worx-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-37899

SCWORX CORP.

(Exact name of registrant as specified in its charter)

Delaware		47-5412331
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

35 Village Road, Suite 100

Middleton, MA 01949

(Address of principal executive offices, including zip code)

(212) 739-7825

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.001 par value per share		WORX		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the registrant’s common stock outstanding at May 15, 2026: 1,066,918

SCWorx Corp.

Form 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		1

Item 1.	Financial Statements (unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II - OTHER INFORMATION		24

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

Exhibit Index		25

Signatures		26

Cautionary Statement Regarding Forward-Looking Statements

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Form 10-Q are forward-looking statements. These statements, among other things, relate to our business strategy, goals and expectations concerning our future operations, prospects, plans and objectives of management. The words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, and similar terms and phrases are used to identify forward-looking statements in this presentation.

Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Forward-looking statements in this Form 10-Q include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook and increased operating expenses.

Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward looking statements as set forth under the heading, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to our ability to:

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reverse the recent decline in our revenue and resume growing our revenue;

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resolve the various litigation proceedings pending against us on favorable terms or at all;

●

obtain additional financing in sufficient amounts or on acceptable terms so that we can fund our business plan;

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reduce our dependence on third-party subcontractors to perform some of the work on our contracts;

●

mitigate the impact of new or changed laws, regulations or other industry standards that could adversely affect our ability to conduct our business;

●

adopt and master new technologies and adjust certain fixed costs and expenses to adapt to our industry’s and customers’ evolving demands; and

●

mitigate the impact of changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters.

Although we believe that the expectations reflected in the forward-looking statements contained in this Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. In light of inherent risks, uncertainties and assumptions, the future events and trends discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Except as required by law, we are under no duty to update or revise any of such forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this Form 10-Q.

You should read this Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

All references to “SCWorx,” “we,” “us,” “our” or the “Company” mean SCWorx Corp., a Delaware corporation, and where appropriate, its wholly owned subsidiaries.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

		Page
		Number
Condensed consolidated balance sheets as of March 31, 2026 (unaudited) and December 31, 2025 (audited)		2

Unaudited condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025		3

Unaudited condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2026 and 2025		4

Unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2026 and 2025		5

Notes to unaudited condensed consolidated financial statements		6

SCWorx Corp.

Condensed Consolidated Balance Sheets

	March 31,			December 31,
	2026			2025
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash	$	1,341,779		$	1,644,439
Accounts receivable, net		314,550			313,350
Prepaid expenses and other assets		182,863			65,627
Total current assets		1,839,192			2,023,416

Property and equipment, net		9,335			10,220
Intangible assets		85,432			20,019
Goodwill		5,842,433			5,842,433
Total assets	$	7,776,392		$	7,896,088

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued liabilities	$	419,566		$	433,469
Accounts payable and accrued liabilities - related party		149,838			149,838
Deferred revenue		157,500			158,750
Convertible loans payable, net of discounts - current portion		-			1,539
Total current liabilities		726,904			743,596

Total liabilities		726,904			743,596

Commitments and contingencies (Note 7)

Stockholders’ equity:
Series A Convertible Preferred stock, $0.001 par value; 900,000 shares authorized; 39,810 shares issued and outstanding		40			40
Common stock, $0.001 par value; 150,000,000 shares authorized; 1,066,918 and 1,055,412 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		1,067			1,055
Additional paid-in capital		42,642,323			42,571,572
Accumulated deficit		(35,593,942	)		(35,420,175	)
Total stockholders’ equity		7,049,488			7,152,492

Total liabilities and stockholders’ equity	$	7,776,392		$	7,896,088

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SCWorx Corp.

