the
relevant intellectual property, or DocGo may determine it is
prudent to agree to a settlement that restricts DocGo’s operations
or its use of certain intellectual property, any of which could
adversely affect DocGo’s business, financial condition and results
of operations.
Risks Related to DocGo’s
Legal and Regulatory Environment
DocGo could be subject to lawsuits for which it does not have
sufficient reserves, which could have a material adverse effect on
DocGo’s business, financial condition and results of
operations.
Healthcare providers and other participants in the healthcare
industry have become subject to an increasing number of lawsuits
alleging medical malpractice and related legal theories such as
negligent hiring, supervision and credentialing. Similarly,
healthcare transportation services can result in lawsuits related
to vehicle collisions and personal injuries, patient care incidents
or mistreatment and employee job-related injuries. Moreover,
in the normal course of DocGo’s business, it has been and may
continue to be involved in lawsuits, claims, audits and
investigations, including those arising out of its billing
practices, employment disputes, contractual claims and other
business disputes for which DocGo may have no insurance coverage,
and which are not subject to actuarial estimates. Some of these
lawsuits may involve large claim amounts and substantial defense
costs.
Adverse outcomes with respect to litigation or any of these legal
proceedings may result in significant settlement costs or
judgments, penalties and fines, which may or may not be covered by
DocGo’s existing insurance or may require DocGo to modify its
services or require it to stop serving certain customers or
geographies, all of which could negatively impact its existing
business and its ability to grow. DocGo may also become subject to
periodic audits, which would likely increase its regulatory
compliance costs and may require it to change its business
practices or the scope of its operations. Managing legal
proceedings, litigation and audits, even if DocGo achieves
favorable outcomes, is time-consuming and diverts management’s
attention from DocGo’s day-to-day business. The outcome
of these matters or future claims and disputes are difficult to
predict and determining reserves for pending litigation and other
legal, regulatory and audit matters requires significant judgment.
There can be no assurance that DocGo’s expectations will prove
correct, and even if these matters are resolved in its favor or
without significant cash settlements, these matters, and the time
and resources necessary to litigate or resolve them, could have a
material effect on DocGo’s results of operations in the period when
it identifies the matter, and could have a material adverse effect
on DocGo’s business, financial condition and results of
operations.
DocGo is subject to a variety of federal, state and local
laws and regulatory regimes, including a variety of labor laws and
regulations, and changes to or the failure to comply with these
laws and regulations could adversely affect DocGo’s
business.
DocGo is subject to various federal, state, and local laws and
regulations including the Employee Retirement Income Security
Act of 1974 (“ERISA”) and regulations promulgated by the
Internal Revenue Service (“IRS”), the U.S. Department of Labor
and the Occupational Safety and Health Administration. DocGo is
also subject to a variety of federal and state employment and labor
laws and regulations, including the Americans with Disabilities
Act, the federal Fair Labor Standards Act, the Worker Adjustment
and Retraining Notification Act, and other regulations related to
working conditions, wage-hour pay, overtime pay, family leave,
employee benefits, antidiscrimination, termination of employment,
safety standards and other workplace regulations. Compliance with
these and other applicable laws and regulations can be
time-consuming and costly. Failure to properly adhere to these
and other applicable laws and regulations could result in
investigations, the imposition of penalties or adverse legal
judgments by public or private plaintiffs. Changes to these laws
and regulations can also increase costs and require DocGo to commit
additional resources to comply with these laws. For example, the
raising of the federal minimum wage or the minimum wage within a
state where DocGo has significant operations, which has been and
continues to be a subject of ongoing discussions in Washington,
D.C. and other U.S. state capitals, could significantly
increase DocGo’s selling, general and administrative expenses.
Changes to or any failure to comply with applicable laws and
regulations could also have a material adverse effect on DocGo’s
business, financial condition and results of operations.
DocGo’s ability to utilize its net operating loss
carryforwards and certain other tax attributes may be
limited.
As of December 31, 2022 and 2021, DocGo had aggregate federal
net operating loss carryforwards of approximately $53.6 million and
$56.6 million, respectively. As of December 31, 2022 and 2021,
the Company had state net operating loss carryforwards of
approximately $74.2 million and $67.2 million, respectively. As of
December 31, 2022 and 2021, DocGo had approximately $903 and
$202,965 respectively, of foreign net operating loss carryforwards.
The federal net operating loss carryforwards generated after
December 31, 2017, of approximately $62.2 million carry forward
indefinitely, while the remaining federal net carryforwards of
approximately $11.7 million begin to expire in 2037. 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. DocGo’s unused losses generally carry forward to
offset future taxable income, if any, until such unused losses
expire. DocGo may be unable to use these losses to offset income
before such unused losses expire. However, U.S. federal net
operating losses generated in 2019 and forward are not subject to
expiration and, if not utilized by fiscal 2021, are only available
to offset 80% of taxable income each year due to changes in tax law
attributable to the passage of Tax Cuts and Jobs Act. In addition,
if DocGo undergoes an “ownership change” — generally
defined as a greater than 50% cumulative change in the equity
ownership of certain shareholders over a rolling
three-year period — under Section 382 of the
Internal Revenue Code, DocGo’s ability to use its
pre-change net operating loss carryforwards and other
pre-change tax attributes to offset future taxable income or
taxes may be limited. Although the Merger did not constitute such
an ownership change, DocGo may experience ownership changes in the
future as a result of changes in its stock ownership, some of which
may not be within DocGo’s control, which could materially reduce or
eliminate DocGo’s ability to use these losses or tax attributes to
offset future taxable income or tax and have an adverse effect on
its business, financial condition and results of operations.
Changes in tax laws or unanticipated tax liabilities could
adversely affect DocGo’s effective income tax rate and
profitability.
DocGo is subject to income taxes in the United States (federal
and state) and various foreign jurisdictions. DocGo’s effective
income tax rate could be adversely affected in the future by a
number of factors, including changes in the valuation of deferred
tax assets and liabilities, changes in tax laws and regulations or
their interpretations and application, and the outcome of income
tax audits in various jurisdictions around the world. In
particular, the Biden administration has proposed increases to the
U.S. corporate income tax rate from 21% to 28% and made other
proposals. If any of these (or similar) proposals are ultimately
enacted into law, in whole or in part, they could have a negative
impact on DocGo’s effective tax rate. DocGo cannot predict the
likelihood, timing or substance of U.S. tax proposals and will
continue to monitor the progress of such proposals, as well as
other global tax reform initiatives.
DocGo continues to monitor changes in tax laws in the U.S. and the
impact of proposed and enacted legislation in the various foreign
jurisdictions in which it operates. In August 2022, the Inflation
Reduction Act of 2022 was enacted, which, among other things,
includes a new 15% alternative minimum tax on the adjusted
financial statement income of certain large corporations for tax
years beginning after December 31, 2022. President Biden has also
provided informal guidance on tax law changes he may support. Among
other things, proposed changes would raise the rate on both
domestic and foreign income. If any of these proposals are
ultimately enacted into legislation, they could materially impact
DocGo’s tax provision, cash tax liability and effective tax
rate.
Changes in accounting rules, assumptions or judgments could
materially and adversely affect DocGo.
Accounting rules and interpretations for certain aspects of DocGo’s
financial reporting are highly complex and involve significant
assumptions and judgment. These complexities could lead to a delay
in the preparation and dissemination of DocGo’s financial
statements. Furthermore, changes in accounting rules and
interpretations or in DocGo’s accounting assumptions or judgments,
such as asset impairments and contingencies, are likely to
significantly impact its financial statements. In some cases, DocGo
could be required to apply a new or revised standard retroactively,
resulting in restating financial statements from prior period(s).
Any of these circumstances could have a material adverse effect on
DocGo’s business, financial condition and results of operations.
For additional information, see the financial statements of DocGo
and related footnotes included elsewhere in this Annual Report on
Form 10-K.
DocGo’s internal control over financial reporting may not be
effective and its independent registered public accounting firm may
not be able to certify as to their effectiveness, which could
adversely affect DocGo’s business.
As a public company, DocGo has significant requirements for
enhanced financial reporting and internal controls, including the
SEC’s rules implementing Sections 302 and 404 of the
Sarbanes-Oxley Act, which require management to certify
financial and other information in its quarterly and annual reports
and provide an annual management report on the effectiveness of
internal control over financial reporting. DocGo has made, and will
continue to make, changes to its internal controls and procedures
for financial reporting and accounting systems to meet its
reporting obligations as a public company. The process of designing
and implementing effective internal controls is a continuous effort
that requires DocGo to anticipate and react to changes in its
business and the economic and regulatory environments and to expend
significant resources to maintain a system of internal controls
that is adequate to satisfy its reporting obligations as a public
company. The measures DocGo takes may not be sufficient to satisfy
its obligations as a public company and if DocGo is unable to
establish or maintain appropriate internal financial reporting
controls and procedures, it could cause DocGo to fail to meet its
reporting obligations on a timely basis, result in material
misstatements in its Consolidated Financial Statements and harm its
results of operations. DocGo is an emerging growth company and, as
such, its independent registered public accounting firm will not be
required to formally attest to the effectiveness of its internal
control over financial reporting pursuant to Section 404 until
the date DocGo is no longer an emerging growth company. At such
time, DocGo’s independent registered public accounting firm may
issue a report that is adverse in the event that it is not
satisfied with the level at which DocGo’s controls are documented,
designed or operating, or it may not issue an unqualified
report.
To comply with the requirements of being a public company, DocGo
may need to undertake various actions, such as implementing
additional internal controls and procedures and hiring additional
accounting or internal audit staff. The rules governing the
standards that must be met for DocGo’s management to assess its
internal control over financial reporting are complex and require
significant documentation, testing and possible remediation.
Testing and maintaining internal controls can divert management’s
attention from other matters that are important to the operation of
DocGo’s business. In connection with the implementation of the
necessary procedures and practices related to internal control over
financial reporting, DocGo may identify deficiencies that it may
not be able to remediate in time to meet the deadline imposed by
the Sarbanes-Oxley Act for compliance with the requirements of
Section 404. DocGo’s testing, or the subsequent testing (if
required) by its independent registered public accounting firm, may
reveal deficiencies in its internal controls over financial
reporting that are deemed to be material weaknesses. Any material
weaknesses could result in a material misstatement of DocGo’s
annual or quarterly Consolidated Financial Statements or
disclosures that may not be prevented or detected. If DocGo
identifies material weaknesses in its internal control over
financial reporting or is unable to comply with the requirements of
Section 404 or assert that its internal control over financial
reporting is effective, or if DocGo’s independent registered public
accounting firm is unable to express an opinion as to the
effectiveness of its internal control over financial reporting when
such disclosure is required, investors may lose confidence in the
accuracy and completeness of DocGo’s financial reports and the
market price of its common stock could be negatively affected, and
DocGo could become subject to investigations by the SEC or other
regulatory authorities, any of which could have an adverse effect
on DocGo’s business, financial condition and results of
operations.
DocGo conducts business in the heavily regulated healthcare
industry and any failure to comply with these laws and government
regulations could require DocGo to make significant changes to its
operations and could have a material adverse effect on its
business, financial condition, and results of
operations.
The U.S. healthcare industry is heavily regulated and closely
scrutinized by federal and state governments. Comprehensive
statutes and regulations govern the manner in which DocGo provides
and bills for its services and collects reimbursement from
governmental programs and private payors, its relationship with its
providers, vendors and clients, its marketing activities and other
aspects of its operations. Of particular importance are:
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the federal False
Claims Act that imposes civil and criminal liability on individuals
or entities that knowingly submit false or fraudulent claims for
payment to the government or knowingly make, or cause to be made, a
false statement in order to have a false claim paid, including qui
tam or whistleblower suits; |
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the federal Civil
Monetary Penalties Law, which prohibits, among other things, the
offering or transfer of remuneration to a Medicare or state
healthcare program beneficiary if the person knows or should know
it is likely to influence the beneficiary’s selection of a
particular provider, practitioner or supplier of services
reimbursable by Medicare or a state healthcare program, unless an
exception applies; |
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reassignment of
payment rules that prohibit certain types of billing and collection
practices in connection with claims payable by the Medicare or
Medicaid programs; |
|
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a provision of the
Social Security Act that imposes criminal penalties on healthcare
providers who fail to disclose or refund known
overpayments; |
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federal and state laws
that prohibit providers from billing and receiving payment from
Medicare and Medicaid for services unless the services are
medically necessary, adequately and accurately documented, and
billed using codes that accurately reflect the type and level of
services rendered; |
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the criminal
healthcare fraud provisions of HIPAA that prohibit knowingly and
willfully executing a scheme or artifice to defraud any healthcare
benefit program or falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for
healthcare benefits, items or services. HIPAA also imposes certain
regulatory and contractual requirements regarding the privacy,
security and transmission of PHI. Similar to the federal
Anti-Kickback Statute, a person or entity does not need to
have actual knowledge of the statute or specific intent to violate
it to have committed a violation; |
|
● |
federal and state laws
and policies that require healthcare providers to maintain
licensure, certification or accreditation to provide professional
healthcare services, to enroll and participate in the Medicare and
Medicaid programs, to report certain changes in their operations to
the agencies that administer these programs, as well as state
insurance laws; |
|
● |
the federal
Anti-Kickback Statute that prohibits the knowing and willful
offer, payment, solicitation or receipt of any bribe, kickback,
rebate or other remuneration for referring an individual, in return
for ordering, leasing, purchasing or recommending or arranging for
or to induce the referral of an individual or the ordering,
purchasing or leasing of items or services covered, in whole or in
part, by any federal healthcare program, such as Medicare and
Medicaid. Remuneration has been interpreted broadly to be anything
of value, and could include compensation, discounts or free
marketing services. A person or entity does not need to have actual
knowledge of the statute or specific intent to violate it to have
committed a violation. In addition, the government may assert that
a claim including items or services resulting from a violation of
the federal Anti-Kickback Statute constitutes a false or
fraudulent claim for purposes of the False Claims Act; |
|
● |
similar state law
provisions pertaining to false claims, self-referral and
anti-kickback issues, some of which may apply to items or
services reimbursed by any third-party payor, including
commercial insurers or services paid out-of-pocket by
patients; |
|
● |
the federal physician
self-referral law under Section 1877 of the Social
Security Act, commonly referred to as the Stark Law, that, unless
one of the statutory or regulatory exceptions applies, prohibits
physicians from referring Medicare or Medicaid patients to an
entity for the provision of certain “designated health services” if
the physician or a member of such physician’s immediate family has
a direct or indirect financial relationship (including an ownership
interest or a compensation arrangement) with the entity, and
prohibits the entity from billing Medicare or Medicaid for such
designated health services. Failure to refund amounts received as a
result of a prohibited referral on a timely basis may constitute a
false or fraudulent claim and may result in civil penalties and
additional penalties under the federal False Claims Act noted
below; |
|
● |
state laws that
prohibit general business corporations, such as DocGo, from
practicing medicine, controlling physicians’ medical decisions or
engaging in some practices such as splitting fees with
physicians; |
|
● |
the Federal Trade
Commission Act and federal and state consumer protection,
advertisement and unfair competition laws, which broadly regulate
marketplace activities and activities that could potentially harm
consumers; and |
|
● |
laws that regulate
debt collection practices. |
DocGo’s ability to provide its services internationally is subject
to the similar laws and regulations in those jurisdictions and the
interpretation of these laws is evolving and varies significantly
from country to county. As in the United States, many of these
laws and regulations are enforced by governmental, judicial and
regulatory authorities with broad discretion. Although similar to
their U.S. counterparts in the subject matters addressed,
these foreign laws may be very different in what is required of the
business and how they regulate the underlying activities. DocGo
cannot be certain that its interpretation of such laws and
regulations are correct in how its structures its operations, its
arrangements with its healthcare provider partners, services
agreements and customer arrangements.
