SCWorx (US:WORX)2025-08-14 17:10PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited condensed consolidated financial statements for SCWorx Corp. as of June 30, 2025, and December 31, 2024, are presented Condensed Consolidated Balance Sheets Balance sheets show increased total assets from cash and receivables, decreased total liabilities, and higher stockholders' equity | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cash | $340,209 | $106,654 | +$233,555 | | Accounts receivable, net | $412,216 | $372,716 | +$39,500 | | Total current assets | $803,500 | $503,378 | +$300,122 | | Total assets | $6,645,933 | $6,345,811 | +$300,122 | | Total current liabilities | $1,187,640 | $1,836,549 | -$648,909 | | Total liabilities | $1,195,587 | $1,856,209 | -$660,622 | | Total stockholders' equity | $5,450,346 | $4,489,602 | +$960,744 | Condensed Consolidated Statements of Operations SCWorx reported increased net losses for both the three and six months ended June 30, 2025, driven by higher interest expense and debt discount amortization | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $682,632 | $742,027 | $1,402,931 | $1,554,126 | | Gross profit | $180,417 | $246,326 | $317,280 | $454,960 | | Loss from operations | $(293,527) | $(307,147) | $(627,524) | $(485,603) | | Interest expense | $(1,534,454) | $(30,166) | $(1,676,760) | $(30,369) | | Net loss | $(1,906,085) | $(337,313) | $(2,382,388) | $(515,972) | | Net loss per share, basic and diluted | $(0.46) | $(0.26) | $(0.78) | $(0.41) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased for the six months ended June 30, 2025, primarily from common stock and additional paid-in capital | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Common stock shares outstanding | 6,420,558 | 1,859,525 | | Common stock ($) | $6,420 | $1,859 | | Additional paid-in capital | $38,802,340 | $35,463,769 | | Accumulated deficit | $(33,358,454) | $(30,976,066) | | Total stockholders' equity | $5,450,346 | $4,489,602 | - Shares issued for conversion of convertible loans and interest totaled 3,959,783 shares, contributing $1,596,122 to additional paid-in capital for the six months ended June 30, 202522 - Issuance of warrants in conjunction with convertible loans added $1,385,000 to additional paid-in capital for the six months ended June 30, 202522 Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, SCWorx saw a net increase in cash, driven by financing activities offsetting operating cash use | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(1,056,454) | $(340,305) | | Net cash from investing activities | $0 | $0 | | Net cash provided by financing activities | $1,290,009 | $266,133 | | Net increase (decrease) in cash | $233,555 | $(74,172) | | Cash, end of period | $340,209 | $17,264 | - Non-cash financing activities included $1,596,122 for shares issued for conversion of convertible loans and interest, and $1,385,000 for warrants issued in conjunction with convertible loans for the six months ended June 30, 202527 Notes to Condensed Consolidated Financial Statements These notes provide detailed information supporting the unaudited condensed consolidated financial statements, covering business, liquidity, policies, and debt Note 1. Description of Business SCWorx Corp. provides health information technology solutions and services, focusing on data content, repair, normalization, and analytics for healthcare providers - SCWorx offers health information technology solutions and services for healthcare providers, specializing in data content, repair, normalization, interoperability, and big data analytics3031 - The company's software platform improves healthcare processes by simplifying and organizing data, enabling interoperability, and providing a basis for sophisticated data analytics31 - Solutions are delivered as Software-as-a-Service (SaaS) over typical three-to-five-year contracted terms, hosted in SCWorx data centers (AWS or RackSpace)34 Note 2. Liquidity and Going Concern SCWorx has incurred recurring operating losses and a significant accumulated deficit, raising substantial doubt about its ability to continue as a going concern - The Company incurred a net loss of $2,382,388 for the six months ended June 30, 2025, and an accumulated deficit of $33,358,454 as of June 30, 202536 - Recurring losses and expected continued cash outflows from operations indicate substantial doubt about the Company's ability to continue as a going concern within one year36 Note 3. Summary of Significant Accounting Policies This note outlines the significant accounting policies used in preparing the condensed consolidated financial statements, covering basis of presentation, revenue, and debt - The financial statements are prepared in accordance with U.S. GAAP and SEC