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended
	March 31,
	2026			2025


Revenue	$	744,899		$	720,299
Cost of revenue		370,790			583,436
Gross profit		374,109			136,863

Operating expenses:
Legal and professional		158,355			203,979
Salaries and wages		140,446			84,278
General and administrative		210,237			182,603
Depreciation		885			-
Total operating expenses		509,923			470,860

Loss from operations		(135,814	)		(333,997	)

Other income (expense)
Interest expense		(37,953	)		(142,306	)
Total other expense		(37,953	)		(142,306	)

Net loss before income taxes		(173,767	)		(476,303	)

Provision for (benefit from) income taxes		-			-

Net loss	$	(173,767	)	$	(476,303	)

Net loss per share, basic and diluted	$	(0.16	)	$	(3.71	)

Weighted average common shares outstanding, basic and diluted		1,061,004			128,359

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SCWorx Corp.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Preferred Stock				Common stock				Additional paid-in		Accumulated
Three Months Ended March 31, 2026	Shares		$		Shares		$		capital		deficit			Total

Balances, December 31, 2025		39,810	$	40		1,055,412	$	1,055	$	42,571,572	$	(35,420,175	)	$	7,152,492

Shares issued for conversion of convertible loans and interest		-		-		8,172		8		42,849		-			42,857
Shares issued for the exercise of warrants		-		-		3,334		4		15,498		-			15,502
Stock based compensation		-		-		-		-		12,404		-			12,404
Net loss		-		-		-		-		-		(173,767	)		(173,767	)

Ending balance, March 31, 2026		39,810	$	40		1,066,918	$	1,067	$	42,642,323	$	(35,593,942	)	$	7,049,488

									Additional
	Preferred Stock				Common stock				paid-in		Accumulated
Three months ended March 31, 2025	Shares		$		Shares		$		capital		deficit			Total

Balances, December 31, 2024		39,810	$	40		123,968	$	124	$	35,465,504	$	(30,976,066	)	$	4,489,602

Shares issued for legal settlement		-		-		12,750		13		148,397		-			148,410
Shares issued for conversion of convertible loans and interest		-		-		3,665		3		47,280		-			47,283
Issuance of warrants in conjunction with convertible loans		-		-		-		-		1,385,000		-			1,385,000
Net loss		-		-		-		-		-		(476,303	)		(476,303	)

Ending balance, March 31, 2025		39,810	$	40		140,383	$	140	$	37,046,181	$	(31,452,369	)	$	5,593,992

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SCWorx Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended
	March 31,
	2026			2025

Cash flows from operating activities:
Net loss	$	(173,767	)	$	(476,303	)

Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		34,175			78,711
Depreciation		885			-
Stock based compensation		12,404			-
Credit loss expense		-			23,800
Changes in operating assets and liabilities:
Accounts receivable		(1,200	)		173,683
Prepaid expenses and other assets		(117,236	)		(42,817	)
Accounts payable and accrued liabilities		(6,760	)		(140,445	)
Deferred revenue		(1,250	)		(21,250	)
Net cash used in operating activities		(252,749	)		(404,621	)

Cash flows from investing activities:
Additions to intangible assets		(65,413	)		-
Net cash used in investing activities:		(65,413	)		-

Cash flows from financing activities:
Proceeds from loans payable, net		-			1,385,000
Payments on loans payable		-			(14,617	)
Proceeds from the exercise of warrants, net of costs		15,502			-
Net cash provided by financing activities		15,502			1,370,383

Net (decrease) increase in cash		(302,660	)		965,762

Cash, beginning of period		1,644,439			106,654

Cash, end of period	$	1,341,779		$	1,072,416

Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	56
Cash paid for income taxes	$	-		$	-

Non-cash investing and financing activities:
Shares issued for conversion of convertible loans and interest	$	42,857		$	47,283
Shares issued for accrued legal settlement	$	-		$	148,410
Warrants issued in conjunction with convertible loans	$	-		$	1,385,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SCWorx Corp.

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2026 and 2025

(Unaudited)

Note 1. Description of Business

Nature of Business

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.

Operations of the 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;

●

CDM management;

●

contract management;

●

request for proposal automation;

●

rebate management;

●

big data analytics modeling; and

●

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.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). They do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto contained in its report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 31, 2026.