Many of these laws and regulations are complex, broad in scope and
have few or narrowly structured exceptions and safe harbors. Often
DocGo is required to fit certain activities within one of the
statutory exceptions and safe harbors available and it is possible
that some of DocGo’s current or future business activities could be
subject to challenge under one or more of such laws. Achieving and
sustaining compliance with these laws can be time-consuming,
requires the commitment of significant resources and may prove
costly. The risk of DocGo being found in violation of these laws
and regulations is increased by the fact that many of these laws
and regulations have not been fully interpreted by the regulatory
authorities or the courts, and their provisions are sometimes open
to a variety of interpretations. DocGo’s failure to accurately
anticipate the application of these laws and regulations to its
current or future business or any other failure or alleged failure
to comply with legal or regulatory requirements could create
liability for DocGo and negatively affect its business. Any action
against DocGo for violation of these laws or regulations, even if
DocGo successfully defends against it, could cause DocGo to incur
significant legal expenses, divert management’s attention from the
operation of the business and result in adverse publicity.
Enforcement officials have a number of mechanisms to combat
regulatory compliance, fraud and abuse, and if DocGo fails to
comply with applicable laws and regulations, it could be liable for
civil or criminal penalties, including fines, damages, recoupment
of overpayments, loss of licenses needed to operate, loss of
enrollment status and approvals necessary to participate in
Medicare, Medicaid and other government and private
third-party healthcare and payor programs, and exclusion from
participation in Medicare, Medicaid and other government healthcare
programs. Investors, officers and managing employees associated
with entities found to have committed healthcare fraud may also be
excluded from participation in government healthcare programs. In
addition, because of the potential for large monetary exposure,
criminal liability and negative publicity, healthcare providers
often resolve allegations without admissions of liability for
significant and material amounts to avoid the uncertainty of
damages that may be awarded in litigation proceedings. Such
settlements often contain additional compliance and reporting
requirements as part of a consent decree, settlement agreement or
corporate integrity agreement.
DocGo believes that its business operations materially comply with
applicable healthcare laws and regulations. However, some of the
healthcare laws and regulations applicable to DocGo are subject to
limited or evolving interpretations, and a review of DocGo’s
business or operations by a court, law enforcement or a regulatory
authority might result in a determination of non-compliance. Any
failure to comply with applicable legal and regulatory requirements
and the consequences of such non-compliance, including those
discussed above, could have a significant adverse effect on DocGo’s
business, financial condition and results of operations.
DocGo is required to comply with laws governing the
transmission, security and privacy of health information and
personally identifiable information.
Numerous state and federal laws and regulations govern the
collection, dissemination, use, privacy, confidentiality, security,
availability, integrity and other processing of personal health
information (“PHI”) and personal identifiable information (“PII”),
including HIPAA. HIPAA establishes a set of national privacy
and security standards for the protection of PHI by health plans,
healthcare clearinghouses and certain healthcare providers,
referred to as “covered entities,” and the business associates with
whom such covered entities contract for services. HIPAA requires
covered entities such as DocGo and their business associates to
develop and maintain policies and procedures with respect to PHI
that is used or disclosed, including the adoption of
administrative, physical and technical safeguards to protect this
information. HIPAA also implemented the use of standard transaction
code sets and standard identifiers that covered entities must use
when submitting or receiving certain electronic healthcare
transactions, including activities associated with the billing and
collection of healthcare claims.
HIPAA also authorizes state attorneys general to file suit on
behalf of their residents. Courts may award damages, costs and
attorneys’ fees related to violations of HIPAA in these cases.
While HIPAA does not create a private right of action allowing
individuals to sue DocGo in civil court for violations of HIPAA,
its standards have been used as the basis for duty of care in state
civil suits such as those for negligence or recklessness in the
misuse or breach of PHI. In addition, HIPAA mandates that the
Secretary of the U.S. Department of Health and Human Services
(“HHS”) conduct periodic compliance audits of covered entities and
business associates for compliance with the HIPAA privacy and
security requirements. HIPAA also tasks HHS with establishing a
methodology whereby harmed individuals who were the victims of
breaches of unsecured PHI may receive a percentage of the fine paid
by the violator under the Civil Monetary Penalties Law.
HIPAA further requires that patients be notified of any
unauthorized acquisition, access, use or disclosure of their
unsecured PHI that compromises the privacy or security of such
information, with certain exceptions related to unintentional or
inadvertent use or disclosure by employees or authorized
individuals. HIPAA specifies that such notifications must be made
“without unreasonable delay and in no case later than 60
calendar days after discovery of the breach.” If a breach
affects 500 patients or more, it must be reported to HHS without
unreasonable delay, and HHS will post the name of the breaching
entity on its public web site. Breaches affecting 500 patients or
more in the same state or jurisdiction must also be reported to a
prominent media outlet serving the state or jurisdiction in which
the breach occurred. If a breach involves fewer than 500 people,
the covered entity must record it in a log and notify HHS within 60
days after the end of the calendar year during which the breach was
discovered.
In addition to HIPAA, numerous other federal and state laws and
regulations protect the confidentiality, privacy, availability,
integrity and security of PHI and other types of PII. State
statutes and regulations vary from state to state, and these laws
and regulations in many cases are more restrictive than, and may
not be preempted by, HIPAA. These laws and regulations are often
uncertain, contradictory and subject to change or differing
interpretations, and DocGo expects new laws, rules and regulations
regarding privacy, data protection and information security to be
proposed and enacted in the future. By way of example, the
California Consumer Privacy Act (CCPA), which went into effect on
January 1, 2020 and was amended by the California Privacy Rights
Act (CPRA), a ballot measure approved by California voters in
November 2020 that went into effect January 1, 2023, has had a
profound impact on the privacy and data security landscape. As the
first comprehensive consumer privacy legislation in the U.S., the
CCPA created where applicable (some information may be exempt from
most of CCPA’s/CPRA’s requirements if subject to HIPAA, for
example), which were further expanded by the CPRA. Other states,
including Colorado, Connecticut and Utah, have followed suit, and
others may in the future, creating a patchwork of overlapping but
different state laws and thus complicating compliance efforts.
As existing data security laws evolve and new ones are implemented,
DocGo may not be able to comply with such requirements in a timely
manner, or such requirements may not be compatible with its current
processes. Changing DocGo’s processes could be
time-consuming and expensive, and failure to implement
required changes within the applicable timeframe could subject
DocGo to liability for non-compliance. Some states may afford
private rights of action to individuals who believe their PII has
been misused. This complex, dynamic legal landscape regarding
privacy, data protection and information security creates
significant compliance issues for DocGo and potentially restricts
its ability to collect, use and disclose data and can expose it to
additional expense, adverse publicity and liability.
There is ongoing concern from privacy advocates, regulators and
others regarding data protection and privacy issues, and the number
of jurisdictions with data protection and privacy laws has been
increasing. In addition, the scope of protection afforded to data
subjects by many of these data protection and privacy laws has been
increasing. There are also ongoing public policy discussions
regarding whether the standards for deidentified, anonymous or
pseudonymized health information are sufficient, and whether the
risk of re-identification is sufficiently small to adequately
protect patient privacy. These trends may lead to further
restrictions on the use of this and similar categories of
information. These initiatives or future initiatives could
compromise DocGo’s ability to access and use data or to develop or
market current or future services.
While DocGo has implemented data privacy and security measures in
an effort to comply with applicable laws and regulations relating
to privacy and data protection, some PHI and other PII or
confidential information is transmitted to or from DocGo by third
parties, who may not implement adequate security and privacy
measures, and it is possible that laws, rules and regulations
relating to privacy, data protection or information security may be
interpreted and applied in a manner that is inconsistent with
DocGo’s practices or those of third parties who transmit PHI and
other PII or confidential information to DocGo. Additionally, as a
business associate under HIPAA, DocGo may also be liable for
privacy and security breaches of PHI and certain similar failures
of DocGo’s subcontractors. Even though DocGo contractually requires
its subcontractors to safeguard protected health information as
required by law, DocGo has limited control over their actions and
practices. If DocGo or these third parties are found to have
violated such laws, rules or regulations, it could result in
government-imposed fines, orders requiring that DocGo or these
third parties change its or their practices, or criminal charges,
which could adversely affect DocGo’s business. Complying with these
various laws and regulations could cause DocGo to incur substantial
costs or require it to change its business practices, systems and
compliance procedures in a manner adverse to its business.
DocGo publishes statements to its patients and partners that
describe how it handles and protects PHI. If federal or state
regulatory authorities or private litigants consider any portion of
these statements to be untrue, DocGo may be subject to claims of
deceptive practices, which could lead to significant liabilities
and consequences, including, without limitation, costs of
responding to investigations, defending against litigation,
settling claims and complying with regulatory or court orders.
DocGo also sends short message service, or SMS, text messages to
potential end users who are eligible to use its service through
certain customers and partners. While DocGo obtains consent from or
on behalf of these individuals to send text messages, federal or
state regulatory authorities or private litigants may claim that
the notices and disclosures DocGo provides, form of consents it
obtains or its SMS texting practices, are not adequate. These SMS
texting campaigns are potential sources of risk for
class action lawsuits and liability for DocGo. An increased
number of class action suits under federal and state laws have been
filed in the past year against companies who conduct SMS texting
programs, which have resulted in or may result in
multimillion-dollar settlements to the plaintiffs. Any future
such litigation against DocGo could be costly and
time-consuming to defend.
Any failure to comply with HIPAA or similar laws and regulations
and the consequences of such non-compliance could have a
material adverse impact on DocGo’s business, financial condition
and results of operations.
If DocGo does not effectively adapt to changes in the
healthcare industry, including changes to laws and regulations
regarding telehealth, DocGo’s business may be harmed.
The unpredictability of the healthcare regulatory landscape means
that sudden changes in laws, rules, regulations and policy are
possible. Federal, state and local legislative bodies frequently
pass legislation and promulgate regulations that affect the
healthcare industry. As has been the trend in the past decade with
healthcare reform, it is reasonable to assume that there will
continue to be increased government oversight and regulation of the
healthcare industry in the future, particularly in times of
changing political, regulatory and other influences. DocGo cannot
provide any assurances regarding the ultimate content, timing or
effect of any new healthcare legislation or regulations, nor is it
possible at this time to estimate the impact of potential new
legislation or regulations on its business. It is possible that
future legislation enacted by Congress or state legislatures, or
regulations promulgated by regulatory authorities at the federal or
state level, could adversely affect DocGo’s current or future
business. The extent to which a jurisdiction considers particular
actions or relationships to comply with the applicable legal
requirements is also subject to evolving interpretations by medical
boards and state attorneys general, among others, each with broad
discretion. It is possible that the changes to the Medicare,
Medicaid or other governmental healthcare program reimbursements
may serve as precedent to possible changes in other payors’
reimbursement policies in a manner adverse to DocGo. Similarly,
changes in private payor reimbursements could lead to adverse
changes in Medicare, Medicaid and other governmental healthcare
programs.
As one example, the telehealth industry is still relatively young
and DocGo’s ability to provide its telehealth solutions is directly
dependent upon the development and interpretation of the laws
governing remote healthcare, the practice of medicine and
healthcare delivery in the applicable jurisdictions and more
broadly. A few states have imposed different, and, in some cases,
additional, standards regarding the provision of services via
telehealth. State medical boards have also established new rules or
interpreted existing rules in their respective states in a manner
that has limited the way telehealth services can be provided.
Although the Covid-19 pandemic has led to the relaxation of
certain Medicare, Medicaid and state licensure restrictions on the
delivery of telehealth services, it is uncertain how long the
relaxed policies will remain in effect, particularly with the
Public Health Emergency (“PHE”) expected to end on May 11, 2023.
There can be no guarantee that upon expiration of the PHE such
restrictions will not be reinstated or changed in a way that
adversely affects DocGo’s current or future telehealth
offerings.
Accordingly, DocGo must monitor its compliance with law in every
jurisdiction in which it operates, on a regular basis. While DocGo
believes that it has structured its contracts and operations in
material compliance with applicable healthcare laws and
regulations, the healthcare laws and regulations applicable to
DocGo may be amended or interpreted in new or different ways that
are adverse to DocGo and new laws and regulations adverse to
DocGo’s current or future business may be adopted in the future.
There can be no assurance that DocGo will be able to successfully
address changes in the current regulatory environment or new laws
and regulations that may be implemented in the future, or that
practices which are compliant now will continue to be so in the
future. Any failure to comply with any changes to or new
developments in the healthcare regulatory environment could have a
material adverse effect on DocGo’s business, financial condition
and results of operations.
DocGo must be properly enrolled in governmental healthcare
programs before it can receive reimbursement for services, and
there may be delays in the enrollment process.
