SCWorx (WORX) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents SCWorx Corp.'s unaudited condensed consolidated financial statements, including balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets Cash and total assets significantly increased from December 2024 to March 2025 due to financing, while total liabilities decreased Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2025 (Unaudited) ($) | December 31, 2024 (Audited) ($) | Change ($) | | :-------------------------------- | :--------------------------- | :-------------------------- | :--------------------------- | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2025 (Unaudited) ($) | December 31, 2024 (Audited) ($) | Change ($) | | :-------------------------------- | :--------------------------- | :-------------------------- | :--------------------------- | | Cash | $1,072,416 | $106,654 | +$965,762 | | Accounts receivable, net | $175,233 | $372,716 | -$197,483 | | Total current assets | $1,314,474 | $503,378 | +$811,096 | | Total assets | $7,156,907 | $6,345,811 | +$811,096 | | Total current liabilities | $1,555,878 | $1,836,549 | -$280,671 | | Total liabilities | $1,562,915 | $1,856,209 | -$293,294 | | Total stockholders' equity | $5,593,992 | $4,489,602 | +$1,104,390 | Unaudited Condensed Consolidated Statements of Operations SCWorx reported decreased revenue and gross profit, increased operating and interest expenses, leading to a significantly higher net loss in Q1 2025 Condensed Consolidated Statements of Operations Highlights | Metric | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | Change (YoY) ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------------------------- | | Revenue | $720,299 | $812,099 | -$91,800 | | Cost of revenue | $583,436 | $603,465 | -$20,029 | | Gross profit | $136,863 | $208,634 | -$71,771 | | Total operating expenses | $470,860 | $387,090 | +$83,770 | | Loss from operations | $(333,997) | $(178,456) | -$(155,541) | | Interest expense | $(142,306) | $(203) | -$(142,103) | | Net loss | $(476,303) | $(178,659) | -$(297,644) | | Net loss per share, basic and diluted | $(0.25) | $(0.14) | -$(0.11) | - Revenue decreased by $91,800, primarily due to contract expiration and non-renewal[19][123] - Interest expense significantly increased from $203 in Q1 2024 to $142,306 in Q1 2025, driven by new convertible notes and amortization of note discounts[19][127] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased in Q1 2025 despite a net loss, driven by share issuances for settlements, loan conversions, and warrants Changes in Stockholders' Equity | Item | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Balances, December 31 | $4,489,602 | $3,853,449 | | Shares issued for legal settlement | $148,410 | - | | Shares issued for conversion of convertible loans and interest | $47,283 | - | | Issuance of warrants in conjunction with convertible loans | $1,385,000 | - | | Net loss | $(476,303) | $(178,659) | | Ending balance, March 31 | $5,593,992 | $3,704,275 | - The Company issued 191,250 common shares valued at $148,410 for a legal settlement in Q1 2025[22][89] - An aggregate of 54,980 common shares were issued for the conversion of $40,000 in principal and $7,283 in accrued interest from convertible loans[22][90] - Warrants valued at $1,385,000 were issued with convertible loans, contributing to additional paid-in capital[22] Unaudited Condensed Consolidated Statements of Cash Flows Cash significantly increased in Q1 2025 due to substantial financing activities, despite higher cash usage in operations Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | Change (YoY) ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------------------------- | | Net cash used in operating activities | $(404,621) | $(59,482) | -$(345,139) | | Net cash from investing activities | - | - | - | | Net cash provided by financing activities | $1,370,383 | $7,647 | +$1,362,736 | | Net increase (decrease) in cash | $965,762 | $(51,835) | +$1,017,597 | | Cash, end of period | $1,072,416 | $39,601 | +$1,032,815 | - Cash used in operating activities increased significantly to $404,621 in Q1 2025, mainly due to net loss and decreases in accounts payable and deferred revenue[25][130] - Cash provided by financing activities surged to $1,370,383 in Q1 2025, primarily from $1,385,000 in proceeds from loans payable[25][133] Notes to Unaudited Condensed Consolidated Financial Statements These notes detail accounting policies, financial instruments, debt, equity, and other significant items impacting the company's financial position Note 1. Description of Business SCWorx Corp. provides health IT solutions and services, focusing on data content, repair, normalization, and interoperability via a SaaS model - SCWorx provides data content and services for healthcare providers, specializing in data repair, normalization, and interoperability for big data analytics[28] - The software platform offers solutions for data normalization, interoperability, and big data analytics to improve healthcare processes and information