The accompanying unaudited condensed consolidated financial statements include the accounts of SCWorx and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at March 31, 2026, the results of its operations and cash flows for the three months ended March 31, 2026. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for future quarters or the full year.

Cash

Cash is maintained with various financial institutions. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company had amounts in excess of the FDIC insured limit of $1,017,344 and $1,356,754 as of March 31, 2026 and December 31, 2025, respectively.

Fair Value of Financial Instruments

Management applies fair value accounting for significant financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the unaudited condensed consolidated financial statements on a recurring basis. Management defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, management considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Fair value of stock options and warrants

Management uses the Black-Scholes option-pricing model to calculate the fair value of stock options and warrants. Use of this method requires management to make assumptions and estimates about the expected life of options and warrants, anticipated forfeitures, the risk-free rate, and the volatility of the Company’s share price. In making these assumptions and estimates, management relies on historical market data.

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers. The Company performs ongoing internal credit evaluations of its customers’ financial condition, obtains deposits and limits the amount of credit extended when deemed necessary but generally requires no collateral.

Significant customers are those which represent more than 10% of the Company’s revenue for each period presented, or the Company’s accounts receivable balance as of each respective balance sheet date. For each significant customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total net accounts receivable are as follows:

	Revenue For The
	Three Months Ended						Accounts Receivable
	March 31,						March 31,			December 31,
Customers	2026			2025			2026			2025
Customer A		19	%		9	%		-	%		-	%
Customer B		16	%		19	%		16	%		8	%
Customer C		13	%		14	%		-	%		-	%
Customer D		9	%		15	%		34	%		32	%
Customer E		7	%		7	%		11	%		11	%

Allowance for Credit Losses

Accounts receivable are comprised of amounts billed and currently due from customers. Accounts receivable are amounts related to any unconditional right the Company has for receiving consideration and are presented as accounts receivable in the condensed consolidated balance sheets. The Company maintains an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. The Company employs the practical expedient to estimate expected credit losses for current accounts receivable by utilizing subsequent cash collections. The evaluation of subsequent cash collections was performed through approximately May 10, 2026, for the reporting period ended March 31, 2026.

Management considers the following factors when determining the collectability of specific customer accounts: customer creditworthiness, past transaction history with the customer, current industry trends, changes in customer payment terms, and specific customer situations. The Company’s normal collection cycle ranges between thirty and 60 days. Estimated uncollectible amounts are charged to earnings and a credit to a valuation allowance. Balances which remain outstanding after reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company has assessed that certain receivables may not be collectable and has recorded an allowance for credit losses of $55,200 as of March 31, 2026 and December 31, 2025.

Leases

We determine if an arrangement is a lease at inception. The current portion of lease obligations are included in accounts payable and accrued liabilities on the consolidated balance sheets. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which are included in the lease ROU asset when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease components only, none with non-lease components, which are generally accounted for separately.

Management has elected a short-term lease exception policy on all classes of underlying assets, permitting the Company to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less).

Goodwill

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and identified intangible assets acquired under a business combination. Goodwill also includes acquired assembled workforce, which does not qualify as an identifiable intangible asset. The Company reviews impairment of goodwill annually in the fourth quarter, or more frequently if events or circumstances indicate that the goodwill might be impaired. The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.

Intangible Assets and Impairment of Long Lived Assets

The Company capitalizes costs incurred during the application development stage for internal-use software, which include external direct costs of materials and services, as well as payroll-related costs for employees directly associated with the software development. Costs related to the preliminary project phase, training, and maintenance are expensed as incurred. Once the software is ready for its intended use, capitalized costs are amortized on a straight-line basis over an estimated useful life of 3 to 5 years in accordance with the provisions of Accounting Standard Codification (“ASC”) 350, “Goodwill and Other Intangible Assets”.