Each time DocGo expands into a new market, whether organically or
by way of acquisition, DocGo must enroll the new operations under
DocGo’s applicable group identification number for Medicare and
Medicaid programs and for certain managed care and private
insurance programs before DocGo is eligible to receive
reimbursement for services rendered to beneficiaries of those
programs. The estimated time to receive approval for the enrollment
is sometimes difficult to predict.
With respect to Medicare, providers can retrospectively bill
Medicare for services provided 30 days prior to the effective
date of the enrollment. In addition, the enrollment rules provide
that the effective date of the enrollment will be the later of the
date on which the enrollment application was filed and approved by
the Medicare contractor, or the date on which the provider began
providing services. If DocGo is unable to complete the enrollment
process within the 30 days after the commencement of services,
DocGo will be precluded from billing Medicare for any services
which were provided to a Medicare beneficiary more than
30 days prior to the effective date of the enrollment. With
respect to Medicaid, new enrollment rules and whether a state will
allow providers to retrospectively bill Medicaid for services
provided prior to submitting an enrollment application varies by
state. Failure to timely enroll could reduce DocGo’s total revenues
and have a material adverse effect on the business, financial
condition or results of operations.
The Affordable Care Act, as currently structured, added additional
enrollment requirements for Medicare and Medicaid, which have been
further enhanced through implementing regulations and increased
enforcement scrutiny. Every enrolled provider must revalidate its
enrollment at regular intervals and must update the Medicare
contractors and many state Medicaid programs with significant
changes on a timely basis. If DocGo fails to provide sufficient
documentation as required to maintain its enrollment, Medicare and
Medicaid could deny continued future enrollment or revoke DocGo’s
enrollment and billing privileges.
The requirements for enrollment, licensure, certification and
accreditation may include notification or approval in the event of
a transfer or change of ownership or certain other changes. Other
agencies or payors with which DocGo has contracts may have similar
requirements, and some of these processes may be complex. Failure
to provide required notifications or obtain necessary approvals may
result in the delay or inability to complete an acquisition or
transfer, loss of licensure, lapses in reimbursement or other
penalties. While DocGo makes reasonable efforts to substantially
comply with these requirements, it cannot assure you that the
agencies that administer these programs or have awarded DocGo
contracts will not find that DocGo has failed to comply in some
material respects. A finding of non-compliance and any
resulting payment delays, refund demands or other sanctions could
have a material adverse effect on DocGo’s business, financial
condition or results of operations.
Reductions in Medicare reimbursement rates or changes in the
rules governing the Medicare program could have a material adverse
effect on DocGo.
DocGo
generates a significant amount of revenues from Medicare, either
directly or through Medicare Advantage (“MA”) plans, particularly
in its healthcare transportation segment. Medicare revenues
represent approximately 6.6% and 7.6% of DocGo’s revenues for
the years ended December 31, 2021 and 2022,
respectively. In addition, many
private payors base their reimbursement rates on the published
Medicare rates or are themselves reimbursed by Medicare for the
services DocGo provides. As a result, DocGo’s results of operations
are, in part, dependent on government funding levels for Medicare
programs and any changes that limit or reduce MA or general
Medicare reimbursement levels, such as reductions in or limitations
of reimbursement amounts or rates under programs, reductions in
funding of programs, expansion of benefits without adequate funding
or elimination of coverage for certain benefits or for certain
individuals, could have a material adverse effect on DocGo’s
business, financial condition and results of operations.
The Medicare program and its reimbursement rates and rules are
subject to frequent change. These include statutory and regulatory
changes, rate adjustments (including retroactive adjustments),
administrative or executive orders and government funding
restrictions, all of which may materially adversely affect the
rates at which Medicare reimburses DocGo for its services. Budget
pressures often cause the federal government to reduce or place
limits on reimbursement rates under Medicare. Implementation of
these and other types of measures could result in substantial
reductions in DocGo’s revenues and operating margins. For example,
due to the federal sequestration, an automatic 2% reduction in
Medicare spending took effect beginning in April 2013.
Although temporarily paused/reduced from May 1, 2020 through June
30, 2022 due to The Cares Act, which was signed into law on
March 27, 2020, and designed to provide financial support and
resources to individuals and business affected by the
COVID-19 pandemic, the 2% reduction was reimposed as of July
1, 2022.
Each year, the Centers for Medicare and Medicaid Services (“CMS”)
issues a final rule to establish the MA benchmark payment rates for
the following calendar year. Reductions to MA rates impacting DocGo
may be greater than the industry average rate and the final impact
of the MA rates can vary from any estimate DocGo may have. In
addition, CMS may change the rules governing the Medicare program,
including those governing reimbursement. Reductions in
reimbursement rates or the scope of services being reimbursed could
have a material adverse effect on DocGo’s business, financial
condition and results of operations.
State and federal efforts to reduce Medicaid spending could
adversely affect DocGo.
Certain of
DocGo’s customers who are individuals are dual-eligible, meaning
their coverage comes from both Medicare and Medicaid. As a result,
a small portion of DocGo’s revenue comes from Medicaid, accounting
for approximately 1.1% and 1.8% of revenue for the years ended
December 31, 2021 and 2022, respectively.
Medicaid is a joint
federal-state program purchasing healthcare services for the
low income and indigent as well as certain higher income
individuals with significant health needs. Under broad federal
criteria, states establish rules for eligibility, services and
payment. Medicaid is a state-administered program financed by
both state funds and matching federal funds. Medicaid spending has
increased rapidly in recent years, becoming a significant
component of state budgets. This, combined with slower state
revenue growth, has led both the federal government and many states
to institute measures aimed at controlling the growth of Medicaid
spending, and in some instances reducing aggregate Medicaid
spending.
For example, a number of states have adopted or are considering
legislation designed to reduce their Medicaid expenditures, such as
financial arrangements commonly referred to as provider taxes.
Under provider tax arrangements, states collect taxes from
healthcare providers and then use the revenue to pay the providers
as a Medicaid expenditure, which allows the states to then claim
additional federal matching funds on the additional reimbursements.
Current federal law provides for a cap on the maximum allowable
provider tax as a percentage of the provider’s total revenue. There
can be no assurance that federal law will continue to provide
matching federal funds on state Medicaid expenditures funded
through provider taxes, or that the current caps on provider taxes
will not be reduced. Any discontinuance or reduction in federal
matching of provider tax-related Medicaid expenditures could
have a significant and adverse effect on states’ Medicaid
expenditures, and as a result could have an adverse effect on
DocGo’s business, financial condition and results of
operations.
Also, as part of the movement to repeal, replace or modify the
Health Care Reform Law and as a means to reduce the federal budget
deficit, there are renewed congressional efforts to move Medicaid
from an open-ended program with coverage and benefits set by
the federal government to one in which states receive a fixed
amount of federal funds, either through block grants or per capita
caps, and have more flexibility to determine benefits, eligibility
or provider payments. If those changes are implemented, DocGo
cannot predict whether the amount of fixed federal funding to the
states will be based on current payment amounts, or if it will be
based on lower payment amounts, which would negatively impact those
states that expanded their Medicaid programs in response to the
Health Care Reform Law.
DocGo expects these state and federal efforts to continue for the
foreseeable future. The Medicaid program and its reimbursement
rates and rules are subject to frequent change at both the federal
and state level. These include statutory and regulatory changes,
rate adjustments (including retroactive adjustments),
administrative or executive orders and government funding
restrictions, all of which may materially adversely affect the
rates at which DocGo’s services are reimbursed by state Medicaid
plans.
DocGo could become the subject of federal and state
investigations and compliance reviews.
Companies in the broader healthcare industry are subject to a high
level of scrutiny by various governmental agencies and their
agents. Both federal and state government agencies have heightened
and coordinated civil and criminal enforcement efforts as part of
numerous ongoing investigations of healthcare companies, as well as
their executives and managers. These investigations relate to a
wide variety of topics, including referral and billing practices.
For example, to enforce compliance with the federal laws, the U.S.
Department of Justice and the Office of Inspector General have
established national enforcement initiatives that focus on specific
billing practices or other suspected areas of abuse. Given the
significant size of actual and potential settlements, it is
expected that the government will continue to devote substantial
resources to investigating healthcare providers’ compliance,
including compliance with the healthcare reimbursement rules and
fraud and abuse laws. DocGo is also required to conduct periodic
internal audits in connection with its
third-party relationships and, in the ordinary course of
business receives repayment demands from third-party payors
based on allegations that its services were not medically
necessary, were billed at an improper level or otherwise violated
applicable billing requirements that require investigation.
Further, DocGo periodically conducts internal reviews of its
regulatory compliance. To date no investigation or audit of DocGo,
its executives or its managers has occurred, whether by the
government and its agents, a third-party or DocGo itself.
However, should such an investigation or audit occur, it could
result in significant expense to DocGo in addition to adverse
publicity and diversion of the management’s attention from DocGo’s
business regardless of the outcome. Any adverse findings against
DocGo could result in significant fines, penalties and other
sanctions, any of which could have a material adverse effect on
DocGo’s business, financial condition and results of
operations.
DocGo’s business practices may be found to constitute illegal
fee-splitting or corporate practice of medicine, which may lead to
penalties and could adversely affect DocGo’s business.
Many states have laws that prohibit business corporations such as
DocGo from practicing medicine, employing physicians, exercising
control over medical judgments or decisions of physicians or other
health care professionals (such as EMTs and nurses), or engaging in
certain business arrangements such as fee-splitting, with each of
the foregoing activities collectively referred to as the “corporate
practice of medicine.” In some states these prohibitions are
expressly stated in a statute or regulation, while in other states
the prohibition is a matter of judicial or regulatory
interpretation. Many of the states in which DocGo currently
operates generally prohibit the corporate practice of medicine, and
other states may as well, including those into which DocGo may
expand in the future.
The state laws and regulations and administrative and judicial
decisions that enumerate the specific corporate practice of
medicine rules vary considerably from state to state and have been
subject to limited judicial or regulatory interpretations. These
laws and regulations are enforced by both the courts and government
agencies, each with broad discretion. Courts, government agencies
or other parties, including physicians, may assert that DocGo is
engaged in the unlawful corporate practice of medicine. While
penalties for violations of the corporate practice of medicine vary
from state to state, as a result of such allegations, DocGo could
be subject to civil and criminal penalties, its contracts could be
found legally invalid and unenforceable, in whole or in part, or
DocGo could be required to restructure its contractual arrangements
entirely. If found to be engaged in the corporate practice of
medicine, DocGo may not be able to restructure its operations or
its contractual arrangements on favorable terms or at all. Any
failure to comply with these laws and regulations regarding the
corporate practice of medicine and the consequences of such
non-compliance could have a material adverse impact on DocGo’s
business, financial condition and results of operations.
DocGo believes its business is structured to comply with the
applicable regulations governing fee-splitting and the
corporate practice of medicine in the states where it generates
revenue; however, in many cases and as noted above, these laws and
regulations applicable to DocGo are subject to limited or evolving
interpretations, and there can be no assurances that a review of
DocGo’s business or operations by a court, law enforcement or a
regulatory authority might result in a determination of
non-compliance.
Risks Related to DocGo’s Indebtedness
DocGo’s future indebtedness could require that it dedicate a
portion of its cash flows to debt service obligations and reduce
the funds that would otherwise be available for other general
corporate purposes and other business opportunities, which could
adversely affect DocGo’s operating performance, growth,
profitability and financial condition, which in turn could make it
more difficult for it to generate cash flow sufficient to satisfy
all of its obligations under its future indebtedness.
As of December 31, 2022, DocGo did not have any amounts outstanding
under a credit agreement (the “Credit Agreement”), dated as of
November 1, 2022, among DocGo, the lender parties thereto, and
Citibank, N.A., as administrative agent (the “Agent”). The Credit
Agreement provides for a revolving credit facility in the initial
aggregate principal amount of $90 million (the “Revolving
Facility”). Borrowings under the Revolving Facility bear interest
at a per annum rate equal to: (i) at DocGo’s option, the (x) the
base rate or (y) the adjusted term SOFR rate, plus (ii) the
applicable margin. DocGo is also required to pay a commitment fee
to the lenders under the Revolving Facility in respect of any
unutilized commitments thereunder. DocGo’s future indebtedness,
including future borrowings under the Credit Agreement or similar
future arrangements, could require that it dedicate a portion of
its cash flows to debt service payments.
DocGo’s future indebtedness could reduce the funds that would
otherwise be available for operations, future business
opportunities and payments of its future debt obligations and could
limit its ability to:
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obtain additional
financing, if necessary, for working capital and operations, or
such financing may not be available on favorable terms; |
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make needed capital
expenditures; |
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make strategic
acquisitions or investments or enter into joint
ventures; |
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react to changes or
withstand a future downturn in its business, the industry or the
economy in general; |
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meet expected demand
growth, budget targets and forecasts of future results; |
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engage in business
activities, including future opportunities that may be in its
interest; and |
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react to competitive
pressures or compete with competitors with less debt. |
These limitations could adversely affect its operating performance,
growth, profitability and financial condition, which would make it
more difficult for it to generate cash flow sufficient to satisfy
its obligations under its future indebtedness.
DocGo’s future ability to make scheduled payments on its future
debt obligations also depends on its then-current financial
condition, results of operations and capital resources, which are
subject to, among other things: the business, financial, economic,
industry, competitive, regulatory and other factors discussed in
these risk factors, and on other factors, some of which are beyond
its control, including: the level of capital expenditures it makes,
including those for acquisitions, if any; its debt service
requirements; fluctuations in its working capital needs; its
ability to borrow funds and access capital markets; and
restrictions on debt service payments and its ability to make
working capital borrowings for future debt service payments
contained in the Credit Agreement.
If DocGo is unable to generate sufficient cash flow to permit it to
meet its future debt obligations under the Credit Agreement or any
future arrangements, then it would be in default and, in the case
of the Credit Agreement, the Agent could accelerate repayment of
all amounts outstanding under the Credit Agreement. If its future
indebtedness were to be accelerated, there can be no assurance that
DocGo would have, or be able to obtain, sufficient funds to repay
such future indebtedness in full. In addition, under the Credit
Agreement, in the event of a default, the Agent could seek
foreclosure of the Agent’s lien on the assets of DocGo and its
subsidiary guarantors and exercise other customary secured creditor
rights.