regulations, and include all normal recurring accruals and adjustments3739 - Revenue recognition follows ASC Topic 606, identifying distinct performance obligations and recognizing revenue as services are rendered or ratably over contract terms4952545557 | Customer | Revenue % (6 Months Ended June 30, 2025) | Accounts Receivable % (June 30, 2025) | Accounts Receivable % (December 31, 2024) | | :--------- | :--------------------------------------- | :------------------------------------ | :---------------------------------------- | | Customer A | 16% | 15% | 3% | | Customer B | 14% | 16% | 41% | | Customer C | 20% | 34% | 37% | Note 4. Debt SCWorx's debt primarily consists of convertible notes issued in July 2024 and January 2025, totaling $2,655,000, with warrants issued in conjunction - The CARES Act PPP loan balance was reduced to $0 as of June 30, 2025, from $27,369 at December 31, 2024, following partial forgiveness and maturity extension81 - Issued $1,155,000 in convertible notes on July 15, 2024, bearing 10% interest, convertible at $1.43/share, with detachable 5-year warrants for 4,887,118 shares83 - Issued $1,500,000 in convertible notes on January 21, 2025, bearing 10% interest, convertible at $1.25/share, with detachable 5-year warrants for 7,256,364 shares84 - Amortization expense on debt discounts was $1,379,532 for the three months and $1,458,243 for the six months ended June 30, 2025, significantly higher than the $30,000 for the same periods in 20248562 Note 5. Leases SCWorx primarily operates under a month-to-month lease for its principal executive office and has no other operating or financing leases - The Company's principal executive office is under a month-to-month arrangement with a base rent of $250 per month86 | Lease Cost | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $1,011 | $1,198 | $2,203 | $2,133 | Note 6. Commitments and Contingencies SCWorx is involved in legal proceedings, faces a Nasdaq minimum bid price deficiency, and has pledged assets as collateral for loans - A legal settlement with Core IR for approximately $502,000 (including interest) is being satisfied by issuing common stock; 501,250 shares have been issued, with a balance of $283,906 owed at December 31, 202490100101 - The Company received a Nasdaq notification for failing to meet the minimum $1 bid price requirement, with a compliance period until October 7, 2025; a reverse stock split may be implemented if compliance is not regained91939495 - The Company has pledged all its assets as collateral for $2,655,000 in senior secured convertible notes issued between July 2024 and January 202597 Note 7. Stockholders' Equity SCWorx's stockholders' equity saw significant activity, including common stock issuance for legal settlements and convertible note conversions, and warrant issuance - As of June 30, 2025, the Company had 45,000,000 authorized common shares and 900,000 Series A convertible preferred shares98 - Between March and May 2025, the Company issued 601,250 shares of common stock for legal settlements, valued at $362,01010010122 - Between February and June 2025, the Company issued 3,959,783 shares of common stock for the conversion of $1,426,071 in principal and $170,051 in interest from convertible notes10310522 - On January 21, 2025, warrants to purchase 7,256,364 common shares were issued in conjunction with convertible notes, valued at $11,422,792 using the Black-Scholes model106 | Warrant Grants | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Number of shares subject to warrants | 43,907,807 | 8,915,798 | | Weighted average exercise price per share | $0.41 | $0.92 | Note 8. Net Loss per Share Basic and diluted net loss per share are computed based on net loss and weighted average common shares outstanding, excluding anti-dilutive securities - Basic and diluted net loss per share for the six months ended June 30, 2025, was $(0.78), compared to $(0.41) for the same period in 202419 | Security Type | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | | Stock options | 0 | 3,333 | | Warrants | 43,907,807 | 9,101 | | Restricted stock units | 122,274 | 163,996 | | Total common stock equivalents | 44,030,081 | 176,430 | Note 9. Related Party Transactions SCWorx has a payable to an officer for contract work, and a shareholder advance was fully remitted by June 30, 2025 - As of June 30, 2025, the Company had a payable of $149,838 to an officer for contract work performed prior to becoming an officer114 - A shareholder advance of $67,622 outstanding at December 31, 2024, was fully remitted by June 30, 2025115 Note 10. Income Tax Provision SCWorx uses the asset and liability method for income taxes and has a full valuation allowance against deferred tax assets due to realization uncertainty - The Company