The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of an asset is less than its carrying amount, then the company records impairment of the asset.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standard Codification (“ASC”) Topic 606 to depict the transfer of promised goods or services in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of Topic 606 the Company performs the following steps:

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Step 1: Identify the contract(s) with a customer

●

Step 2: Identify the performance obligations in the contract

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Step 3: Determine the transaction price

●

Step 4: Allocate the transaction price to the performance obligations in the contract

●

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Company follows the accounting revenue guidance under Topic 606 to determine whether contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer.

The Company has identified the following performance obligations in its SaaS contracts with customers:

Data Normalization: which includes data preparation, product and vendor mapping, product categorization, data enrichment and other data related services,

Software-as-a-service (“SaaS”): which is generated from clients’ access of and usage of the Company’s hosted software solutions on a subscription basis for a specified contract term, which is usually annually. In SaaS arrangements, the client cannot take possession of the software during the term of the contract and generally has the right to access and use the software and receive any software upgrades published during the subscription period,

Maintenance: which includes ongoing data cleansing and normalization, content enrichment, and optimization, and

Professional Services: mainly related to specific customer projects to manage and/or analyze data and review for cost reduction opportunities

A contract will typically include Data Normalization, SaaS and Maintenance, which are distinct performance obligations and are accounted for separately. The transaction price is allocated to each separate performance obligation on a relative stand-alone selling price basis. Significant judgement is required to determine the stand-alone selling price for each distinct performance obligation and is typically estimated based on observable transactions when these services are sold on a stand-alone basis. At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when the performance obligation has been met. The Company considers control to have transferred upon delivery because the Company has a present right to payment at that time, the Company has transferred use of the good or service, and the customer is able to direct the use of, and obtain substantially all the remaining benefits from, the good or service.

The Company’s SaaS and Maintenance contracts typically have termination for convenience without penalty clauses and accordingly, are generally accounted for as month-to-month agreements. If it is determined that the Company has not satisfied a performance obligation, revenue recognition will be deferred until the performance obligation is deemed to be satisfied.

Revenue recognition for the Company’s performance obligations are as follows:

Data Normalization and Professional Services

The Company’s Data Normalization and Professional Services are typically a fixed fee. When these services are not combined with SaaS or Maintenance revenues as a single unit of accounting, these revenues are recognized as the services are rendered and when contractual milestones are achieved and accepted by the customer. When these services are combined with SaaS or Maintenance revenues, revenues are recognized ratably over the period of the contract.

SaaS and Maintenance

SaaS and Maintenance revenues are recognized ratably over the contract terms beginning on the commencement date of each contract, which is the date on which the Company’s service is made available to customers.

The Company does have some contracts that have payment terms that differ from the timing of revenue recognition, which requires the Company to assess whether the transaction price for those contracts include a significant financing component. The Company has elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if it expects that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. The Company does not maintain contracts in which the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service exceeds the one-year threshold.

The Company has one revenue stream, from the SaaS business, and believes it has presented all varying factors that affect the nature, timing and uncertainty of revenues and cash flows.

Remaining Performance Obligations

As of March 31, 2026 and December 31, 2025, the Company had $157,500 and $158,750, respectively, of remaining performance obligations recorded as deferred revenue. The Company expects to recognize the revenue relating to the current performance obligations during the following 12 month period.

Costs to Obtain and Fulfill a Contract

Costs to fulfill a contract typically include costs related to satisfying performance obligations as well as general and administrative costs that are not explicitly chargeable to customer contracts. These expenses are recognized and expensed when incurred in accordance with ASC 340-40, “Other Assets and Deferred Costs—Contracts with Customers”.

Cost of Revenues

Cost of revenues primarily represent data center hosting costs, consulting services and maintenance of the Company’s large data array that were incurred in delivering professional services and maintenance of the Company’s large data array during the periods presented.

Convertible Debt and Amortization of Debt Discounts

The Company has issued various debt instruments with warrants and conversion features for which total proceeds were allocated to individual instruments based on the relative fair value of each instrument at the time of issuance. The relative fair value of the warrants issued in connection with convertible debt was recorded as discount on debt and amortized over the term of the respective debt. For the three months ended March 31, 2026 and 2025 amortization of debt discount was $34,175 and $78,711, respectively.