DocGo might incur future debt, which could further increase
the risks to its financial condition described above.
DocGo may incur significant additional indebtedness in the future,
including off-balance sheet financings, trade credit, contractual
obligations and general and commercial liabilities. Although the
Credit Agreement contains certain restrictions on the incurrence of
additional indebtedness, these restrictions are subject to a number
of qualifications and exceptions, and the additional indebtedness
incurred in compliance with these restrictions could be
substantial. These restrictions also would not prevent DocGo from
incurring obligations that do not constitute indebtedness, and
additionally it has its borrowing capacity under the Revolving
Facility, which as of December 31, 2022, did not have any
borrowings outstanding, and had an available borrowing capacity of
approximately $90 million (which is subject to customary borrowing
conditions). DocGo may be able to increase the commitments under
the Revolving Facility by an additional aggregate principal amount
of up to $50 million. DocGo’s future debt levels could further
exacerbate the related risks to DocGo’s financial condition that it
now faces.
If DocGo is unable to generate sufficient cash to service its
future indebtedness, it may be forced to take other actions to fund
the satisfaction of its obligations under its future indebtedness,
which may not be successful.
If DocGo’s cash flow is insufficient to fund its future debt
service obligations, it could face substantial liquidity problems
and could be forced to reduce or delay investments and capital
expenditures or to dispose of material assets or operations, raise
additional debt or equity capital or restructure or refinance its
future indebtedness. DocGo may not be able to implement any such
alternative measures on commercially reasonable terms or at all
and, even if successful, those alternative actions may not allow
DocGo to meet its future debt service obligations. Even if new
financing were available, it may be on terms that are less
attractive to DocGo than its then-existing indebtedness or it may
not be on terms that are acceptable to DocGo. In addition, the
Credit Agreement restricts DocGo’s ability to dispose of assets and
use the proceeds from those dispositions. Thus, DocGo may not be
able to consummate those dispositions or to obtain proceeds in an
amount sufficient to meet any debt service obligations then
due.
If DocGo cannot generate sufficient cash flow to permit it to meet
future payment requirements on its debt, then, under the Credit
Agreement, it would be in default and the Agent could accelerate
repayment of all amounts outstanding under the Credit Agreement. If
DocGo’s future indebtedness were to be accelerated, there can be no
assurance that it would have, or be able to obtain, sufficient
funds to repay such future indebtedness in full. In addition, in
the case of the Credit Agreement, in the event of a default, the
Agent could seek foreclosure of the Agent’s lien on the assets of
DocGo and its subsidiary guarantors and exercise other customary
secured creditor rights, and DocGo could be forced into bankruptcy
or liquidation.
The terms of DocGo’s Credit Agreement and potential future
debt arrangements could restrict its current and future operations,
particularly its ability to respond to changes or to take certain
actions.
The Credit Agreement imposes significant operating and financial
restrictions on DocGo and may limit its ability to engage in acts
that may be in its best interest, including restrictions on DocGo’s
ability to:
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incur
or guarantee additional indebtedness; |
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pay
dividends and make other distributions on, or redeem or repurchase,
capital stock; |
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make
certain investments; |
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enter
into transactions with affiliates; |
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merge
or consolidate; and |
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transfer or sell
assets. |
Additionally, the Credit Agreement also requires DocGo to maintain
a certain interest coverage ratio and a net leverage ratio. DocGo’s
ability to comply with the covenants and restrictions contained in
the Credit Agreement may be affected by events beyond its control.
If market or other macroeconomic conditions deteriorate, its
ability to comply with these covenants and restrictions may be
impaired.
A breach of the covenants could result in an event of default under
the Credit Agreement, which, if not cured or waived, could have a
material adverse effect on DocGo’s business, results of operations
and financial condition, including the acceleration of payments as
described above. If DocGo’s then-existing indebtedness were to be
accelerated, there can be no assurance that it would have, or be
able to obtain, sufficient funds to repay such indebtedness in
full. In addition, in the event of a default, the Agent could seek
foreclosure of the Agent’s lien on the assets of DocGo and its
subsidiary guarantors and exercise other customary secured creditor
rights, and DocGo could be forced into bankruptcy or liquidation.
Any future debt arrangements that DocGo may enter into could also
impose similar restrictions.
DocGo’s variable rate indebtedness could subject it to
interest rate risk, which could cause its debt service obligations
to increase significantly.
Borrowings under the Revolving Facility are at variable rates of
interest and DocGo’s future borrowings under the Revolving Facility
could expose DocGo to interest rate risk. If interest rates
increase, DocGo’s debt service obligations on its future variable
rate indebtedness could increase even though the amount borrowed
will remain the same, and DocGo’s net income and operating cash
flows, including cash available for servicing its indebtedness,
would correspondingly decrease.
If the financial institutions that are lenders under the
Revolving Facility fail to extend credit under the facility,
DocGo’s liquidity and results of operations may be adversely
affected.
Each financial institution that is a lender under the Revolving
Facility is responsible on a several but not joint basis for
providing a portion of the loans to be made under the facility. If
any participant or group of participants with a significant portion
of the commitments under the Revolving Facility fails to satisfy
its or their respective obligations to extend credit under the
facility and DocGo is unable to find a replacement for such
participant or participants on a timely basis (if at all), DocGo’s
liquidity may be adversely affected. In addition, the lenders under
the Revolving Facility may terminate or reduce the Revolving
Facility in certain circumstances, which could adversely impact
DocGo’s liquidity and results of operations.
Risks Relating to Ownership of Common Stock
Nasdaq may delist DocGo’s securities from trading on its
exchange, which could limit investors’ ability to make transactions
in its securities and subject DocGo to additional trading
restrictions.
DocGo’s Common Stock is listed on Nasdaq under the symbol “DCGO.”
DocGo is required to meet continued listing requirements for its
securities to continue to be listed on Nasdaq, including having a
minimum number of public securities holders and a minimum stock
price. DocGo cannot assure you that it will continue to meet those
listing requirements in the future.
If Nasdaq delists DocGo’s securities from trading on its exchange
and DocGo is not able to list its securities on another national
securities exchange, DocGo expects its securities could be quoted
on an over-the-counter market. If this were to occur, it could
face significant material adverse consequences, including:
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a limited availability
of market quotations for its securities; |
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reduced liquidity for
its securities; |
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a determination that
the Common Stock is a “penny stock” which will require brokers
trading in Common Stock to adhere to more stringent rules and
possibly result in a reduced level of trading activity in the
secondary trading market for its securities; |
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a limited amount of
news and analyst coverage; and |
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a decreased ability to
issue additional securities or obtain additional financing in the
future. |
Because there are no current plans to pay cash dividends on
Common Stock for the foreseeable future, you may not receive any
return on investment unless you sell your Common Stock for a price
greater than that which you paid for it.
DocGo intends to retain future earnings, if any, for future
operations, expansion and debt repayment and there are no current
plans to pay any cash dividends for the foreseeable future. The
declaration, amount and payment of any future dividends on shares
of Common Stock will be at the sole discretion of the Board. The
Board may take into account general and economic conditions,
DocGo’s financial condition and results of operations, DocGo’s
available cash and current and anticipated cash needs, capital
requirements, contractual, legal, tax, and regulatory restrictions,
implications on the payment of dividends by DocGo to its
stockholders or by its subsidiaries to it and such other factors as
the Board may deem relevant. In addition, DocGo’s ability to pay
dividends is limited by covenants of DocGo’s existing and
outstanding indebtedness and may be limited by covenants of any
future indebtedness DocGo incurs. As a result, you may not receive
any return on an investment in Common Stock unless you sell Common
Stock for a price greater than that which you paid for it.
If securities analysts do not publish research or reports
about DocGo’s business or if they downgrade the Common Stock or
DocGo’s sector, DocGo’s stock price and trading volume could
decline.
The trading market for Common Stock relies in part on the research
and reports that industry or financial analysts publish about DocGo
or its business. DocGo does not control these analysts. In
addition, some financial analysts may have limited expertise with
DocGo’s model and operations. Furthermore, if one or more of the
analysts who do cover DocGo downgrade its stock or industry, or the
stock of any of its competitors, or publish inaccurate or
unfavorable research about its business, the price of Common Stock
could decline. If one or more of these analysts cease coverage of
DocGo or fail to publish reports on it regularly, DocGo could lose
visibility in the market, which in turn could cause its stock price
or trading volume to decline.
Future sales, or the perception of future sales, by DocGo or
its stockholders in the public market could cause the market price
for Common Stock to decline.
The sale of shares of Common Stock in the public market, or the
perception that such sales could occur, by senior executives,
directors and significant stockholders could harm the prevailing
market price of shares of Common Stock. These sales, or the
possibility that these sales may occur, also might make it more
difficult for DocGo to sell equity securities in the future at a
time and at a price that it deems appropriate.
In addition, the shares of Common Stock reserved for future
issuance under DocGo’s equity incentive plans will become eligible
for sale in the public market once those shares are issued, subject
to provisions relating to various vesting agreements and, in some
cases, limitations on volume and manner of sale applicable to
affiliates under Rule 144, as applicable. The number of shares
of Common Stock reserved for future issuance under its equity
incentive plans, including Substitute Options, represents
approximately 11.5% of outstanding Common Stock as of December 31,
2022. The compensation committee of the Board may determine the
exact number of shares to be reserved for future issuance under its
equity incentive plans at its discretion. DocGo has filed a
Form S-8 under the Securities Act to register shares of
Common Stock and securities convertible into or exchangeable for
shares of Common Stock issued pursuant to DocGo’s equity incentive
plan and may file additional registration statements on Form S-8 in
the future. Any such Form S-8 registration statements
will automatically become effective upon filing. Accordingly,
shares registered under such registration statements will be
available for sale in the open market.
In the future, DocGo may also issue its securities in connection
with investments or acquisitions. The amount of shares of Common
Stock issued in connection with an investment or acquisition could
constitute a material portion of DocGo’s
then-outstanding shares of Common Stock. Any issuance of
additional securities in connection with investments or
acquisitions may result in additional dilution to DocGo’s
stockholders.
DocGo’s share repurchase program may subject it to certain
risks.
DocGo has adopted a share repurchase program to repurchase shares
of its Common Stock; however, any future decisions to reduce or
discontinue repurchasing its common stock pursuant to its share
repurchase program could cause the market price for its Common
Stock to decline.
Although the Board has authorized the share repurchase program, any
determination to execute its share repurchase program will be
subject to, among other things, its financial position and results
of operations, available cash and cash flow, capital requirements
and other factors, as well as its board of director’s continuing
determination that the repurchase program is in the best interests
of its stockholders and is in compliance with all laws and
agreements applicable to the repurchase program. DocGo’s share
repurchase program does not obligate it to acquire any common
stock. If it fails to meet any expectations related to share
repurchases, the market price of its Common Stock could decline,
and could have a material adverse impact on investor confidence.
Additionally, price volatility of its Common Stock over a given
period may cause the average price at which DocGo repurchases its
Common Stock to exceed the stock’s market price at a given point in
time.
DocGo may further increase or decrease the amount of repurchases of
its Common Stock in the future. Any reduction or discontinuance by
DocGo of repurchases of its Common Stock pursuant to its current
share repurchase program could cause the market price of its Common
Stock to decline. Moreover, in the event repurchases of DocGo’s
common stock are reduced or discontinued, its failure or inability
to resume repurchasing Common Stock at historical levels could
result in a lower market valuation of its Common Stock.
Anti-takeover provisions in DocGo’s organizational documents
could delay or prevent a change of control.
Certain provisions of the Certificate of Incorporation (as the same
may be amended and/or restated from time to time) and the Bylaws
(as the same may be amended and/or restated from time to time) may
have an anti-takeover effect and may delay, defer or prevent a
merger, acquisition, tender offer, takeover attempt or other change
of control transaction that a stockholder might consider in its
best interest, including those attempts that might result in a
premium over the market price for the shares held by DocGo’s
stockholders.
These provisions provide for, among other things:
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A
classified board of directors; |
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the
ability of the Board to issue one or more series of preferred
stock; |
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advance notice for
nominations of directors by stockholders and for stockholders to
include matters to be considered at DocGo’s annual
meetings; |
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certain limitations on
convening special stockholder meetings; |
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limiting the ability
of stockholders to act by written consent; |
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supermajority
provisions to amend the bylaws and certain sections of the
certificate of incorporation; and |
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the
Board with express authority to make, alter or repeal the
Bylaws. |
These anti-takeover provisions could make it more difficult
for a third party to acquire DocGo, even if the third party’s offer
may be considered beneficial by many of DocGo’s stockholders. As a
result, DocGo’s stockholders may be limited in their ability to
obtain a premium for their shares. These provisions could also
discourage proxy contests and make it more difficult for you and
other stockholders to elect directors of your choosing and to cause
DocGo to take other corporate actions you desire. See
“Description of Securities.”
The certificate of incorporation designates the Court of
Chancery of the State of Delaware as the sole and exclusive forum
for certain types of actions and proceedings that may be initiated
by stockholders, which could limit stockholders’ ability to obtain
a favorable judicial forum for disputes with DocGo or its
directors, officers, employees or stockholders.
The certificate of incorporation provides that, unless DocGo, in
writing, selects or consents to the selection of an alternative
forum: (a) the sole and exclusive forum for any complaint
asserting any internal corporate claims, to the fullest extent
permitted by law, and subject to applicable jurisdictional
requirements, is the Court of Chancery of the State of Delaware
(or, if the Court of Chancery does not have, or declines to accept,
jurisdiction, another state court or a federal court located within
the State of Delaware) and (b) the sole and exclusive forum
for any complaint asserting a cause of action arising under the
Securities Act, to the fullest extent permitted by law, shall be
the federal district courts of the U.S.; provided however, these
provisions of the certificate of incorporation will not apply to
suits brought to enforce a duty or liability created by the
Exchange Act (as explained below).