flow[29] - SCWorx's software modules include Item Master File repair, CDM, contract, and rebate management, big data analytics, and data integration[30] - Solutions are delivered via a Software-as-a-Service (SaaS) model, typically with three-to-five-year contracted terms, hosted in AWS or RackSpace[32] Note 2. Liquidity and Going Concern Recurring operating losses and an accumulated deficit raise substantial doubt about the Company's ability to continue as a going concern - The Company incurred a net loss of $476,303 for Q1 2025 and $1,136,225 for the year ended December 31, 2024[34] - The accumulated deficit as of March 31, 2025, was $31,452,369[34] - These conditions indicate substantial doubt about the Company's ability to continue as a going concern within one year[34] Note 3. Summary of Significant Accounting Policies Outlines key accounting principles for financial statements, including presentation, cash, fair value, revenue, and financial instruments Basis of Presentation and Principles of Consolidation Unaudited consolidated financial statements adhere to U.S. GAAP and SEC regulations, consolidating SCWorx and its subsidiaries with intercompany eliminations - Financial statements are prepared in accordance with U.S. GAAP and SEC rules, including all normal recurring accruals and adjustments[35][37] - The statements consolidate SCWorx and its wholly-owned subsidiaries, eliminating all material intercompany balances and transactions[36] Cash The Company holds cash exceeding the FDIC insured limit by $762,641 as of March 31, 2025 - As of March 31, 2025, the Company had $762,641 in cash deposits exceeding the FDIC insured limit of $250,000[38] Fair Value of Financial Instruments Fair value accounting uses a three-level hierarchy, prioritizing quoted prices in active markets (Level 1) and observable inputs (Level 2) - Fair value is the price received from selling an asset or paid to transfer a liability in an orderly transaction between market participants[39] - The fair value hierarchy categorizes inputs into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[39] Fair value of stock options and warrants The Black-Scholes model calculates fair value for stock options and warrants, requiring management assumptions on expected life, forfeitures, and volatility - The Black-Scholes option-pricing model calculates the fair value of stock options and warrants[40] - Assumptions for the model include expected life, anticipated forfeitures, risk-free rate, and volatility of the Company's share price[40] Concentration of Credit and Other Risks Credit risk is concentrated in cash and accounts receivable, with significant customer concentrations impacting both revenue and receivables - Financial instruments subject to significant credit risk are cash and accounts receivable[41] Significant Customer Concentrations | Customer | Revenue % (Q1 2025) (%) | Revenue % (Q1 2024) (%) | A/R % (March 31, 2025) (%) | A/R % (December 31, 2024) (%) | | :--------- | :-------------------- | :-------------------- | :----------------------- | :------------------------ | | Customer A | 15% | 14% | 23% | 11% | | Customer B | 14% | 12% | 19% | 18% | | Customer C | 19% | 18% | 26% | 20% | | Customer D | -% | 9% | -% | 15% | | Customer E | 7% | 5% | -% | 27% | Allowance for Credit Losses The Company uses an expected credit loss model, increasing the allowance to $43,800 as of March 31, 2025 - The Company uses an expected credit loss model, considering historical loss rates, credit quality indicators, and current economic conditions[43] Allowance for Credit Losses | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------------ | :------------- | :---------------- | | Allowance for credit losses | $43,800 | $20,000 | - The normal collection cycle for receivables ranges between 30 and 60 days[44] Goodwill Goodwill is the difference between acquisition cost and fair value of net assets, reviewed annually for impairment or more frequently if indicated - Goodwill is the difference between aggregate consideration paid for an acquisition and the fair value of net tangible and identified intangible assets acquired[45] - The Company reviews goodwill for impairment annually in Q4, or more frequently if events indicate potential impairment[45] Revenue Recognition Revenue is recognized under ASC Topic 606, identifying distinct performance obligations like Data Normalization, SaaS, and Maintenance, based on stand-alone selling prices - Revenue is recognized in accordance with ASC Topic 606, using a five-step model to depict the transfer of promised goods or services[46][47] - Key performance obligations include Data Normalization, Software-as-a-Service (SaaS), Maintenance, and Professional Services[48][54] - SaaS and Maintenance revenues are recognized ratably over typical three-to-five-year contract terms, delivered via hosted software solutions[32][51] Remaining Performance Obligations | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :-------------------------- | :------------- | :---------------- | | Remaining performance