Docgo Inc. quarterly report, Q2 FY2021

Full document

Business context and reporting period

This is Motion Acquisition Corp.’s unaudited Form 10-Q for the quarter ended June 30, 2021—not an operating-company 10-Q filed by DocGo Inc. Motion was a blank-check company formed to complete a business combination and had not begun operations or generated revenue. It had agreed to merge with Ambulnz, Inc. dba DocGo under a March 8, 2021 merger agreement; completion remained subject to stockholder and regulatory approvals and other conditions.

Financial results and position

  • Revenue and margins: No operating revenue was reported. Operating expenses were general and administrative costs of $245,345 for Q2 and $628,161 for the six months. Operating margin is not meaningful for this pre-combination SPAC.
  • Net loss: $3.04 million for Q2 and $1.05 million for the six months. Q2 loss included a $2.80 million noncash loss from the change in fair value of warrant liabilities; the six-month warrant fair-value loss was $445,662. Trust investment income was $4,110 for Q2 and $21,124 for the six months.
  • Cash flow: Six-month net cash used in operating activities was $678,235; $33,742 was provided by investing activities from interest released from the Trust Account. Cash declined $644,193 to $234,160.
  • Liquidity: At June 30, cash was $234,160, working capital was approximately $293,000, and Trust Account investments were $115.0 million. Management said available working capital and borrowing capacity should meet needs through the earlier of a business combination or one year from the filing.
  • Liabilities and equity: Current liabilities were $163,795. Other significant liabilities were $9.49 million of warrant liabilities and $4.03 million of deferred underwriting commissions, payable from the Trust Account if a business combination closes. No conventional long-term debt or working-capital loans were reported. Stockholders’ equity was $5.00 million; 9,678,938 Class A shares were classified as subject to possible redemption.

Changes and transaction details

No prior-year comparable income statement or cash-flow period is presented, so year-over-year operating comparisons are unavailable. From December 31, 2020 to June 30, 2021, cash fell from $878,653 to $234,160, warrant liabilities rose from $9.04 million to $9.49 million, and the number of Class A shares subject to possible redemption declined from 9,784,208 to 9,678,938. The Q2 net loss was substantially affected by warrant remeasurement; the filing reports a smaller warrant fair-value loss for the six-month period.

The proposed DocGo transaction contemplated 83.6 million Class A shares for DocGo stockholders, up to 5.0 million additional earn-out shares, and a concurrent $125 million PIPE investment. After stated placement-agent fees, the PIPE was expected to contribute $120.625 million, alongside remaining Trust Account funds. The filing also disclosed an approximately $14.2 million M&A advisory fee payable from the Trust Account upon completion. Motion’s business-combination deadline was October 19, 2022, absent an extension.

Outlook, risks, and unusual items

  • Management stated that the company would use operating cash to pay existing accounts payable and fund transaction costs, and that completion of the merger was not assured.
  • If Motion did not complete a business combination by the deadline, it would redeem public shares and liquidate, subject to the charter and applicable law; warrants would expire worthless and receive no Trust Account distribution.
  • Management said COVID-19 could negatively affect the healthcare industry in which DocGo operates, but the specific impact was not determinable. The financial statements included no related adjustments.
  • Warrants were classified as liabilities and remeasured at fair value through earnings. The Q2 fair-value charge materially affected reported results; the filing says June 30 valuations used quoted Public Warrant prices for both public and private warrants.
  • Disclosure controls and procedures were deemed ineffective as of June 30 because of a material weakness previously reported. The company said it had expanded its review process for complex securities accounting, but was still evaluating whether remediation was effective.
  • The company reported no lease obligations, purchase commitments, or off-balance-sheet arrangements. It adopted ASU 2020-06 on January 1, 2021, with no reported financial-statement impact.

Important facts for investors to verify

  1. Whether the DocGo merger and the $125 million PIPE closed, and the final transaction terms, approvals, and redemption levels.
  2. The actual funds available at closing after redemptions, deferred underwriting commissions, and the disclosed advisory fee.
  3. The status and valuation effects of warrant liabilities, including potential dilution and warrant exercise or redemption terms.
  4. Whether the previously identified material weakness was remediated and whether disclosure controls became effective.
  5. Whether operating cash and borrowing capacity proved sufficient to fund transaction and reporting costs through closing or the business-combination deadline.