As a result, (1) derivative action or proceeding brought on
behalf of DocGo, (2) action asserting a claim of breach of a
fiduciary duty owed by any director, officer, stockholder or
employee to DocGo or its stockholders, (3) action asserting a
claim arising pursuant to any provision of the DGCL or the
certificate of incorporation or the Bylaws, or (4) action
asserting a claim governed by the internal affairs doctrine shall,
to the fullest extent permitted by law, be exclusively brought in
the Court of Chancery of the State of Delaware (or, if the Court of
Chancery does not have, or declines to accept, jurisdiction,
another state court or a federal court located within the State of
Delaware). Any person or entity purchasing or otherwise acquiring
any interest in shares of DocGo’s capital stock shall be deemed to
have notice of and to have consented to the provisions of the
certificate of incorporation described above. This choice of forum
provision may limit a stockholder’s ability to bring a claim in a
judicial forum that it finds favorable for disputes with DocGo or
its directors, officers or other employees, which may discourage
such lawsuits against DocGo and its directors, officers and
employees. Alternatively, if a court were to find these provisions
of the certificate of incorporation inapplicable to, or
unenforceable in respect of, one or more of the specified types of
actions or proceedings, DocGo may incur additional costs associated
with resolving such matters in other jurisdictions, which could
adversely affect DocGo’s business and financial condition.
The certificate of incorporation provides that the exclusive forum
provision is applicable to the fullest extent permitted by
applicable law, subject to certain exceptions. Section 27 of
the Exchange Act creates exclusive federal jurisdiction over
all suits brought to enforce any duty or liability created by the
Exchange Act or the rules and regulations thereunder. As a
result, the exclusive forum provision does not apply to suits
brought to enforce any duty or liability created by the
Exchange Act or any other claim for which the federal courts
have exclusive jurisdiction.
The market price and trading volume of Common Stock may be
volatile.
Stock markets, including Nasdaq, have from time-to-time experienced
significant price and volume fluctuations. The market price of
DocGo’s Common Stock, has been and may continue to be volatile and
could decline significantly, whether such price changes are related
to matters specific to DocGo, or due to general market conditions.
In addition, the trading volume in Common Stock may fluctuate and
cause significant price variations to occur. If the market price of
the Common Stock declines significantly, you may be unable to
resell your shares of Common Stock at or above the market price of
Common Stock. DocGo cannot assure you that the market price of
Common Stock will not fluctuate widely or decline significantly in
the future in response to a number of factors, including, among
others, the following:
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the realization of any
of the risk factors presented in this Annual Report; |
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actual or anticipated
differences in DocGo’s estimates, or in the estimates of analysts,
for DocGo’s revenues, results of operations, level of indebtedness,
liquidity or financial condition; |
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additions and
departures of key personnel; |
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failure to comply with
the requirements of the Nasdaq; |
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failure to comply with
the Sarbanes-Oxley Act or other laws or
regulations; |
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future issuances,
sales or resales, or anticipated issuances, sales or resales, of
Common Stock; |
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DocGo’s inability to
execute its stock repurchase program as planned, including failure
to meet internal or external expectations around the timing or
price of stock repurchases, and any reductions or discontinuances
of repurchases thereunder; |
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perceptions of the
investment opportunity associated with Common Stock relative to
other investment alternatives; |
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the performance and
market valuations of other similar companies; |
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future announcements
concerning DocGo’s business or its competitors’
businesses; |
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broad disruptions in
the financial markets, including sudden disruptions in the credit
markets; |
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speculation in the
press or investment community; |
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actual, potential or
perceived control, accounting or reporting problems; |
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changes in accounting
principles, policies and guidelines; and |
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general macroeconomic
and geopolitical conditions, such as the effects of the
COVID-19 or other pandemic outbreaks, recessionary fears,
rising interest rates, and inflationary environment local and
national elections, fuel prices, international currency
fluctuations, corruption, political instability, including the
conflict in Ukraine and rising tensions in the Taiwan Strait and
acts of war or terrorism. |
In the past, securities class-action litigation has often been
instituted against companies following periods of volatility in the
market price of their securities. This type of litigation could
result in substantial costs and divert DocGo’s management’s
attention and resources, which could have a material adverse effect
on DocGo.
Future issuances of debt securities and equity securities may
adversely affect DocGo, including the market price of Common Stock
and may be dilutive to existing stockholders.
There is no assurance that DocGo will not incur debt or issue
equity ranking senior to Common Stock. Those securities will
generally have priority upon liquidation. Such securities also may
be governed by an indenture or other instrument containing
covenants restricting its operating flexibility. Additionally, any
convertible or exchangeable securities that DocGo issues in the
future may have rights, preferences and privileges more favorable
than those of Common Stock. Separately, additional financing may
not be available on favorable terms, or at all. Because DocGo’s
decision to issue debt or equity in the future will depend on
market conditions and other factors, it cannot predict or estimate
the amount, timing, nature or success of DocGo’s future capital
raising efforts. As a result, future capital raising efforts may
reduce the market price of Common Stock and be dilutive to existing
stockholders.
The JOBS Act permits “emerging growth companies” like DocGo
to take advantage of certain exemptions from various reporting
requirements applicable to other public companies that are not
emerging growth companies.
DocGo qualifies as an “emerging growth company” as defined in
Section 2(a)(19) of the Securities Act, as modified by the JOBS
Act. As such, DocGo can take advantage of certain exemptions from
various reporting requirements for as long as it continues to be an
emerging growth company, including (i) the exemption from the
auditor attestation requirements with respect to internal control
over financial reporting under Section 404 of the Sarbanes-Oxley
Act, (ii) the exemptions from say-on-pay, say-on-frequency and
say-on-golden parachute voting requirements and (iii) reduced
disclosure obligations regarding executive compensation in DocGo’s
periodic reports and proxy statements. As a result, DocGo’s
stockholders may not have access to certain information they deem
important. DocGo will remain an emerging growth company until the
earliest of (i) the last day of the fiscal year (a) following the
fifth anniversary of its Initial Public Offering, (b) in which
DocGo has a total annual gross revenue of at least
$1.07 billion or (c) in which DocGo is deemed to be a large
accelerated filer, which means the market value of the Common Stock
held by non-affiliates exceeds $700 million as of the
last business day of its second fiscal quarter, and (ii) the date
on which DocGo has issued more than $1.0 billion in
non-convertible debt during the prior
three-year period.
In addition, Section 107 of the JOBS Act also provides that an
emerging growth company can take advantage of the exemption from
complying with new or revised accounting standards provided in
Section 7(a)(2)(B) of the Securities Act as long as it is an
emerging growth company. An emerging growth company can therefore
delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. The JOBS Act
provides that a 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 election to opt
out is irrevocable. DocGo has elected to avail itself 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, DocGo, 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
DocGo’s financial statements with another public company that is
neither an emerging growth company nor an emerging growth company
that has opted out of using the extended transition period
difficult or impossible because of the potential differences in
accounting standards used.
DocGo cannot predict if investors will find its Common Stock less
attractive because it relies on these exemptions. If some investors
find the Common Stock less attractive as a result, there may be a
less active trading market for the Common Stock and more stock
price volatility.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Facilities
Our principal executive offices are located in New York City,
where we occupy approximately 6,000 square feet under a lease that
expires in 2026. We use this facility for administration, sales and
marketing, and general corporate activities. In addition to our
headquarters, to support our local operations, as of December 31,
2022, we owned or leased 30 office locations elsewhere in the
United States (seven in New York, six in Wisconsin, four in
New Jersey, three in Texas, two each in California, Colorado and
Delaware, one each in Alabama, New Mexico, Pennsylvania and
Tennessee. These local facilities are used principally for
ambulance basing, garaging and maintenance, as well as for
administrative activities and general oversight. Outside of the
United States, we currently lease seven facilities in England.
These facilities are used for administrative functions and
ambulance basing. Our leases for our local facilities expire at
various dates through 2029. We believe our existing facilities are
adequate to meet our current requirements, and we anticipate that
suitable space will be readily available if needed. We intend to
procure additional, similar facilities as we expand
geographically.
Vehicle Fleet
As of December 31, 2022, we operated 643 vehicles in the United
States, including 384 ambulances, 88 wheelchair vans and 171
basic transportation or support vehicles. Approximately 47% of our
fleet is leased and 53% is owned. We replace ambulances based upon
age and usage, generally every eight to ten years. The average
age of our existing active ambulance fleet is approximately
four years. We generally prefer to lease vehicles, but we have
purchased vehicles in the past when deemed appropriate. Most of our
owned vehicles were acquired in connection with business
acquisitions.
As of December 31, 2022, we operated another 395 vehicles in the
United Kingdom, including 18 First Response Ambulances, 11 Mental
Health Transport vehicles, 52 High Dependency Units, 288 Patient
Transport vehicles and 26 support vehicles. Approximately 67% of
our fleet is owned and 33% is leased.
We use a combination of commercial and in-house maintenance
services to maintain our fleet. In those geographies where quality
external commercial maintenance services are able to meet our
quality standards, we will utilize those commercial maintenance
services. We continue to explore ways to decrease our overall
maintenance expenditures for vehicles, including major refurbishing
and overhaul of our vehicles to extend their useful life.
Item 3. Legal Proceedings.
We are subject to legal proceedings, claims and litigation arising
in the ordinary course of our business. The information set forth
in Note 20 of the Notes to the Consolidated Financial Statements is
incorporated herein by reference.
From time to time, in the ordinary course of our business, we, like
others in our industry, receive requests for information from
government agencies in connection with their regulatory or
investigational authority. These requests can include subpoenas or
demand letters for documents to assist the government in audits or
investigations. We review such requests and notices and take what
we believe to be appropriate action. We have been subject to
certain requests for information and investigations in the past and
could be subject to such requests for information and
investigations in the future.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
Our Common Stock is currently traded on The Nasdaq Capital Market
under the trading symbol “DCGO.”
As of March 14, 2023, there were 103 holders of record of our
Common Stock.
We have not declared or paid any cash dividends on our Common Stock
to date, and we do not currently intend to pay cash dividends in
the foreseeable future. The payment of cash dividends in the future
will depend on a number of factors, including our future revenues
and earnings, if any, capital requirements and general financial
condition. Any future determination relating to our dividend policy
will be made at the discretion of our Board. Our ability to declare
dividends may be limited by restrictive covenants we may agree to
in connection with our indebtedness.
Recent Sales of Unregistered Securities
None.
Repurchases of Equity Securities
On May 24, 2022, our Board approved a share repurchase program to
purchase up to $40 million of our Common Stock (the “Program”). The
Program does not obligate us to acquire any specific number of
shares and will expire on November 24, 2023, and the Program may be
suspended, extended, modified or discontinued at any time. Under
the Program, repurchases can be made using a variety of methods,
which may include open market purchases, block trades, privately
negotiated transactions and/or a non-discretionary trading plan,
all in compliance with the rules of the SEC and other applicable
legal requirements. The timing, manner, price and amount of any
common stock repurchases under the Program are determined by us in
our discretion and depend on a variety of factors, including legal
requirements, price and economic and market conditions. During the
twelve months ended December 31, 2022, the Company repurchased
536,839 shares. As of December 31, 2022, approximately $36.2
million remained available for share repurchases pursuant to the
Program.
|
Month |
|
Total
Number of
Shares
Purchased |
|
|
Average
Price
Paid per
Share |
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs |
|
|
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs |
|
| October 1 through 31, 2022 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
39,502,000 |
|
| November 1 through 30, 2022 |
|
|
193,927 |
|
|
|
6.88 |
|
|
|
193,927 |
|
|
$ |
38,168,568 |
|
| December 1 through 31, 2022 |
|
|
272,912 |
|
|
|
7.10 |
|
|
|
272,912 |
|
|
$ |
36,231,296 |
|
| |
|
|
466,839 |
|
|
$ |
6.98 |
|
|
|
466,839 |
|
|
$ |
36,231,296 |
|
Item 6. Reserved.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with our
Consolidated financial statements and the accompanying notes
included elsewhere in this Annual Report on Form 10-K. The
discussion and analysis below contain certain forward-looking
statements about our business and operations that are subject to
the risks, uncertainties, and other factors described in the
section entitled “Risk Factors,” included in Part I, Item 1A, and
other factors included elsewhere in this Annual Report on Form
10-K. These risks, uncertainties, and other factors could cause our
actual results to differ materially from those expressed in, or
implied by, the forward-looking statements. Please refer to the
section entitled “Cautionary Note Regarding Forward-Looking
Statements.”
Unless the context requires otherwise, references to “DocGo,”
“we,” “us,” “our” and “the Company” in this section are to the
business and operations of DocGo and its consolidated subsidiaries,
including those periods prior to the Business Combination. Certain
figures, such as interest rates and other percentages, included in
this section have been rounded for ease of presentation. Percentage
figures included in this section have, in some cases, been
calculated on the basis of such rounded figures. For this reason,
percentage amounts in this section may vary slightly from those
obtained by performing the same calculations using the figures in
DocGo’s Consolidated Financial Statements or in the associated
text. Certain other amounts that appear in this section may
similarly not sum due to rounding.
Overview
DocGo, which was originally formed in 2015, is a healthcare
transportation and mobile services company that uses proprietary
dispatch and communication technology to help provide quality
healthcare transportation and mobile services
in-person medical treatment directly to patients in the
comfort of their homes, workplaces and other
non-traditional locations, in major metropolitan cities in the
United States and the United Kingdom.
The Company derives revenue primarily from its two operating
segments: Transportation Services and Mobile Health Services.
| |
● |
Transportation Services: The services
offered by this segment encompass both emergency response and
non-emergency transport services. Non-emergency transport
services include ambulance transports and wheelchair transports.
Net revenue from Transportation Services is derived from the
transportation of patients based on billings to third party payors
and healthcare facilities. |
| |
● |
Mobile Health Services: The services
offered by this segment include a wide variety of healthcare
services performed at home and offices, testing, vaccinations and
event services which include on-site healthcare support at
sporting events and concerts. |
See Item 1. “Business” in this Annual Report on Form 10-K for
additional information regarding DocGo’s business.
For the year ended December 31, 2022 the Company recorded
net income of $30.7 million, compared to net income of $19.2
million in the year ended December 31, 2021.