obligations (deferred revenue) | $332,833 | $354,083 | Costs to Obtain and Fulfill a Contract Costs incurred to fulfill contracts, including those for performance obligations and general administrative expenses, are recognized and expensed when incurred - Costs to fulfill a contract are recognized and expensed when incurred, in accordance with ASC 340-40[56] Cost of Revenues Cost of revenues primarily comprises data center hosting, consulting services, and maintenance for the Company's large data array - Cost of revenues primarily includes data center hosting costs, consulting services, and maintenance of the Company's large data array[57] Convertible Debt and Amortization of Debt Discounts Debt proceeds with warrants and conversion features are allocated by fair value, with warrant values amortized as debt discounts; amortization was $78,711 in Q1 2025 - Proceeds from debt instruments with warrants and conversion features are allocated based on the relative fair value of each instrument[58] - The value of warrants issued with convertible debt is recorded as a debt discount and amortized over the debt term[58] Amortization of Debt Discount | Metric | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Amortization of debt discount | $78,711 | $0 | Contract Balances Contract liabilities, representing advance customer payments, totaled $332,833 as of March 31, 2025, expected to be recognized as revenue within 12 months Contract Liabilities (Deferred Revenue) | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------ | :------------- | :---------------- | | Contract liabilities | $332,833 | $354,083 | - The Company expects to recognize revenue related to current performance obligations within the next 12 months[55] Income Taxes The Company uses the asset and liability method for income taxes, establishing a full valuation allowance against deferred tax assets due to realization uncertainty - The Company uses the asset and liability method for income taxes, measuring deferred tax assets and liabilities using enacted tax rates[61] - A valuation allowance has been established for deferred tax assets due to the uncertainty of realizing all benefits[62] - There was no income tax expense for the three months ended March 31, 2025, and 2024[64] Stock-Based Compensation Stock-based compensation is measured at grant date fair value using Black-Scholes and recognized over vesting, relying on subjective assumptions - Stock-based compensation expense is measured at grant date fair value using a Black-Scholes option pricing model and recognized straight-line over the vesting period[65] - Calculations rely on subjective assumptions such as expected term, stock price volatility, and pre-vesting option forfeiture rate[67] Loss Per Share Basic and diluted net loss per share are computed per ASC 260, excluding 16,294,436 anti-dilutive common stock equivalents as of March 31, 2025 - Basic EPS is calculated by dividing net loss by the weighted average common shares outstanding[68] - Diluted EPS gives effect to all dilutive potential common shares, but excludes anti-dilutive securities[68] Anti-Dilutive Securities Excluded from EPS Calculation | Security Type | March 31, 2025 | March 31, 2024 | | :------------------------ | :------------- | :------------- | | Stock options | - | 3,333 | | Warrants | 16,172,162 | 9,101 | | Restricted stock units | 122,274 | 163,996 | | Total common stock equivalents | 16,294,436 | 176,430 | Indemnification The Company indemnifies customers against IP infringement and officers/directors for certain events, with no claims filed or liabilities recorded to date - The Company provides indemnification to customers against intellectual property infringement claims and to officers/directors for certain events[69][70] - No such claims have been filed against the Company, and no liability has been recorded in the financial statements[69] Contingencies A liability for contingencies is accrued when probable and estimable; reasonably possible losses are disclosed, requiring significant judgment - A liability is recorded when a loss is probable and the amount can be reasonably estimated[71] - If a loss is reasonably possible and estimable, it is disclosed in the notes to the financial statements[71] Use of Estimates Financial statement preparation requires management estimates and assumptions, regularly evaluated, with actual results potentially differing materially - Management makes estimates and assumptions for financial reporting, including for allowance for doubtful accounts, long-lived assets, stock-based compensation, goodwill, and deferred income tax valuation allowances[73] - Actual results may differ materially and adversely from these estimates[73] Recently Issued Accounting Pronouncements The Company adopted ASU 2023-07 Segment Reporting, enhancing disclosures by requiring additional information on significant segment expenses - The Company adopted ASU 2023-07 Segment Reporting (Topic 280) as of its fiscal year December 31, 2024[75] - This guidance enhances reportable segment disclosures by