Contract Balances

Contract assets arise when the associated revenue was earned prior to the Company’s unconditional right to receive a payment under a contract with a customer (unbilled revenue) and are derecognized when either it becomes a receivable or the cash is received. There were no contract assets as of March 31, 2026 and December 31, 2025.

Contract liabilities arise when customers remit contractual cash payments in advance of the Company satisfying its performance obligations under the contract and are derecognized when the revenue associated with the contract is recognized when the performance obligation is satisfied. Contract liabilities were $157,500 and $158,750 as March 31, 2026 and December 31, 2025, respectively.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.

Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2026 and December 31, 2025, the Company has evaluated available evidence and concluded that the Company may not realize all the benefits of its deferred tax assets; therefore, a valuation allowance has been established for its deferred tax assets.

ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

There was no income tax expense for three months ended March 31, 2026 and 2025.

Stock-Based Compensation

The Company accounts for stock-based compensation expense in accordance with the authoritative guidance on share-based payments. Under the provisions of the guidance, stock-based compensation expense is measured at the grant date based on the fair value of the option or warrant using a Black-Scholes option pricing model and is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

The authoritative guidance also requires that the Company measures and recognizes stock-based compensation expense upon modification of the term of stock award. The stock-based compensation expense for such modification is accounted for as a repurchase of the original award and the issuance of a new award.

Calculating stock-based compensation expense requires the input of highly subjective assumptions, including the expected term of the stock-based awards, stock price volatility, and the pre-vesting option forfeiture rate. The Company estimates the expected life of options granted based on historical exercise patterns, which are believed to be representative of future behavior. The Company estimates the volatility of the Company’s common stock on the date of grant based on historical volatility. The assumptions used in calculating the fair value of stock-based awards represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, its stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. The Company estimates the forfeiture rate based on historical experience of its stock-based awards that are granted, exercised and cancelled. If the actual forfeiture rate is materially different from the estimate, stock-based compensation expense could be significantly different from what was recorded in the current period. The Company also grants performance-based restricted stock awards to employees and consultants. These awards will vest if certain employee\consultant-specific or Company-designated performance targets are achieved. If minimum performance thresholds are achieved, each award will convert into a designated number of the Company’s common stock. If minimum performance thresholds are not achieved, then no shares will be issued. Based upon the expected levels of achievement, stock-based compensation is recognized on a straight-line basis over the requisite service period. The expected levels of achievement are reassessed over the requisite service periods and, to the extent that the expected levels of achievement change, stock-based compensation is adjusted in the period of change and recorded on the statements of operations and the remaining unrecognized stock-based compensation is recorded over the remaining requisite service period. Refer to Note 8, Stockholders’ Equity, for additional detail.

Loss Per Share

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings (loss) per share (“EPS”) on the face of the consolidated statements of operations. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants and the exercise of fully vested restricted stock units. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Indemnification

The Company provides indemnification of varying scope to certain customers against claims of intellectual property infringement made by third parties arising from the use of the Company’s software. In accordance with authoritative guidance for accounting for guarantees, the Company evaluates estimated losses for such indemnification. The Company considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, no such claims have been filed against the Company and no liability has been recorded in its condensed consolidated financial statements.

As permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. In addition, the Company has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable it to recover any payments above the applicable policy retention, should they occur.

Contingencies

The Company records a liability when the Company believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. If the Company determines that a loss is reasonably possible, and the loss or range of loss can be estimated, the Company discloses the possible loss in the notes to the unaudited condensed consolidated financial statements. The Company reviews the developments in its contingencies that could affect the amount of the provisions that has been previously recorded, and the matters and related possible losses disclosed. The Company adjusts provisions and changes to its disclosures accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. Significant judgment is required to determine both the probability and the estimated amount.