COVID-19
The spread of COVID-19 and the related shutdowns and restrictions
had a mixed impact on our business. In the Transportation Services
segment, which comprises primarily of non-emergency medical
transport, the Company saw a decline in volumes from historical and
expected levels, as elective surgeries and other non-emergency
surgical procedures were postponed. In addition, in the Mobile
Health segment, the Company experienced lost revenue associated
with sporting, concerts and other events, as those events were
cancelled or had a significantly restricted (or entirely
eliminated) 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 experienced positive business
impacts from COVID-19. In April and May 2020, the Company
participated in an emergency project with Federal Emergency
Management Agency in the New York City area. This engagement
resulted in incremental transportation revenue that partially
offset some of the lost non-emergency transport revenues. In
addition, in response to the need for widespread COVID-19 testing
and available EMTs and paramedics, the Company expanded its
operations to include Rapid Reliable Testing (“RRT”), with the goal
of performing COVID-19 tests at nursing homes, municipal sites,
businesses, schools and other venues. RRT is part of the Mobile
Health business line. Mobile Health generated approximately $325.9
million in revenue in the year ended December 31, 2022, as compared
to $234.4 million in 2021 and $30.9 million in 2020. While COVID-19
testing has become a minor part of this segment’s business, as of
the second half of 2022, the Mobile Health segment has continued to
grow. We have expanded our service offerings in this segment to
offer a wider range of testing, vaccination and other services to a
broader customer group.
During 2020 and the early part of 2021, the Company continued to
operate with several back-office employees working remotely. During
that time, the Company did not witness any significant reduction in
productivity from these employees, nearly all of whom returned to
their respective offices and other locations by early 2021 and our
operations have proceeded without major interruption. DocGo also
utilized several government programs in 2020 related to the
pandemic, receiving approximately $1.0 million in payments through
the Public Health and Social Services Emergency Fund authorized
under the Coronavirus Aid, Relief and Economic Security Act and
related legislation as well as various state and local programs.
DocGo also received accelerated Medicare payments of approximately
$2.4 million that were repaid in 2022.
As the COVID-19 pandemic reaches endemic stages, the future impacts
of it or other pandemics on DocGo remain highly uncertain and
subject to numerous factors, including the severity of any new
outbreaks, resurgences and variants, actions taken to contain
resurgences or variants or to address their impact, and other
effects, and its related impact on medical transportation levels
remain uncertain. However, trip volumes in most of our markets
returned to more normal historical levels in 2021, and this trend
continued throughout 2022. The Company generated, during 2021,
COVID-19 testing revenue, included in its Mobile Health services
segment, above the levels projected, and this persisted through the
second quarter of 2022. However, as expected, COVID-19 testing
revenues declined in the third quarter of 2022 and declined further
in the fourth quarter, to the point where, as of the date of the
filing of this Annual Report on Form 10-K, they account for an
insignificant proportion of total revenues. Given the nature of the
Company’s contracts with most of its customers, which include
multiple procedures for which the Company is paid per hours worked,
per vehicles and related equipment utilized and on a per-procedure
basis (such procedures including both testing and several other
procedures), it is difficult to determine the revenues that are
directly attributable to COVID-19 testing. However, the Company
estimates that COVID-19 testing revenue will continue to account
for an insignificant proportion of Mobile Health segment and
overall consolidated revenues in 2023 and beyond, as COVID-19
enters the endemic phase. In a broader, strategic sense, the
consumer focus on Mobile Health services and the formation of RRT,
and its emergence as a significant contributor to overall revenues,
have accelerated the diversification in the Company’s business by
more rapid expansion of the Mobile Health segment, which has now
become our larger operating segment, both in terms of revenues and
personnel.
The Company’s current business plan assumes an increased demand for
Mobile Health services, a demand that was accelerated by the
pandemic, but which we believe 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. In the Transportation
segment, volumes are expected to continue to rise, reflecting an
aging population in the U.S. and U.K., which tends to drive demand
for the non-emergent medical transportation services provided by
the Company.
Factors Affecting Our Results of Operations
Our operating results and financial performance are influenced by a
variety of factors, including, among others, our ability to obtain
or maintain operating licenses; the success of our acquisition
strategy; conditions in the healthcare transportation and mobile
health services markets; our competitive environment; overall
macroeconomic and geopolitical conditions, including rising
interest rates, the inflationary environment, the potential
recessionary environment, regional conflict and tensions;
availability of healthcare professionals; changes in the cost of
labor; and production schedules of our suppliers. Some of these
important factors are briefly discussed below. Future revenue
growth and improvement in operating results will be largely
contingent on DocGo’s ability to penetrate new markets and further
penetrate existing markets, which is subject to a number of
uncertainties, many of which are beyond DocGo’s control. The
COVID-19 pandemic also significantly impacted DocGo’s business, as
discussed above. While the direct impact of the pandemic itself has
waned, other impacts, such as supply chain disruptions and the cost
and availability of labor are expected to persist.
Operating Licenses
DocGo has historically pursued a strategy to apply for ambulance
operating licenses in the states, counties and cities, identified
for future new market entry. The approval of a new operating
license may take an extended period of time. DocGo reduces this
risk through its acquisition strategy by identifying businesses
and/or underlying licenses in these new markets that may be for
sale.
Acquisitions
Historically DocGo pursued an acquisition strategy to obtain
ambulance operating licenses from small operators. Future
acquisitions may also include larger companies that may help drive
revenue, profitability, cash flow and stockholder value, in both
the Mobile Health and the Transportation segments. During the
twelve months ended December 31, 2022, DocGo completed five
acquisitions, for a purchase price of $69.1 million.
On July 6, 2022, the Company acquired Government Medical Services,
LLC (“GMS”) in exchange for $20.3 million in cash and up to a total
of $3.0 million in future contingent consideration upon GMS meeting certain performance
conditions. GMS is in the business of providing licensed
healthcare clinicians. We believe this acquisition will allow us to
increase our presence in that market, while giving us improved
access to municipal contracts.
On July 13, 2022, the Company acquired Exceptional Medical
Transportation, LLC (“Exceptional”) in exchange for $7.7 million in
cash (and a total of $6.0 million deferred consideration).
The Company also agreed to
pay an estimated $1.1 million contingent consideration upon
Exceptional meeting certain performance conditions.
Exceptional is in the business of providing medical transportation
services in New Jersey. We believe this acquisition will allow us
to increase our presence in that market.
On August 9, 2022, the Company acquired Ryan Brothers Ambulance
Inc. (“RB”), in exchange for $7.4 million of cash (and a total of
$4 million in future contingent consideration). Ryan Brothers is in
the business of providing medical transportation services in
Wisconsin. We believe this acquisition will allow us to increase
our presence in that market.
On October 12, 2022, the Company acquired Community Ambulance
Services LTD (“CAS”) in exchange for approximately $5.5 million in cash. CAS is
located in the U.K. and 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
that this acquisition will help allow us to continue to grow our
presence in the U.K. market.
On December 9, 2022, Ambulnz
U.K. Ltd., a wholly owned subsidiary of the Company acquired
Location Medical Services, LLC (“LMS”) for a total of $11.6 million
in cash (of which $11.3 million is deferred consideration) and $2.5
million in future contingent consideration. LMS, based in
Shepperton, U.K., provides professional medical support services,
including staff and equipment, for events (festivals, equestrian,
cycling, etc.), as well as for the film and television production
industry. LMS has a staff of over 250 medical professionals. We
believe that this acquisition will allow us to increase our share
of the events business in the U.K. market.
During the twelve months ended December 31, 2021, DocGo
completed one acquisition, for a purchase price of
$2.3 million.
Healthcare Services Market
The transportation services market is highly dependent on patients
requiring transportation after surgeries and other medical
procedures and treatments. During the pandemic, DocGo experienced a
decrease in transportation volumes as a result of fewer elective
surgeries. However, since 2021, the Company has seen increased
demand and trip volumes in nearly all of its Transportation
services markets, as elective surgeries resumed and as the Company
expanded its customer base.
Overall Economic Conditions in the Markets in which we
Operate
Economic changes both nationally and locally in our markets impact
our financial performance. Unfavorable changes in demographics,
health care coverage of transportation and mobile health services,
interest rates, ambulance manufacturing, a weakening of the
national economy or of any regional or local economy in which we
operate and other factors beyond our control could adversely affect
our business.
Trip Volumes and Average Trip Price
A “trip” is defined as an instance where the Company completes the
transport of a patient to a specific destination, for which we are
able to charge a fee. This metric does not include instances where
a trip is ordered and subsequently either canceled (by the
customer) or declined (by the Company). As trip volume represents
the most basic unit of transportation service provided by the
Company, it is the best measure of the level of demand for the
Company’s Transportation services, and is used by management to
monitor and manage the scale of the business.
The average trip price is calculated by dividing the aggregate
revenue from completed transports (“trips”) by the total number of
transports, and is an important indicator of the effective rate at
which the Company is being compensated for its provision of
Transportation services.
Revenues generated from programs under which DocGo is paid a fixed
rate for the use of a fully staffed and equipped ambulance do not
factor in the trip counts or average trip prices mentioned above.
We anticipate that these fixed rate, “leased hour” programs will
account for an increasing proportion of the Transportation
segment’s revenues in the future.
Our Ability to Control Expenses
We pay close attention to managing our working capital and
operating expenses. Some of our most significant operating expenses
are labor costs, medical supplies and vehicle-related costs,
such as fuel, maintenance, repair and insurance. Insurance costs
include premiums paid for coverage as well as reserves for
estimated losses within the Company’s insurance policy deductibles.
We aim to employ our proprietary technology to drive improvements
in productivity per transport. We regularly analyze our workforce
productivity with a goal of balancing the optimum,
cost-efficient labor mix for our locations.
Inflation
Beginning in March 2021, the inflation rate in the US, as measured
by the Consumer Price Index (CPI) has generally trended higher.
This data is reported monthly, showing year-over-year changes in
prices across a basket of goods and services. The monthly 12-month
inflation rate was 2.6% in March 2021, and increased steadily over
the rest of 2021 and into 2022, with the inflation rate hitting
9.1% in June 2022. The inflation rate has seemingly moderated since
that point, declining to 6.4% in January 2023, but remains well
above historical averages. On an annual basis, in 2019, the
inflation rate was approximately 1.8%, while it dropped to
approximately 1.2% in 2020, rising to 4.7% in 2021 and 8.0% in
2022. The increased inflation rate has had an impact on the
Company’s expenses in several areas, including wages, fuel and
medical and other supplies. This has had the impact of compressing
gross profit margins, as the Company is generally unable to pass
these higher costs on to its customers, particularly in the short
term. In an attempt to dampen inflation, the U.S. Federal Reserve
implemented seven interest rate hikes in 2022, and another hike to
date in 2023, raising its benchmark rate (the “federal funds rate”)
from near 0.00%% at the beginning of 2022 to the current level of
4.50%-4.75% as of the date of the filing of this Annual Report on
Form 10-K. The federal funds rate was raised in March, May, June,
July, September, November and December of 2022 and in February of
2023. The rate of the increase in the federal funds rate has
declined, however, with the December 2022 increase coming in at
0.50% and the February 2023 rate increase of 0.25%, compared with
rate hikes at 0.75% each in June, July, September and November of
2022. Looking to 2023, we anticipate a continued moderation of the
inflation rate when compared to the levels seen in 2022, as a
result of these recent rate hikes, but expect that inflation will
remain well above the levels seen in the previous 10 years, when
the annual inflation rate ranged from 0.1% to 2.4%. If inflation is
above the levels that the Company anticipates, gross margins could
be below plan and our business, operating results and cash flows
may be adversely affected.
Investing in R&D and Enhancing our Customer
Experience
Our performance is dependent on the investments we make in research
and development, including our ability to attract and retain highly
skilled research and development personnel. We must continually
develop and introduce innovative new software services, integrate
with third-party products and services, mobile applications
and other new offerings. If we fail to innovate and enhance our
brand and our products, our market position and revenue will likely
be adversely affected.
Regulatory Environment
DocGo is subject to federal, state and local regulations including
healthcare and emergency medical services laws and regulations and
tax laws and regulations. The Company’s current business plan
assumes no material change in these laws and regulations. In the
event any such change occurs, compliance with new laws and
regulations might significantly affect its operations and cost of
doing business.
Components of Results of Operations
Our business consists of two reportable
segments — Transportation services and Mobile Health
services. The Company evaluates the performance of both segments
based primarily on results of its operations. Accordingly, other
income and expenses not included in results from operations are
only included in the discussion of consolidated results of
operations.
Revenue
The Company’s revenue consists of services provided by its
Transportation segment and its Mobile Health segment.
Cost of Revenues
Cost of revenues consists primarily of revenue generating wages
paid to employees, vehicle insurance costs (including insurance
premiums and costs incurred under the insurance deductibles),
maintenance, fuel, laboratory fees, facility rent, medical supplies
and subcontractors. We expect cost of revenue to continue to rise
in proportion to the expected increase in revenue.
Operating expenses
General and Administrative Expenses
General and administrative expenses consist primarily of salaries,
bad debt expense, insurance expense, consultant fees, and
professional fees for accounting services. We expect our general
and administrative expense to increase as we scale up headcount
with the growth of our business, and as a result of operating as a
public company, including compliance with SEC rules and
regulations, audit, additional insurance expenses, investor
relations activities, and other administrative and professional
services.
Depreciation and Amortization
DocGo depreciates its assets using the straight-line method
over the estimated useful lives of the respective assets.
Amortization of intangibles consists of amortization of
definite-lived intangible assets over their respective useful
lives.
Legal and Regulatory Expenses
Legal and regulatory expenses include legal fees, consulting fees
related to healthcare compliance, claims processing fees and legal
settlements.
Technology and development Expenses
Technology and development expense, net of capitalization, consists
primarily of costs incurred in the design and development of
DocGo’s proprietary technology, third-party software and
technologies. We expect technology and development expense to
increase in future periods to support our growth, including as we
invest in the optimization, accuracy and reliability of our
platform to help drive efficiency in our operations. These expenses
may vary from period to period as a percentage of revenue,
depending primarily upon when we choose to make more significant
investments, which is in turn, dependent on numerous factors,
including when we plan to enter into new business lines or customer
sales channels.
Sales, Advertising and Marketing
Our sales and marketing expenses consist of costs directly
associated with our sales and marketing activities, which primarily
include sales commissions, marketing programs, trade shows, and
promotional materials. We expect that our sales and marketing
expenses will continue to increase over time as we increase our
marketing activities, grow our domestic and international
operations, and continue to build brand awareness. As the Company
expands its sales efforts to include the direct-to-consumer
channel, marketing expenses are likely to increase as a percentage
of revenues, given the marketing-intensive nature of that sales
channel.