requiring additional disclosures about significant segment expenses[75] Note 4. Debt Details debt obligations, including a CARES Act loan and significant convertible notes issued in 2024 and 2025, increasing interest expense and debt discount amortization Debt Balances | Debt Type | March 31, 2025 ($) | December 31, 2024 ($) | | :-------------------------- | :------------- | :---------------- | | CARES Act Loan (remaining) | $12,752 | $27,369 | | Convertible loans payable, net of discounts (current) | $51,334 | - | | Convertible loans payable, net of discounts (long-term) | $7,037 | $19,660 | | Accrued interest for notes | $110,207 | $53,950 | - In July 2024, the Company issued $1,155,000 in 10% convertible notes due December 31, 2025, convertible at $1.43 per share, and granted 4,887,118 detachable warrants[78] - In January 2025, the Company issued $1,500,000 in 10% convertible notes due January 21, 2027, convertible at $1.25 per share, and granted 7,256,364 detachable warrants[79] - Amortization expense of debt discount was $78,711 for the three months ended March 31, 2025[80] Note 5. Leases The Company's main lease is a month-to-month Tampa office arrangement; short-term leases are off-balance sheet, and non-lease components are combined - The Company's principal executive office in Tampa, Florida, is under a month-to-month operating lease with a base rent of $250 per month[81] - Leases with a probable term of 12 months or less are not recorded on the condensed consolidated balance sheets[82] Operating Lease Costs | Metric | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :---------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $1,192 | $935 | Note 6. Commitments and Contingencies Commitments include a legal settlement with Core IR, a broker commission agreement for capital, and pledged assets as collateral for secured convertible notes - The Company settled an arbitration award with Core IR by agreeing to issue common stock valued at $502,000; 191,250 shares were issued by March 31, 2025, with a remaining balance of $135,496[85] - A 120-day agreement with a registered broker obligates the Company to pay a 6% commission on capital raised from introduced parties, expiring around July 17, 2025[86] - The Company has pledged all its assets as collateral for $2,655,000 in senior secured convertible notes issued between July 15, 2024, and January 17, 2025[87] Note 7. Stockholders' Equity Details authorized shares, common stock issuances for legal settlements and note conversions, and significant warrant issuances with convertible loans - The Company has 45,000,000 Common shares and 900,000 Series A convertible preferred shares authorized[88] - On March 14, 2025, 191,250 common shares were issued for a legal settlement, valued at $148,410[89] - Between February 3 and February 27, 2025, 54,980 common shares were issued for the conversion of $40,000 principal and $7,283 accrued interest from convertible notes[90] - On January 21, 2025, warrants to purchase 7,256,364 common shares were issued with convertible notes, valued at $11,422,792 using the Black-Scholes model[91] Stock Incentive Plan Activity | Item | Balance at Dec 31, 2024 | Granted (Q1 2025) | Balance at Mar 31, 2025 | | :-------------------- | :---------------------- | :------------------ | :---------------------- | | Warrants (Number of shares) | 8,915,798 | 7,256,364 | 16,172,162 | | Restricted Stock Units (Number of shares) | 122,274 | - | 122,274 | Note 8. Net Loss per Share Diluted net loss per share computation excluded 16,294,436 anti-dilutive common stock equivalents as of March 31, 2025 - Basic net loss per share is computed by dividing net loss by the weighted average common shares outstanding[96] - Diluted net loss per share excludes securities that would have an anti-dilutive effect[96][97] Anti-Dilutive Securities Excluded from Diluted EPS | Security Type | March 31, 2025 | March 31, 2024 | | :------------------------ | :------------- | :------------- | | Stock options | - | 3,333 | | Warrants | 16,172,162 | 9,101 | | Restricted stock units | 122,274 | 163,996 | | Total common stock equivalents | 16,294,436 | 176,430 | Note 9. Related Party Transactions The Company has a $149,838 payable to an officer and a $67,622 shareholder advance from a former CEO, both outstanding as of March 31, 2025 - As of March 31, 2025, the Company had a payable of $149,838 due to an officer for contract work performed prior to becoming an officer[98] - A non-interest bearing shareholder advance of $67,622 from the Company's former CEO and shareholder was outstanding as of March 31, 2025[99] Note 10. Income Tax Provision The Company has federal NOL carryforwards of $40.3 million and state loss carryforwards of $19.7 million, with a $12,481,000 valuation allowance - As of March 31, 2025, the Company had federal net operating loss carryforwards of approximately $40.3 million and state loss carryforwards of approximately $19.7 million[103] - A valuation allowance of approximately $12,481,000 was established as of March 31, 2025, due to