has federal net operating loss carryforwards of approximately $41.2 million (June 30, 2025) and $39.9 million (December 31, 2024)120 - State loss carryforwards were approximately $20.5 million (June 30, 2025) and $19.3 million (December 31, 2024)120 - A full valuation allowance of approximately $13,020,000 (June 30, 2025) and $12,378,000 (December 31, 2024) has been established against deferred tax assets due to uncertainty of realization121 Note 11. Segment Reporting SCWorx operates as a single reportable segment in health information technology solutions and services within the United States - The Company operates in a single segment: health information technology solutions and services, located solely in the United States123124 - The Chief Executive Officer, as the Chief Operating Decision Maker, manages business activities as a single segment and uses consolidated profit and loss to evaluate performance125 Note 12. Subsequent Events Subsequent to June 30, 2025, SCWorx issued common shares for convertible loan conversions, and a broker commission obligation expired - Between July 2, 2025, and August 6, 2025, the Company issued 1,460,534 shares of common stock for the conversion of $518,143 in principal and accrued interest on convertible loans128 - A contract commitment with a registered broker for a 6% commission on capital raised expired around July 17, 2025129 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses SCWorx's financial condition, highlighting decreased revenue, increased net losses from higher interest expenses, and ongoing liquidity concerns Corporate Information SCWorx Corp. was formed through a series of mergers and name changes, originating from SCWorx, LLC in 2016 - SCWorx Corp. was formed through a series of corporate transactions, including the merger of SCW LLC into SCWorx Acquisition Corp. in 2018, and the subsequent acquisition by Alliance MMA, Inc. in 2019, which then changed its name to SCWorx Corp29131 Our Business SCWorx provides health information technology solutions and services to healthcare providers, focusing on data normalization, interoperability, and big data analytics - SCWorx offers health information technology solutions and services for healthcare providers, specializing in data content, repair, normalization, interoperability, and big data analytics132133 - The company's software platform aims to improve information flow, achieve supply chain cost reductions, decrease accounts receivables aging, and accelerate accurate billing133 - Solutions are delivered via a Software-as-a-Service (SaaS) model, typically under three-to-five-year contracts, and sold through direct sales and strategic partnerships137 Results of Operations – Three Months Ended June 30, 2025 vs. 2024 For the three months ended June 30, 2025, SCWorx experienced decreased revenue and increased net loss, primarily due to higher other expenses | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Difference | | :-------------------- | :--------------------------- | :--------------------------- | :----------- | | Revenue | $682,632 | $742,027 | $(59,395) | | Cost of revenues | $502,215 | $495,701 | $6,514 | | Operating expenses | $473,944 | $553,473 | $(79,529) | | Other expense | $(1,612,558) | $(30,166) | $(1,582,392) | | Net loss | $(1,906,085) | $(337,313) | $(1,568,772) | - Revenue decreased by $59,395, primarily due to the expiration and non-renewal of certain customer contracts139 - Other expenses increased significantly by $1,582,392, mainly due to the issuance of new interest-bearing convertible notes and the amortization of note discounts142 Results of Operations – Six Months Ended June 30, 2025 vs. 2024 For the six months ended June 30, 2025, SCWorx reported decreased revenue and a substantial increase in net loss, driven by higher other expenses | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Difference | | :-------------------- | :--------------------------- | :--------------------------- | :----------- | | Revenue | $1,402,931 | $1,554,126 | $(151,195) | | Cost of revenues | $1,085,651 | $1,099,166 | $(13,515) | | Operating expenses | $944,804 | $940,563 | $4,241 | | Other expense | $(1,754,864) | $(30,369) | $(1,724,495) | | Net loss | $(2,382,388) | $(515,972) | $(1,866,416) | - Revenue decreased by $151,195, primarily due to the expiration and non-renewal of certain customer contracts146 - Other expenses increased significantly by $1,724,495, mainly due to the issuance of new interest-bearing convertible notes and the amortization of note discounts149 Liquidity and Capital Resources SCWorx's cash position improved for the six months ended June 30, 2025, due to financing activities offsetting operating cash use | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(1,056,454) | $(340,305) | | Net