Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes included in Item 1, "Financial Statements" of this Form 10-Q. In addition to our historical unaudited condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs which involves risk, uncertainty and assumptions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q.

Corporate Information

SCWorx, LLC (n/k/a SCW FL Corp.) ("SCW LLC") was a privately held limited liability company which was organized in Florida on November 17, 2016. On December 31, 2017, SCW LLC acquired Primrose Solutions, LLC ("Primrose"), a Delaware limited liability company, which became its wholly-owned subsidiary and focused on developing functionality for the software now used and sold by SCWorx Corp. (the "Company" or "SCWorx"). The majority interest holders of Primrose were interest holders of SCW LLC and based upon Staff Accounting Bulletin Topic 5G, the technology acquired has been accounted for at predecessor cost of $0. To facilitate the planned acquisition by Alliance MMA, Inc., a Delaware corporation ("Alliance"), on June 27, 2018, SCW LLC merged with and into a newly-formed entity, SCWorx Acquisition Corp., a Delaware corporation ("SCW Acquisition"), with SCW Acquisition being the surviving entity. Subsequently, on August 17, 2018, SCW Acquisition changed its name to SCWorx Corp. In June 2018, the Company began to collect subscriptions for common stock. On November 30, 2018, the Company and certain of its stockholders agreed to cancel 6,510 shares of common stock. From June to November 2018, the Company collected $1,250,000 in subscriptions and issued 3,125 shares of common stock to new third-party investors. In addition, on February 1, 2019, (i) SCWorx Corp. (f/k/a SCWorx Acquisition Corp.) changed its name to SCW FL Corp. (to allow Alliance to change its name to SCWorx Corp.) and (ii) Alliance acquired SCWorx Corp. (n/k/a SCW FL Corp.) in a stock-for-stock exchange transaction and changed Alliance's name to SCWorx Corp., which is the Company's current name, with SCW FL Corp. becoming the Company's subsidiary.

On April 7, 2026, following stockholder approval at the Company's annual meeting, the Company amended its certificate of incorporation to implement a 1 for 15 reverse split of its common stock. The effect of the reverse stock split was to combine every 15 shares of outstanding common stock into one share of common stock. The reverse stock split was effective at the opening of the trading day on April 10, 2026. The effects of the reverse stock split have been reflected in this Quarterly Report on Form 10-Q for all periods presented.

Our Business

SCWorx is a provider of data content and services related to the repair, normalization and interoperability of information for healthcare providers and big data analytics for the healthcare industry.

SCWorx has developed and markets health information technology solutions and associated services that improve healthcare processes and information flow within hospitals. SCWorx's software platform enables healthcare providers to simplify, repair, and organize its data ("data normalization"), allows the data to be utilized across multiple internal software applications ("interoperability") and provides the basis for sophisticated data analytics ("big data"). SCWorx's solutions are designed to improve the flow of information quickly and accurately between the existing supply chain, electronic medical records, clinical systems, and patient billing functions. The software is designed to achieve multiple operational benefits such as supply chain cost reductions, decreased accounts receivables aging, accelerated and more accurate billing, contract optimization, increased supply chain management and cost visibility, synchronous Charge Description Master ("CDM") and control of vendor rebates and contract administration fees.

SCWorx empowers healthcare providers to maintain comprehensive access and visibility to an advanced business intelligence that enables better decision-making and reductions in product costs and utilization, ultimately leading to accelerated and accurate patient billing. SCWorx's software modules perform separate functions as follows:

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virtualized Item Master File repair, expansion and automation;

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CDM management;

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contract management;

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request for proposal automation;

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rebate management;

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big data analytics modeling; and

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data integration and warehousing.

SCWorx continues to provide transformational data-driven solutions to some of the finest, most well-respected healthcare providers in the United States. Clients are geographically dispersed throughout the country. The Company's focus is to assist healthcare providers with issues they have pertaining to data interoperability. SCWorx provides these solutions through a combination of direct sales and relationships with strategic partners.

SCWorx's software solutions are delivered to clients within a fixed term period, typically a three-to-five-year contracted term, where such software is hosted in SCWorx data centers (Amazon Web Service's "AWS" or RackSpace) and accessed by the client through a secure connection in a software as a service ("SaaS") delivery method.

SCWorx currently sells its solutions and services in the United States to hospitals and health systems through its direct sales force and its distribution and reseller partnerships.