Legal costs associated with loss contingencies are accrued based upon legal expenses incurred by the end of the reporting period.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the unaudited condensed consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to the allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, stock-based compensation, goodwill, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s condensed consolidated financial statements upon adoption.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”). The amendments in this update provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under FASB ASC 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient. ASU 2025-05 is effective for annual periods, including interim reporting periods within annual reporting periods, beginning after December 15, 2025 with early adoption permitted. The adoption did not have an impact on our condensed consolidated financial statements.

Note 3. Intangible Assets

The Company capitalizes costs associated with software developed for internal use, including payroll for employees directly involved in development and external consulting fees, once the project has reached the application development stage in accordance with ASC 350-40. Amortization is computed using the straight-line method over an estimated useful life of 3–5 years.

During the three months ended March 31, 2026, the Company capitalized $65,413 in costs related to new software development. The Company is still in the development phase and the asset has not yet been put into service. Therefore, no amortization of the asset has occurred as of the date of these condensed consolidated financial statements.

Note 4. Goodwill

On February 1, 2019, the Company’s shareholders exchanged all of its outstanding shares in exchange for 5,263,158 shares of Alliance common stock. Due to the Company’s shareholders acquiring a controlling interest in Alliance after acquisition, the transaction was treated as a reverse merger for accounting purposes, with SCWorx being the reporting company.

The acquisition was accounted for under the acquisition method of accounting with an initial goodwill value of $8,366,467. During the year ended December 31, 2023, the Company determined the fair value of its goodwill to be less than its carrying value and recognized impairment expense $2,524,034.

There were no changes to the carrying value of goodwill for the three months ended March 31, 2026 and 2025.

Note 5. Debt

Convertible Loans

On July 15, 2024, the Company issued an aggregate $1,155,000 in convertible notes bearing interest at 10% per annum. The notes mature on December 31, 2025 and are convertible into the Company’s common stock at a price of $1.43 per share, subject to certain adjustments, at the holder’s request. The noteholders and certain third parties were also granted detachable 5 year warrants to purchase an aggregate of 4,887,118 shares of the Company’s common stock at exercise prices ranging from $1.43 to $1.692 per share. The Company valued the warrants at $6,163,572 using the Black-Scholes pricing model. The Company has allocated the note proceeds based on relative fair value and has recorded the value of the warrants as a discount to the debt in the amount of $973,200. As of March 31, 2026, all principal amounts had been converted into equity.

On January 21, 2025, the Company issued an aggregate $1,500,000 in convertible notes bearing interest at 10% per annum. The notes mature on January 21, 2027 and are convertible into the Company’s common stock at a price of $1.25 per share, subject to certain adjustments, at the holder’s request. The noteholders and certain third parties were also granted detachable 5 year warrants to purchase an aggregate of 7,256,364 shares of the Company’s common stock at exercise prices ranging from $1.25 to $1.65 per share. The Company valued the warrants at $11,422,792 using the Black-Scholes pricing model. The Company has allocated the note proceeds based on relative fair value and has recorded the value of the warrants as a discount to the debt in the amount of $1,186,579, as well as the value of the conversion feature of $198,421. Additionally, the Company recorded debt issuance costs of $115,000 as a discount to the debt. As of March 31, 2026, all principal amounts had been converted into equity.

The Company has accrued interest for the above notes in the amount of $142,750 and $146,116 as of March 31, 2026 and December 31, 2025, respectively, which is included in accounts payable and accrued liabilities on the Company’s condensed consolidated balance sheets. The Company recognized amortization expense on debt discounts of $34,175 and $78,711 during the three months ended March 31, 2026 and 2025, respectively.

Note 6. Leases

Operating Leases

The Company’s principal executive office in Middleton Massachusetts is under a one year arrangement with a base rent of $990 per month running from November1, 2025 through October 31, 2026.

The Company has operating leases for corporate, business and technician offices. Leases with a probable term of 12 months or less, including month-to-month agreements, are not recorded on the consolidated balance sheets, unless the arrangement includes an option to purchase the underlying asset, or an option to renew the arrangement, that the Company is reasonably certain to exercise (short-term leases). The Company recognizes lease expense for these leases on a straight-line basis over the lease term. As a practical expedient, the Company elected, for all office and facility leases, not to separate non-lease components (common-area maintenance costs) from lease components (fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component.