cash from investing activities | $0 | $0 | | Net cash provided by financing activities | $1,290,009 | $266,133 | | Change in cash | $233,555 | $(74,172) | - Cash used in operating activities increased to approximately $1,056,000 in 2025, mainly due to the net loss of $2,382,000, partially offset by non-cash adjustments like amortization of debt discount ($1,458,000)152 - Cash provided by financing activities was approximately $1,290,000 in 2025, primarily from proceeds from loans payable ($1,385,000)155 Liquidity and Going Concern SCWorx faces substantial doubt about its ability to continue as a going concern due to recurring losses and insufficient capital, and is addressing a Nasdaq bid price deficiency - Recurring operating losses and insufficient capital resources raise substantial doubt about the Company's ability to continue as a going concern157 - Nasdaq notified the Company of a minimum bid price deficiency, with a compliance period until October 7, 2025; a reverse stock split is planned if compliance is not regained158159161 Off-Balance Sheet Arrangements As of June 30, 2025, and December 31, 2024, SCWorx did not have any off-balance sheet arrangements - The Company did not have any off-balance sheet arrangements as of June 30, 2025, and December 31, 2024162 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, SCWorx is not required to provide quantitative and qualitative disclosures about market risk - SCWorx is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk1633 Item 4. Controls and Procedures Management concluded that SCWorx's disclosure controls were not effective as of June 30, 2025, due to internal control deficiencies, with no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management concluded that SCWorx's disclosure controls and procedures were not effective as of June 30, 2025, due to internal control deficiencies - Disclosure Controls were not effective as of June 30, 2025, due to deficiencies in the design of internal controls and lack of segregation of duties164 Changes in Internal Control over Financial Reporting There were no material changes in SCWorx's internal control over financial reporting during the three and six months ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the three and six months ended June 30, 2025166 PART II - OTHER INFORMATION Item 1. Legal Proceedings SCWorx accrues liabilities for probable and estimable legal losses and is involved in an arbitration case with Core IR, settling a judgment via common stock CorProminence d/b/a Core IR v. SCWorx SCWorx is settling a $502,000 judgment from an arbitration award to Core IR by issuing common stock, with 501,250 shares issued as of May 21, 2025 - An arbitration award of $461,856 to Core IR, which grew to approximately $502,000 with interest, is being settled by issuing common stock169 - As of May 21, 2025, the Company issued 159,776, 191,250, 230,000, and 180,000 shares of common stock in tranches to satisfy the settlement169 Item 1A. Risk Factors As a smaller reporting company, SCWorx is not required to provide specific risk factor disclosures under this item - SCWorx is a smaller reporting company and is not required to provide risk factor information under this item170 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds SCWorx has not sold any unregistered equity securities since the beginning of the six-month period ended June 30, 2025, that were not previously reported - No unregistered sales of equity securities have occurred since the beginning of the six-month period ended June 30, 2025, that were not previously reported171 Item 3. Defaults Upon Senior Securities This item is not applicable to SCWorx for the reporting period - This item is not applicable172 Item 4. Mine Safety Disclosures This item is not applicable to SCWorx for the reporting period - This item is not applicable173 Item 5. Other Information There is no other information to report under this item - No other information to report174 Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL data files Exhibit Index The exhibit index details various documents filed, such as the Certificate of Incorporation, By-laws, CEO and CFO certifications, and Inline XBRL documents - Key exhibits include Certificate of Incorporation, Amended and Restated By-laws, CEO and CFO certifications (Section 302 and 1350), Clawback Policy, and Inline XBRL documents177 Signatures The report is duly signed on behalf of SCWORX CORP. by its President and Chief Executive Officer, Timothy A. Hannibal, and its Chief Financial Officer, Christopher J. Kohler, on August 14, 2025 - The report was signed by Timothy A. Hannibal, President and Chief Executive Officer, and Christopher J. Kohler, Chief Financial Officer, on August 14, 2025181183