Results of Operations - Three months ended March 31, 2026 as compared to the three months ended March 31, 2025

Our operating results for the three month periods ended March 31, 2026 and 2025 are summarized as follows:

		Three Months Ended
		March 31, 2026				March 31, 2025				Difference
Revenue		$	744,899			$	720,299			$	24,600
Cost of revenues			370,790				583,436				(212,646	)
Operating expenses			509,923				470,860				39,063
Other income (expense)			(37,953	)			(142,306	)			104,353
Provision for income taxes			-				-				-
Net loss		$	(173,767	)		$	(476,303	)		$	302,536

Revenues

Revenue for the three months ended March 31, 2026 was $744,899 as compared to $720,299 for the three months ended March 31, 2025. This increase was primarily due to the modification certain customer contracts as well as new customer contracts during the current year.

Cost of revenues

Cost of revenues were $370,790 for the three months ended March 31, 2026 compared to $583,436 for the same period in 2025. The decrease is primarily related to a decrease in labor costs as well as decreases in our cloud hosting costs. Overall gross profit for the year ended December 31, 2025 increased by approximately 173% from the same period in the prior year due in part to reductions in our cloud hosting costs of approximately $24,000 and contractor expenses of approximately $180,000.

Operating expenses

Operating expenses increased $39,063 to $509,923 for the three months ended March 31, 2026, as compared to $470,860 in the same period of 2025. The increase is primarily attributable to increases in salaries and wages of approximately $56,000 and non cash stock compensation expense of $12,000, partially offset by decreases in Legal and professional fees of $46,000. We expect operating expenses to remain relatively flat during the rest of 2026 with the exception of marketing and advertising.

Other income (expense)

We had other expenses of $37,953 and $142,306 during the three months ended March 31, 2026 and 2025, respectively, comprised of non-cash interest expense and amortization of debt discounts. The decrease was primarily due to a reduction in the balance of existing convertible notes as well as a reduction in amortization of note discounts during the current year period.

Net loss

For the three months ended March 31, 2026, we incurred a net loss of $173,767 compared to a net loss of $476,303 for the same period in 2025 due to the factors detailed above.

Liquidity and Capital Resources

Cash Flows

		Three Months Ended March 31,
		2026				2025
Net cash used in operating activities		$	(252,749	)		$	(404,621	)
Net cash used in investing activities			(65,413	)			-
Net cash provided by financing activities			15,502				1,370,383
Change in cash		$	(302,660	)		$	965,762

Operating Activities

Cash used in operating activities was approximately $253,000 for the three months ended March 31, 2026, mainly related to the net loss of approximately $174,000, increases of $1,000 in accounts receivable, and $117,000 in prepaid expenses and other assets, decreases of $7,000 in accounts payable and accrued liabilities and $1,000 in deferred revenue, partially offset by amortization of discounts $34,000, depreciation of $1,000 and non-cash stock based compensation of $12,000.

Cash used in operating activities was approximately $405,000 for the three months ended March 31, 2025, mainly related to the net loss of approximately $476,000, a $140,000 decrease in accounts payable and accrued liabilities, a $21,000 decrease in deferred revenue and a $43,000 increase in prepaid expenses, partially offset by amortization of discounts on debt agreements of $79,000, credit loss expense of $24,000 and a decrease in accounts receivable of $174,000.

Investing Activities

Net cash used in investment activities was approximately $65,000 for the three months ended March 31, 2026 due to the Company's capitalization of internal development costs related to new software assets.

The Company did not have any investing activities during the three months ended March 31, 2025.

Financing Activities

Cash provided by financing activities was approximately $15,000 for the three months ended March 31, 2026, consisting of proceeds from warrant exercises.

Cash provided by financing activities was $1,370,383 for the three months ended March 31, 2025, consisting of proceeds loans payable of $1,385,000 partially offset by repayments of loans payable of approximately $15,000.

Nasdaq minimum bid price deficiency notification

As Previously Disclosed in the Company's periodic report filed with the SEC on April 16, 2025, Nasdaq notified the Company that based upon the Company's closing bid price for the last 30 consecutive business days (February 26, 2025 through April 9, 2025), the Company no longer meets the listed securities requirement to maintain a minimum bid price of $1 per share pursuant to Nasdaq Rules 5550(a)(2) and 5810(c)(3)(A).

On October 8, 2025, the Company received written notification from the Listing Qualifications Department of Nasdaq, granting the Company's request for a 180-day extension to regain compliance with the Bid Price Rule. The Company now has until April 6, 2026 to meet the requirement.

On April 7, 2026, Nasdaq notified the Company that, because it failed to regain compliance with Nasdaq's minimum bid price requirement of $1 per share pursuant to Nasdaq Rule 5550(a)(2), its securities will be delisted from the Capital Market. Consequently, trading of the Company's common stock was suspended at the opening of business on April 14, 2026, and a Form 25-NSE was filed with the Securities and Exchange Commission, which removed the Company's securities from listing and registration on The Nasdaq Stock Market.

The Company has filed an appeal of the Nasdaq Staff's delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules.

Off-Balance Sheet Arrangements

As March 31, 2026 and December 31, 2025, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.