uncertainty regarding the realization of deferred tax assets[104] Income Tax Rate Reconciliation | Tax Rate Component | Percentage (%) | | :------------------------- | :--------- | | Statutory federal income tax rate | 21.00% | | State tax rate | 1.65% | | Valuation Allowance | (22.65)% | | Effective tax rate | 0.00% | Note 11. Segment Reporting The Company operates as a single segment in health IT solutions in the US, with the CEO evaluating performance using consolidated profit and loss - The Company operates in a single segment: health information technology solutions and services, located in the United States[107] - The Chief Executive Officer, as the CODM, manages business activities as a single operating and reportable segment and uses consolidated profit and loss to evaluate performance[108] Note 12. Subsequent Events Subsequent events include common share issuances for loan conversions and Core IR settlement, plus a Nasdaq non-compliance notification for minimum bid price - Between April 2 and May 12, 2025, the Company issued 1,302,948 common shares for the conversion of $600,086 in principal and accrued interest on convertible loans[111] - On May 1, 2025, 230,000 common shares valued at $138,000 were issued as part of the Core IR legal settlement[112] - On April 10, 2025, Nasdaq notified the Company of non-compliance with the $1 minimum bid price requirement, granting a 180-day compliance period until October 7, 2025[113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial condition and operations, highlighting revenue decline, increased net loss, and ongoing liquidity challenges Corporate Information SCWorx Corp. formed through mergers and name changes, implementing a 1-for-15 reverse stock split in October 2023 - SCWorx Corp. was formed through the merger of SCW LLC into SCWorx Acquisition Corp., later changing its name to SCWorx Corp[116] - A 1-for-15 reverse stock split of common stock was implemented on October 11, 2023[117] Our Business SCWorx provides health IT solutions for data normalization, interoperability, and big data analytics to improve hospital processes via a SaaS model - SCWorx provides data content and services for healthcare providers, specializing in data repair, normalization, interoperability, and big data analytics[118] - The software platform aims to simplify, repair, and organize data, enable interoperability, and provide a basis for sophisticated data analytics[119] - Solutions are delivered as Software-as-a-Service (SaaS) over typical three-to-five-year contracted terms[121] Results of Operations – Three months ended March 31, 2025 as compared to the three months ended March 31, 2024 Q1 2025 saw declining revenue and gross profit, increased operating and interest expenses, resulting in a significantly higher net loss year-over-year Revenues Revenue decreased by $91,800 to $720,299 in Q1 2025, primarily due to expiring and non-renewed customer contracts - Revenue for Q1 2025 was $720,299, a decrease of $91,800 from $812,099 in Q1 2024[123] - The decrease was primarily attributed to the expiration and non-renewal of certain customer contracts[123] Cost of revenues Cost of revenues decreased by $20,029 to $583,436 in Q1 2025, mainly due to staffing reductions - Cost of revenues decreased to $583,436 in Q1 2025 from $603,465 in Q1 2024[125] - The decrease was primarily a result of staffing reductions[125] Operating expenses Operating expenses increased by $83,770 to $470,860 in Q1 2025, driven by higher legal/professional fees and increased marketing efforts - Operating expenses increased by $83,770 to $470,860 in Q1 2025[126] - The increase was primarily due to approximately $45,000 in higher legal and professional fees and increased marketing and sales efforts[126] - Operating expenses are expected to remain relatively flat for the rest of 2025, with the exception of marketing and advertising[126] Other income (expense) Other expenses significantly increased to $142,306 in Q1 2025, solely due to higher interest expense from new convertible notes and amortization - Other expenses increased from $203 in Q1 2024 to $142,306 in Q1 2025[127] - This increase was due to the issuance of new interest-bearing convertible notes and the amortization of note discounts[127] Net loss Net loss for Q1 2025 was $476,303, a significant increase from $178,659 in Q1 2024, driven by factors detailed above - Net loss for Q1 2025 was $476,303, compared to $178,659 for Q1 2024[128] Summary of Operating Results | Metric | March 31, 2025 ($) | March 31, 2024 ($) | Difference ($) | | :---------------------- | :------------- | :------------- | :--------- | | Revenue | $720,299 | $812,099 | $(91,800) | | Cost of revenues | $583,436 | $603,465 | $(20,029) | | Operating expenses | $470,860 | $387,090 | $83,770 | | Other expense | $(142,306) | $(203) | $(142,103) | | Net loss | $(476,303) | $(178,659) | $(297,644) | Liquidity and Capital Resources Cash improved significantly in Q1 2025 from financing, despite increased operating cash usage; recurring losses raise going concern doubts Cash Flows