SCWorx (WORX) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2022 Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for SCWorx Corp., including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, liquidity, and legal contingencies for the three months ended March 31, 2022, and 2021 Consolidated Balance Sheets The consolidated balance sheets show the company's financial position, with a notable decrease in cash and total stockholders' equity, alongside an increase in accounts receivable and total liabilities from December 31, 2021, to March 31, 2022 | Metric | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Cash | $8,293 | $71,075 | | Accounts receivable - net | $697,195 | $464,851 | | Total current assets | $981,641 | $756,468 | | Total liabilities | $3,137,016 | $2,717,865 | | Total stockholders' equity | $6,211,092 | $6,405,070 | | Total assets | $9,348,108 | $9,122,935 | Unaudited Consolidated Statements of Operations The company reported a reduced net loss for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a gain on forgiveness of a PPP loan, despite a decrease in revenue and an increase in operating loss | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $1,030,949 | $1,148,257 | | Total operating expenses | $1,797,090 | $1,896,200 | | Loss from operations | $(766,141) | $(747,943) | | Gain on forgiveness of PPP loan | $139,595 | $- | | Net loss | $(626,546) | $(747,943) | | Net loss per share, basic and diluted | $(0.06) | $(0.07) | Unaudited Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased from December 31, 2021, to March 31, 2022, primarily due to the net loss, partially offset by stock-based compensation and shares issued for accounts payable settlement | Metric | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | | Balances, December 31, 2021 (Total) | $6,405,070 | | Shares issued as settlement of accounts payable | 83,954 shares ($85,000 value) | | Shares issued for vested restricted stock units | 18,666 shares | | Stock based compensation | $347,568 | | Net Loss | $(626,546) | | Ending balance, March 31, 2022 (Total) | $6,211,092 | Unaudited Consolidated Statements of Cash Flows Cash used in operating activities significantly decreased in Q1 2022 compared to Q1 2021, while there were no investing or financing activities in Q1 2022, leading to a net decrease in cash | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(62,782) | $(426,901) | | Net cash used in investing activities | $- | $- | | Net cash provided by financing activities | $- | $139,595 | | Net (decrease) increase in cash | $(62,782) | $(287,306) | | Cash, end of period | $8,293 | $89,119 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering the company's business, liquidity, significant accounting policies, and specific financial line items, offering context to the reported figures - Financial statements are prepared in accordance with U.S. GAAP and SEC rules, consolidating SCWorx and its wholly-owned subsidiaries[40] - The company applies fair value accounting using a three-level hierarchy for financial instruments[45] | Customer | Revenue (Q1 2022) | Revenue (Q1 2021) | Accounts Receivable (Mar 31, 2022) | Accounts Receivable (Dec 31, 2021) | | :--------- | :------------------ | :------------------ | :--------------------------------- | :--------------------------------- | | Customer A | 13% | 8% | 55% | -% | | Customer B | 10% | 9% | 14% | 9% | | Customer C | 12% | 5% | 3% | 13% | | Customer D | 11% | -% | 3% | -% | | Customer E | -% | 26% | -% | 21% | - Allowance for doubtful accounts increased to $468,611 as of March 31, 2022, from $421,736 as of December 31, 2021[48] | Inventory Component | March 31, 2022 | December 31, 2021 | | :------------------ | :------------- | :---------------- | | Inventory | $523,440 | $523,440 | | Allowance for obsolescence | $(366,840) | $(366,840) | | Net inventory value | $156,600 | $156,600 | - Revenue recognition follows Topic 606, identifying distinct performance obligations such as Data Normalization, SaaS, Maintenance, and Professional Services, with SaaS and Maintenance revenues recognized ratably over contract terms[53][55][59] - Deferred revenue (remaining performance obligations) increased to $764,500 as of March 31, 2022, from $472,750 as of December 31, 2021[65][69] - Stock-based compensation expense is measured at grant date fair value using a Black-Scholes model and recognized over the vesting period[76] Note 1. Description of Business SCWorx provides health information technology solutions for healthcare providers, focusing on data normalization, interoperability, and big data analytics. The COVID-19 pandemic adversely impacted customer acquisition and service utilization, leading the company to temporarily engage in PPE sales as an intermediary - SCWorx offers health information technology solutions and services to improve healthcare processes and information flow within hospitals, including data normalization, interoperability, and big data analytics[28][29] - The company's software modules include virtualized Item Master File repair, CDM management, contract management, and big data analytics modeling[30] - Solutions are delivered via a Software-as-a-Service (SaaS) model, typically with three-to-five-year contracted terms, hosted in SCWorx data centers (AWS or RackSpace)[32] - The COVID-19 pandemic adversely impacted new customer acquisition and customers' ability to focus resources on expanding SCWorx services, affecting growth prospects[33][34] - To mitigate revenue impacts,