For the three months ended March 31, 2026 and 2025, the components of lease expense were as follows:

	For the Three Months Ended
	March 31,
	2026		2025
Operating lease cost	$	5,206	$	1,192
Total lease cost	$	5,206	$	1,192

As of March 31, 2026 and December 31, 2025, the Company had no additional operating leases, other than those noted above, and no financing leases.

Note 7. Commitments and Contingencies

In conducting its business, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

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.

Note 8. Stockholders’ Equity

Authorized Shares

On December 8, 2025, the Company amended its certificate of incorporation to increase the aggregate number of shares issuable to 155,000,000 consisting of the following:

150,000,000 shares of Common Stock, $0.001 par value per share; and

ii.

5,000,000 shares of Preferred Stock, $0.001 par value per share available for designation

The Company currently has 150,000,000 common shares and has 900,000 Series A convertible preferred shares authorized designated with a par value of $0.001 per share.

Common Stock

Issuance of Shares for Note Conversions

On February 12, 2026, the Company issued an aggregate 8,172 shares of common stock for the conversion of an aggregate $42,857 in principal interest due under the Company’s senior secured convertible notes.

Issuance of Shares for Warrant Exercises

On February 12, 2026, the Company issued an aggregate 3,334 shares of common stock for the exercise of warrants.

Stock Incentive Plan

The number of shares of the Company’s common stock that are issuable pursuant to warrant and stock option grants with time-based vesting as of and for the three months ended March 31, 2026 were:

	Warrant Grants					Stock Option Grants				Restricted Stock Units
	Number of shares subject to warrants			Weighted- average exercise price per share		Number of shares subject to options		Weighted- average exercise price per share		Number of shares subject to restricted stock units
Balance at December 31, 2025		3,603,677		$	4.77		-	$	-		8,147
Granted		-			-		-		-		-
Exercised		(3,334	)		4.65		-		-		-
Cancelled/Expired		(402	)		900.00		-		-		-
Balance at March 31, 2026		3,599,941		$	4.67		-	$	-		8,147
Exercisable at March 31, 2026		2,335,535		$	4.67		-	$	-		8,147

The number of shares of the Company’s common stock that are issuable pursuant to warrant and stock option grants with time-based vesting as of and for the three months ended March 31, 2025 were:

	Warrant Grants				Stock Option Grants				Restricted Stock Units
	Number of shares subject to warrants		Weighted- average exercise price per share		Number of shares subject to options		Weighted- average exercise price per share		Number of shares subject to restricted stock units
Balance at December 31, 2024		594,387	$	13.80		-	$	-		8,147
Granted		483,758		20.10		-		-		-
Exercised		-		-		-		-		-
Cancelled/Expired		-		-		-		-		-
Balance at March 31, 2025		1,078,145	$	16.65		-	$	-		8,147
Exercisable at March 31, 2025		1,078,145	$	16.65		-	$	-		8,147

The Company’s outstanding warrants at March 31, 2026 are as follows:

Warrants Outstanding							Warrants Exercisable
Exercise Price Range	Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price		Intrinsic Value
$4.65 - $7.92		3,599,941		3.55	$	4.67	2,335,535	$	4.67	$	-

The Company’s outstanding warrants at March 31, 2025, are as follows:

Warrants Outstanding								Warrants Exercisable
Exercise Price Range		Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price		Intrinsic Value
	$12.90 - $900.00		1,078,145		4.53	$	16.65		1,078,145	$	16.65		2,792,060

As of March 31, 2026 and December 31, 2025, there was no unrecognized expense for unvested stock options and restricted stock awards.

	For the Three Months Ended
	March 31,
	2026		2025
Stock-based compensation expense	$	12,404	$	-

Stock-based compensation expense categorized by the equity components for the three months ended March 31, 2026 and 2025 is as follows:

	For the Three Months Ended
	March 31,
	2026		2025
Common stock	$	12,404	$	-
Total	$	12,404	$	-

Stock compensation is included in general and administrative expense on the consolidated statements of operations.