Net cash increased by $965,762 in Q1 2025, primarily from $1,370,383 in financing activities, offsetting operating cash usage Summary of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2025 ($) | Three Months Ended March 31, 2024 ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(404,621) | $(59,482) | | Net cash from investing activities | - | - | | Net cash provided by financing activities | $1,370,383 | $7,647 | | Change in cash | $965,762 | $(51,835) | Operating Activities Cash used in operating activities increased to approximately $405,000 in Q1 2025, due to net loss and decreases in payables/deferred revenue - Cash used in operating activities was approximately $405,000 for Q1 2025[130] - Key factors included a net loss of $476,000, a $140,000 decrease in accounts payable, and a $21,000 decrease in deferred revenue, partially offset by a $174,000 decrease in accounts receivable[130] Investing Activities The Company had no investing activities during the three months ended March 31, 2025, or 2024 - The Company had no investing activities during the three months ended March 31, 2025, and 2024[132] Financing Activities Cash provided by financing activities was $1,370,383 in Q1 2025, mainly from $1,385,000 in proceeds from loans payable - Cash provided by financing activities was $1,370,383 for Q1 2025[133] - This consisted of $1,385,000 in proceeds from loans payable, partially offset by approximately $15,000 in loan repayments[133] Liquidity and Going Concern Recurring operating losses and insufficient capital raise substantial doubt about the Company's ability to continue as a going concern - Recurring operating losses and insufficient capital resources raise substantial doubt about the Company's ability to continue as a going concern[135] - The Company may not have sufficient capital from operations and existing financing to meet operating expenses and working capital requirements[135] Off-Balance Sheet Arrangements The Company had no off-balance sheet arrangements as of March 31, 2025, or December 31, 2024 - The Company did not have any off-balance sheet arrangements as of March 31, 2025, and December 31, 2024[136] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, SCWorx Corp. is not required to provide market risk disclosures - SCWorx Corp. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[137] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2025, due to design deficiencies and lack of segregation of duties Evaluation of Disclosure Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2025, due to design deficiencies and lack of segregation of duties - Management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2025[138] - Ineffectiveness was attributed to deficiencies in the design of internal controls and a lack of segregation of duties[138] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during Q1 2025 - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025[139] PART II - OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The Company is involved in legal proceedings, notably a $461,856 arbitration award to Core IR, settled by issuing common stock - The Company received a final arbitration award of $461,856 to Core IR, which later became a judgment of approximately $502,000 including interest[142] - A settlement agreement was reached to issue common stock to Core IR with a value of $502,000[142] - The Company issued 159,776 shares in July 2024 and an additional 191,250 shares on March 14, 2025, under this agreement, with remaining balances included in accounts payable[142] Item 1A. Risk Factors As a smaller reporting company, SCWorx Corp. is not required to provide risk factor disclosures under this item - SCWorx Corp. is a smaller reporting company and is not required to provide risk factor information under this item[143] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company has not sold any previously unreported unregistered equity securities since January 1, 2025 - The Company has not sold any unregistered equity securities not previously reported in a Form 8-K since the beginning of the three-month period ended March 31, 2025[144] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company - This item is not applicable[145] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[146] Item 5. Other Information No other information is reported under this item - No other information is reported under this item[147] Item 6. Exhibits Lists exhibits filed with this Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL data - The exhibit index includes corporate documents such as the Certificate of Incorporation and By-laws, as well as certifications from the CEO and CFO[150] - XBRL (eXtensible Business Reporting Language) documents are also filed as exhibits for interactive data[150] Signatures The report is signed by Timothy A. Hannibal (CEO) and Christopher J. Kohler (CFO) on May 15, 2025 - The report is signed by Timothy A. Hannibal, President and Chief Executive Officer, and Christopher J. Kohler, Chief Financial Officer, on May 15, 2025[154][156]