Interest Expense
Interest expense consists primarily of interest on our outstanding
borrowings under our outstanding notes payable, credit line and
financing obligations.
Results of Operations
Comparison of Fiscal 2022 with Fiscal 2021
| |
|
Years Ended December 31, |
|
Change |
|
Change |
|
$ in Millions |
|
2022 |
|
2021 |
|
$ |
|
% |
| |
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
440.5 |
|
|
$ |
318.7 |
|
|
$ |
121.8 |
|
|
|
38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of
revenues |
|
|
285.8 |
|
|
|
209.0 |
|
|
|
76.8 |
|
|
|
37 |
% |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
103.4 |
|
|
|
74.9 |
|
|
|
28.5 |
|
|
|
38 |
% |
|
Depreciation and amortization |
|
|
10.6 |
|
|
|
7.5 |
|
|
|
3.1 |
|
|
|
41 |
% |
|
Legal and regulatory |
|
|
8.8 |
|
|
|
3.9 |
|
|
|
4.9 |
|
|
|
126 |
% |
|
Technology and development |
|
|
5.4 |
|
|
|
3.3 |
|
|
|
2.1 |
|
|
|
64 |
% |
|
Sales, advertising and marketing |
|
|
4.7 |
|
|
|
4.8 |
|
|
|
(0.1 |
) |
|
|
(2 |
)% |
|
Total expenses |
|
|
418.7 |
|
|
|
303.4 |
|
|
|
115.3 |
|
|
|
38 |
% |
|
Income (loss) from operations |
|
|
21.8 |
|
|
|
15.4 |
|
|
|
6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
0.8 |
|
|
|
(0.8 |
) |
|
|
1.6 |
|
|
|
200 |
% |
|
Gain (loss) from Payroll Protection Program (“PPP”) loan
forgiveness |
|
|
- |
|
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
|
|
|
Gain on remeasurement of warrant liabilities |
|
|
1.1 |
|
|
|
5.2 |
|
|
|
(4.1 |
) |
|
|
|
|
|
Gain (loss) on equity method investment |
|
|
- |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
|
|
|
|
|
Gain on remeasurement of finance leases |
|
|
1.4 |
|
|
|
- |
|
|
|
1.4 |
|
|
|
|
|
|
Loss on disposal of fixed assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Gain on bargain purchase |
|
|
1.6 |
|
|
|
- |
|
|
|
1.6 |
|
|
|
|
|
|
Other income (loss) |
|
|
(3.9 |
) |
|
|
- |
|
|
|
(3.9 |
) |
|
|
|
|
|
Total other income (expense) |
|
|
1.0 |
|
|
|
4.4 |
|
|
|
(3.4 |
) |
|
|
(77 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before income tax benefit (expense) |
|
|
22.8 |
|
|
|
19.8 |
|
|
|
3.3 |
|
|
|
|
|
|
Benefit (provision) for income tax |
|
|
7.9 |
|
|
|
(0.6 |
) |
|
|
8.5 |
|
|
|
|
|
|
Net income (loss) |
|
|
30.7 |
|
|
|
19.2 |
|
|
|
11.5 |
|
|
|
60 |
% |
|
Net loss attributable to noncontrolling interests |
|
|
(3.9 |
) |
|
|
(4.5 |
) |
|
|
0.6 |
|
|
|
13 |
% |
|
and Subsidiaries |
|
$ |
34.6 |
|
|
$ |
23.7 |
|
|
|
10.9 |
|
|
|
|
|
Consolidated
For the year ended December 31, 2022, total revenues were $440.5
million, an increase of $121.8 million, or 38%, from the total
revenues recorded in the year ended December 31, 2021.
Mobile
Health
For the year ended December 31, 2022, Mobile Health revenue was
$325.9 million, an increase of $91.4 million, or 39%, as compared
with the year ended December 31, 2021. This increase was primarily
due to the expansion of the services offered by this segment,
particularly with respect to testing, vaccination and other
healthcare services revenues. This expansion accelerated through
2021 and into 2022 as the Company increased its customer base,
primarily in the municipal customer segment, and its geographic
reach, while extending the terms of and/or expanding the scope of
several large customer contracts and introducing a broader range of
services. Compared to the prior year, 2022 featured significantly
lower COVID-19 testing revenue, which was outweighed by the
substantial increase in other Mobile Health services, as the Mobile
Health segment transitioned away from its dependence on COVID-19
related revenue. COVID-19 testing continued to be a significant
driver of Mobile Health revenues in the first half of 2022, but
dropped sharply in the third quarter of the year, and represented
an insignificant proportion of total revenues in the fourth
quarter.
Transportation
Services
For the year ended December 31, 2022, Transportation Services
revenue was $114.6 million an increase of $30.3 million, or 36%, as
compared with the year ended December 31, 2021. This increase was
due to a 20% increase in transportation trip volumes, from 180,753
trips for the year ended December 31, 2021 to 216,009 trips for the
year ended December 31, 2022. The increase in trip volumes was due
to a combination of growth in the customer base in certain core
markets, entry into new markets in 2021 and early 2022 and
acquisitions made during the second half of 2022. Our average trip
price increased from $301 in the year ended December 31, 2021, to
$380 in the year ended December 31, 2022. The increase in the
average trip price in 2022 reflected a shift in mix toward
higher-priced transports with existing customers, as well as the
acquisition of licenses to provide higher acuity transports
resulting in higher prices per trip. The average trip price also
benefited from a 5.1% increase in the average Medicare
reimbursement rate for ambulance transports. In October 2022, the
Centers for Medicare and Medicaid Services (CMS) announced that the
Medicare ambulance fee schedule would be increasing by a further
8.7%, effective January 1, 2023.
Cost of Revenue
For the year ended December 31, 2022, total cost of revenue
(exclusive of depreciation and amortization) increased by 37%, as
compared to the year ended December 31, 2021, while revenue
increased by approximately 38%. Cost of revenue as a percentage of
revenue decreased to 64.9% in 2022 from 65.5% in 2021.
In absolute dollar terms, cost of revenue in the year ended
December 31, 2022 increased by $76.8 million from the levels of the
year ended December 31, 2021. This was primarily attributable to a
$64.9 million increase in total compensation, due to higher
headcount for both the Transportation Services and Mobile Health
segments; a $16.0 million increase in subcontracted labor, driven
mostly by the Mobile Health segment, where the Company did not have
sufficient personnel to staff the initial phases of large new
projects; $13.6 million increase in vehicle costs, driven by a
continued increase in the Company’s vehicle fleet and higher fuel
and maintenance costs, as well as costs incurred to rent vehicles
to provide Mobile Health services; a $2.1 million increase in
travel costs, due to field personnel and other clinicians who
traveled out of their home regions to provide Mobile Health
services; a $0.4 million increase in facilities and related costs;
and approximately $2.6 million in increases across a variety of
other cost of revenue categories relating to the Company’s
increased scale and geographic presence. These items were partially
offset by a $21.1 million decrease in lab fees related to COVID-19
testing activity, reflecting sharply lower COVID-19 testing
activity in the second half of 2022, lower per-test lab fees and a
shift toward rapid tests; and a $1.8 million decline in medical
supplies, reflecting a decline in COVID-19 testing activity and
improved sourcing of various supplies.
For the Mobile Health segment, cost of revenues (exclusive of
depreciation and amortization) in the year ended December 31, 2022
amounted to $199.2 million, compared to $145.2 million in the year
ended December 31, 2021. Cost of revenues as a percentage of
revenues decreased slightly to 61.1% from 61.9%, due to the
increase in revenues and the continued shift away from higher-cost
subcontracted labor toward Company personnel during 2022, which was
partially offset by higher compensation costs associated with some
of the Company’s newer projects.
For the Transportation services segment, cost of revenues
(exclusive of depreciation and amortization) in the year ended
December 31, 2022 was $86.5 million, an increase of $23.1 million,
or 36%, from the year ended December 31, 2021. Cost of revenues as
a percentage of revenues were essentially unchanged, at 75.5% in
2022 compared to 75.3% in 2021. Increased volumes and higher
average trip prices, as described above, combined with lower
average hourly wages, as recent market wage pressures began to
subside, and as the Company more effectively managed its staff to
reduce overtime hours for field employees, to offset the effects of
increased fuel costs. Fuel prices moderated somewhat during the
third quarter and in the fourth quarters of 2022, but the full-year
average fuel price for 2022 was approximately 29% above the
full-year average for 2021. We anticipate that fuel prices will
remain at elevated levels for 2023, but we expect that the
full-year average for 2023 will be lower than it was in 2022.
Operating expenses
For the year ended December 31, 2022, operating expenses were
$132.9 million compared to $94.4 million for the year ended
December 31, 2021, an increase of 41%. As a percentage of revenue,
operating expenses increased slightly, from 29.6% in 2021 to 30.2%
in 2022, despite the significant increase in overall revenues
described above, as the Company continued to add to its management
infrastructure and incurred a full year’s worth of expenses
relating to its status as a public company. The increase of $38.3
million related primarily to a $20.1 million increase in total
compensation, which includes salaries, benefits, bonuses and
commissions for both direct and subcontracted labor, reflecting
higher headcount driven by the Company’s overall growth and
expansion; a $7.1 million increase in legal, accounting and other
professional fees related to increased revenue and related contract
generation and SEC filing-related costs; a $2.8 million increase in
insurance costs reflecting the growth and expansion of the Company,
as well as the addition of directors and officers (D&O)
insurance in 2022; a $3.2 million increase in depreciation and
amortization charges due to an increase in assets to support
revenue growth and capitalized software amortization, including
from recently acquired companies; a $2.3 million increase in rent
utility expenses, due to the Company’s ongoing growth and
geographic expansion; a $2.9 million increase in IT infrastructure,
driven by the Company’s business and headcount expansion; and a
$0.6 million increase in marketing expenses, driven in part by
expenditures made to develop and expand the Company’s
direct-to-consumer (DTC) and other Mobile Health programs. These
items were partially offset by a $0.7 million decline witnessed
across several operating expense categories, such as travel,
commissions and general office expenses. The Company anticipates
that operating expenses will continue to increase along with the
Company’s revenue growth and remain in the range of 25%-30% of
revenue in the coming quarters.
For the Mobile Health segment, operating expenses in the year ended
December 31, 2022 were $58.0 million, up 25% from operating
expenses of $46.3 million in the year ended December 31, 2021.
Operating expenses as a percentage of revenues decreased to 17.8%
from 19.8% in 2021, due to the increase in Mobile Health revenues,
which outweighed the effect of the significant expenditures that
were made in 2022 in the expansion of services and geographic areas
of operation, as well as the continued buildout of the Mobile
Health management infrastructure and the costs of developing the
Company’s “on-demand” direct-to-consumer offering.
For the Transportation services segment, operating expenses in the
year ended December 31, 2022 were $74.0 million, up $26.6 million,
or 56%, from the year ended December 31, 2021. Operating expenses
as a percentage of revenues increased to 64.6% from 56.3% in the
prior year period, despite the increase in revenues, primarily due
to increases in the Company’s corporate overhead expenditures, as
described above, as these expenses were allocated to the
Transportation segment for purposes of segment reporting. Operating
expenses for the Transportation segment were also driven higher by
the inclusion of the acquisitions the Company made in the second
half of 2022.
Interest Income (Expense), Net
For the year ended December 31, 2022, the Company recorded $0.8
million of net interest income compared to $0.8 million of interest
expense in the year ended December 31, 2021. This was due to a
significantly higher amount of interest earned during 2022,
resulting from an increase in the Company’s cash balances in
income-bearing accounts, coupled with higher rates of interest
earned on balances in these accounts, which reflected significantly
higher market interest rates.
Gain/(loss) on Remeasurement of Warrant Liabilities
During the year ended December 31, 2022, the Company recorded a net
gain of approximately $1.1 million from the remeasurement of
warrant liabilities. The warrants are marked-to-market in each
reporting period, and this gain reflected the decrease in DocGo’s
stock price relative to the beginning of the period. During the
year ended December 31, 2021, the Company recorded a net gain of
$5.2 million on the remeasurement of warrant liabilities. 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 and Continental Stock
Transfer & Trust Company, as warrant agent, 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.
Gain/(Loss) on Equity Method Investment
During the year ended December 31, 2022, the Company recorded a
gain on equity method investment of $8,919, representing its share
of the losses incurred by an entity in which the Company has a
minority interest, which is accounted for under the equity method.
This investment was made in the fourth quarter of 2021, during
which period a loss of $66,818 was recorded in relation to this
equity method investment.
Gain on Bargain Purchase
During the year ended December 31, 2022, the Company recorded a
gain on bargain purchase of approximately $1.6 million in relation
to an acquisition made during the fourth quarter of the year,
wherein the tangible net asset value of the acquired entity
exceeded the purchase price. No such gain or loss was recorded
during the same period in 2021.
Gain/(Loss) from Remeasurement of Finance Leases
During the year ended December 31, 2022, the Company recorded a
gain from remeasurement of finance leases of approximately $1.4
million, resulting from a change in estimated remaining liabilities
under the terms of its leases. No such gain or loss was recorded in
the same period in 2021.
Gain from PPP Loan Forgiveness
In 2021, the Company recorded a $0.1 million gain due to the
forgiveness of a loan that one of its subsidiaries had obtained via
the government’s Paycheck Protection Program (PPP) in 2020. No gain
from loan forgiveness was recorded during the year ended December
31, 2022.
Income Tax Benefit (Expense)
During the year ended December 31, 2022, the Company recorded an
income tax benefit of $7.9 million compared to an income tax
expense of $0.6 million in the year ended December 31, 2021. The
tax benefit in 2022 was due to the release of the valuation
allowance recorded in previous years for net operating losses
(NOLs), as the Company determined that it was now more likely than
not that it would be able to realize its NOL carryforwards in the
future.
Net Loss Attributable to Noncontrolling Interest
For the year ended December 31, 2022, the Company had a net loss
attributable to noncontrolling interest of approximately $3.8
million compared to a net loss attributable to noncontrolling
interest of $4.6 million for the year ended December 31, 2021. For
both periods, the loss reflected ongoing investments in new markets
that were entered into during 2021 and 2022, partially offset by
income generated by those markets.