Note 9. Net Loss per Share

Basic net loss per share is computed by dividing net loss for the period by the weighted average shares of common stock outstanding during each period. Diluted net loss per share is computed by dividing net loss for the period by the weighted average shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company uses the treasury stock method to determine whether there is a dilutive effect of outstanding option grants.

The following securities were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:

	For the Three Months Ended
	March 31,
	2026		2025
Warrants		3,599,941		1,078,144
Restricted stock units		8,147		8,147
Total common stock equivalents		3,608,088		1,086,291

Note 10. Related Party Transactions

At March 31, 2026 and December 31, 2025, the Company had a payable due to an officer in the amount of $149,838 for contract work performed prior to becoming an officer.

The above amount and terms are not necessarily indicative of what third parties would agree to.

Note 11. Income Tax Provision

As of March 31, 2026 and December 31, 2025, the Company had federal net operating loss carryforwards of approximately $42.1 million and $41.9 million, respectively, available to offset future taxable income. As of March 31, 2026 and December 31, 2025, the Company had state loss carry-forwards of approximately $20.5 million and $20.3 million, respectively. Future utilization of net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The federal net operating loss carryforwards can be carried forward indefinitely and state loss carryforwards begin to expire in 2039.

The valuation allowance as of March 31, 2026 and December 31, 2025 was $13,419,411 and $13,380,053, respectively. The net change in valuation allowance for the three months ended March 31, 2026 was an increase of $39,358. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of March 31, 2026 and December 31, 2025.

As of March 31, 2026 and December 31, 2025, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income tax is as follows (in percentages):

Statutory federal income tax rate	21.00	%
State tax rate	1.65	%
Valuation Allowance	(22.65	)%
	0.00	%

Note 12. Segment Reporting

As noted above, the Company 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.

The Company has determined that it currently operates in a single segment - health information technology solutions and services, located in a single geographic location – the United States. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. Since the Company operates in a single segment, the measure of segment total assets and loss from operations is the same as that reported on the accompanying condensed consolidated balance sheets as total assets, and the accompanying condensed consolidated statements of operations as loss from operations, respectively.

The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). The CODM manages the Company’s business activities as a single operating and reportable segment. The CODM uses consolidated profit and loss to evaluate and measure performance against progress in its commercialization efforts and clinical trials. The following table sets forth significant segment assets and expenses.

	March 31,		December 31,
	2026		2025
Assets:
Cash	$	1,341,779	$	1,644,439
Accounts receivable, net		314,550		313,350
Prepaid expenses and other assets		182,863		65,627
Property and equipment, net		9,335		10,220
Intangible assets		85,432		20,019
Goodwill		5,842,433		5,842,433
Total Assets	$	7,776,392	$	7,896,088

	For the Years Ended
	March 31,
	2026			2025

Revenue	$	744,899		$	720,299
Cost of revenue		370,790			583,436
Gross profit		374,109			136,863

Operating expenses:
Legal and professional		158,355			203,979
Salaries and wages		140,446			84,278
General and administrative		210,237			182,603
Depreciation		885			-
Total operating expenses		509,923			470,860

Other income (expense)
Interest expense		(37,953	)		(142,306	)
Total other expense		(37,953	)		(142,306	)

Net loss	$	(173,767	)	$	(476,303	)

Note 13. Subsequent Events

The Company has evaluated all events that occurred after the date of the financial statements and through the date of issuance to determine if they must be reported. Management has determined that other than those disclosed below, there were no additional reportable subsequent events to be disclosed.

Reverse Stock Split

Item 2. 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

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.

●

virtualized Item Master File repair, expansion and automation;

●

CDM management;

●

contract management;

●

request for proposal automation;

●

rebate management;

●

big data analytics modeling; and

●

data integration and warehousing.

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

SEC Form 10-Q filed by SCWorx Corp.