Liquidity and Capital Resources
Since inception, DocGo has completed three equity financing
transactions as its principal source of liquidity. Generally, the
Company has utilized equity raised to finance operations,
investments in assets, ambulance operating licenses and to fund
accounts receivable. The Company has also funded these activities
through operating cash flows. In November 2021, upon the completion
of the merger between Motion and Ambulnz, the Company received
proceeds of approximately $158.1 million, net of transaction
expenses. Despite the fact that the Company generated positive net
income in the year ended December 31, 2022, operating cash flows
are not always sufficient to meet immediate obligations arising
from current operations. For example, as the business has grown,
the Company’s expenditures for human capital and supplies has
expanded accordingly, and the timing of the payments for payroll
and to associated vendors, compared to the timing of receipts of
cash from customers, frequently results in the need to use existing
cash balances to fund these working capital needs. The Company’s
working capital needs depend on many factors, including the overall
growth of the Company and the various payment terms that are
negotiated with customers and vendors. Future capital requirements
depend on many factors, including potential acquisitions, DocGo’s
level of investment in technology and ongoing technology
development, and rate of growth in existing markets and into new
markets. Capital requirements might also be affected by factors
outside of the Company’s control, such as interest rates, rising
inflation and other monetary and fiscal policy changes to the
manner in which the Company currently operates. Additionally, as
the impact of the COVID-19 on the economy and on the Company’s
market environment and operations evolves, the Company routinely
assesses its liquidity needs. If the Company’s growth rate is
higher than is currently anticipated, resulting in
greater-than-anticipated capital requirements, the Company might
need to, or choose to, raise additional capital through debt or
equity financings.
On November 1, 2022, the Company entered into a revolving loan and
security agreement with two banks, with one bank acting as the
administrative agent (the “Lenders”), with an initial maximum
commitment amount of $90,000,000. The revolving facility includes
the ability for the Company to request an increase to the
commitment by an additional amount of 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 Company’s consolidated net
leverage ratio. The revolving facility matures on 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. As of the
date of the filing of this Annual Report on Form 10-K, the Company
has not made any draws under the facility and there are no amounts
outstanding.
Considering the foregoing, DocGo anticipates that its existing
balances of cash and cash equivalents, future expected cash flows
generated from its operations and its available line of credit
under the revolving facility (as further discussed in Note 9, “Line
of Credit” to the Consolidated Financial Statements) will be
sufficient to satisfy operating requirements for at least the next
twelve months.
Capital Resources
Comparison as of December
31, 2022 and December 31, 2021
| |
|
As of December 31, |
|
|
Change |
|
|
Change |
|
| $
in Millions |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
| Working capital |
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
|
$ |
271.1 |
|
|
$ |
256.0 |
|
|
$ |
15.1 |
|
|
|
6 |
% |
| Current
liabilities |
|
|
100.2 |
|
|
|
57.9 |
|
|
|
42.3 |
|
|
|
73 |
% |
| Total working
capital |
|
$ |
170.9 |
|
|
$ |
198.1 |
|
|
$ |
(27.2 |
) |
|
|
(14 |
%) |
As of December 31, 2022, available cash totaled $157.3 million,
which represented a decrease of $18.2 million compared to December
31, 2021, as changes to working capital accounts and cash used for
acquisitions in 2022 outweighed the positive cash flow generated by
operations. As of December 31, 2022, working capital amounted to
$170.9 million, which represented a decrease of $27.2 million
compared to December 31, 2021, which reflected the decreased cash
balance in 2022. Increased accounts receivable, which reflected the
growth of the business and a shift towards higher credit quality
customers, who have longer payment terms, in 2022, were outweighed
by the increase in current liabilities, which reflected the growth
of the business and amounts due to seller resulting from
acquisitions.
Cash Flows
Year ended December 31,
2022 and 2021
| |
|
As of December 31, |
|
Change |
|
Change |
|
$ in Millions |
|
2022 |
|
2021 |
|
$ |
|
% |
| Cash flow
summary |
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) operating activities |
|
$ |
28.9 |
|
|
$ |
(1.9 |
) |
|
$ |
30.8 |
|
|
|
1,621 |
% |
| Net
cash provided by/(used in) investing activities |
|
|
(38.4 |
) |
|
$ |
(8.6 |
) |
|
|
(29.8 |
) |
|
|
(347 |
%) |
| Net
cash provided by/(used in) financing activities |
|
|
(6.2 |
) |
|
$ |
155.2 |
|
|
|
(161.4 |
) |
|
|
(104 |
%) |
|
Effect of exchange rate changes |
|
|
0.7 |
|
|
$ |
- |
|
|
|
0.7 |
|
|
|
100 |
% |
|
Net (decrease) increase in cash |
|
$ |
(15.0 |
) |
|
$ |
144.7 |
|
|
$ |
(159.7 |
) |
|
|
(110 |
%) |
Operating activities
During the year ended December 31, 2022, cash provided by operating
activities was $28.9 million, aided by net income of $30.73
million. Non-cash charges were $11.3 million and included $7.3
million in depreciation of property and equipment and right-of-use
assets, $3.2 million from amortization of intangible assets, $3.8
million in bad debt expense primarily related to a provision for
potential uncollectible accounts receivable, $8.1 million of stock
compensation expense, and a non-cash loss of $2.9 million related
to the impairment of a business unit that was discontinued at the
end of the year. These charges were partially offset by non-cash
gains of $1.4 million relating to the remeasurement of finance
lease liabilities $1.1 million from the remeasurement of warrant
liabilities, $1.6 million in a gain on a bargain purchase and $9.9
million in the realization of a deferred tax asset. Changes in
assets and liabilities resulted in an approximately $13.2 million
decrease to operating cash flow, as an $8.4 million increase in
accounts receivable, a $4.2 million increase in prepaid expenses
and a $6.0 million decrease in accrued liabilities outweighed the
effect of a $1.8 million decrease in other assets and a $3.6
million increase in accounts payable.
During the year ended December 31, 2021, cash used in operating
activities was $1.9 million, despite net income of $19.2 million.
Non-cash charges amounted to $7.7 million, as $5.2 million in
depreciation of property and equipment and right-of-use assets,
$1.8 million from amortization of intangible assets, $4.5 million
in bad debt expense primarily related to a provision for potential
uncollectible accounts receivable and $1.4 million of stock
compensation expense were partially offset by $5.2 million in a
non-cash gain on the remeasurement of warrant liabilities. Changes
in assets and liabilities resulted in an approximately $28.8
million decrease in operating cash flow and were primarily driven
by a $57.1 million increase in accounts receivable arising from the
growth of the business, particularly in the fourth quarter of the
year and the inclusion of larger Mobile Health customers with
extended credit terms; and a $3.5 million increase in prepaid
expenses and other current assets, partially offset by a $32.6
million increase in accounts payable and accrued expenses due
primarily to the extension of credit and timing of payments, as
DocGo attempted to align the timing of payments to vendors with the
timing of payments received from customers, where possible, in an
attempt to manage cash balances.
Investing activities
During the year ended December 31, 2022, cash used in investing
activities was $38.4 million and consisted of the acquisition of
property and equipment totaling approximately $3.2 million, the
acquisition of intangibles in the amount of $2.3 million and $33.0
million in the acquisition of businesses, primarily relating to
acquisitions the Company completed in the third and fourth quarters
of 2022.
During the year ended December 31, 2021, cash used in investing
activities was $8.6 million, primarily consisting of the
acquisition of property and equipment totaling $4.8 million and the
acquisition of businesses and intangibles of $3.1 million to
support the ongoing growth of the business. In addition, the
Company made an equity investment amounting to approximately $0.7
million.
Financing activities
During the year ended December 31, 2022, cash used in financing
activities was $6.2 million, including $3.7 million in the
repurchase of Common Stock, $3.0 million in payments under the
terms of a finance lease, $2.5 million decrease in amounts due to
seller and $0.9 million in repayments of notes payable, which were
partially offset by $2.1 million in non-controlling interest
contributions and $2.0 million in proceeds from the exercise of
stock options.
During the year ended December 31, 2021, cash provided by financing
activities was $155.2 million, due primarily to $158.1 million in
proceeds from the issuance of common stock in connection with the
Motion merger, which is net of $20.0 million in issuance costs.
This was slightly offset by $2.2 million in payments on obligations
under the terms of a finance lease, and $0.5 million in
expenditures to acquire the remaining 20% of the Company’s U.K.
subsidiary. During 2021, the Company received $8.0 million in
proceeds from a revolving bank loan, which was repaid during the
fourth quarter of 2021.
Future minimum annual maturities of notes payable as of December
31, 2022 are as follows:
|
Amounts in millions |
|
Notes
Payable |
|
| 2023 |
|
|
0.6 |
|
| 2024 |
|
|
0.5 |
|
| 2025 |
|
|
0.4 |
|
| 2026 |
|
|
0.3 |
|
| Thereafter |
|
|
0.1 |
|
| Total
maturities |
|
$ |
1.9 |
|
| Current portion
of notes payable |
|
|
(0.7 |
) |
| Long-term portion
of notes payable |
|
$ |
1.2 |
|
Future minimum lease payments
under finance leases as of the year ended December 31,
2022:
|
Amounts in millions |
|
Finance Leases |
|
| 2023 |
|
$ |
3.2 |
|
| 2024 |
|
|
2.4 |
|
| 2025 |
|
|
2.2 |
|
| 2026 |
|
|
1.4 |
|
| 2027 and thereafter |
|
|
0.4 |
|
| Total future
minimum lease payments |
|
|
9.6 |
|
| Less effects of
discounting |
|
|
(1.0 |
) |
| Present value of
future minimum lease payments |
|
$ |
8.6 |
|
Future minimum lease payments under operating leases as of the year
ended December 31, 2022:
|
Amounts in millions
|
|
|
Operating Leases |
|
| 2023 |
|
|
$ |
2.8 |
|
| 2024 |
|
|
|
2.3 |
|
| 2025 |
|
|
|
2.3 |
|
| 2026 |
|
|
|
1.7 |
|
| 2027 and thereafter |
|
|
|
1.6 |
|
| Total future
minimum lease payments |
|
|
|
10.7 |
|
| Less effects of
discounting |
|
|
|
(1.3 |
) |
| Present value of
future minimum lease payments |
|
|
$ |
9.4 |
|
Critical Accounting Policies
Basis of Presentation
The Company’s Consolidated Financial Statements are presented in
conformity with accounting principles generally accepted in the
U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the
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.
Pursuant to the Business Combination, the merger between Motion and
Ambulnz 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 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. The shares of common stock and corresponding capital
amounts and earnings per share available for common stockholders,
prior to the Business Combination, have been retroactively restated
as shares of the Company, reflecting the exchange ratio (645.1452
to 1) established in the Business Combination. Further, Ambulnz was
determined to be the accounting acquirer in the transaction, as
such, the acquisition is considered to be a business combination
under Accounting Standards Codification (“ASC”), Topic 805,
Business Combinations, (“ASC 805”) and was accounted for using the
acquisition method of accounting.
Principles of Consolidation
The Company holds a variable interest in an entity 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 as of December 31, 2022. Total liabilities, all of which
were current for the VIE, was $320,424 as of December 31, 2022. The
VIE’s total stockholders’ deficit was $290,130 as of 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.
Business Combinations
The Company accounts for its business combinations under the
provisions of ASC 805-10, Business Combinations (“ASC
805-10”), which requires that the acquisition method of accounting
be used for all business combinations. Assets acquired and
liabilities assumed, including NCI, are recorded at the date of
acquisition at their respective fair values. ASC 805-10 also
specifies criteria that intangible assets acquired in a business
combination must meet to be recognized and reported apart from
goodwill.
Goodwill represents the excess purchase price over the fair value
of the tangible net assets and intangible assets acquired in a
business combination. If the business combination provides for
contingent consideration, the Company records the contingent
consideration at fair value at the acquisition date and any changes
in fair value after the acquisition date are accounted for as
measurement-period adjustments. Changes in fair value of contingent
consideration resulting from events after the acquisition date,
such as earn-outs, are recognized as follows: 1) if the contingent
consideration is classified as equity, the contingent consideration
is not re-measured and its subsequent settlement is accounted for
within equity, or 2) if the contingent consideration is classified
as a liability, the changes in fair value are recognized in
earnings. For transactions that are business combinations, the
Company evaluates the existence of goodwill or a gain from a
bargain purchase. The Company capitalizes acquisition-related costs
and fees associated with asset acquisitions and immediately
expenses acquisition-related costs and fees associated with
business combinations.
The estimated fair value of net assets to be acquired, including
the allocation of the fair value to identifiable assets and
liabilities, is determined using established valuation techniques.
Management uses assumptions on the basis of historical knowledge of
the business and projected financial information of the target.
These assumptions may vary based on future events, perceptions of
different market participants and other factors outside the control
of management, and such variations may be significant to estimated
values.
Goodwill and Indefinite-Lived Intangible
Assets
Goodwill represents the excess of the 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.
On February 3, 2023, Ambulnz Health, LLC (“Health”), commenced an
assignment for the benefit of creditors (“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 an assignee (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.
Based on such filing for Health, the Company impaired the goodwill
assigned to that reporting unit as of December 31, 2022 by
approximately $5.1 million.
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 payor.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income
Taxes (“ASC 740”), which provides for deferred taxes using an
asset and liability approach. The Company recognizes deferred tax
assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or its
tax returns. Deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse.
Valuation allowances are provided, if based upon the weight of
available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized. The Company accounts
for uncertain tax positions in accordance with the provisions of
ASC 740. When uncertain tax positions exist, the Company recognizes
the tax benefit of tax positions to the extent that the benefit
would more likely than not be realized assuming examination by the
taxing authority. The determination as to whether the tax benefit
will more likely than not be realized is based upon the technical
merits of the tax position as well as consideration of the
available facts and circumstances. The Company recognizes any
interest and penalties accrued related to unrecognized tax benefits
as income tax expense.
Please see Note 2, “Summary of Significant Accounting Policies” to
the Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
We are a smaller reporting company, as defined by Rule 12b-2 under
the Securities and Exchange Act of 1934 and in Item 10(f)(1) of
Regulation S-K, and are not required to provide the information
under this item.
Item 8. Financial Statements and Supplementary Data.
DocGo Inc. and Subsidiaries
Index to the Consolidated Financial Statements
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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 |
|
|
|
-
|
|
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.
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.
DocGo Inc. and Subsidiaries
NOT