What changed in this filing

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Item 9A. Controls and Procedures

2021-05-19 compared with 2020-06-12 · 1652 added, 1978 removed, 278 unchanged (93% of the section changed)

Controls and Procedures

Management’s Conclusions Regarding

Effectiveness of Disclosure Controls and Procedures

Management conducted

an evaluation of the effectiveness of our “disclosure controls and procedures”

Management’s

Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

conducted an evaluation of the effectiveness of our “disclosure controls and procedures”

(“Disclosure Controls”),

3 unchanged sentences

The Disclosure Controls evaluation was done under the supervision and with

the participation of management, including our Chief Executive Officer, based on the 2013 framework and criteria established by

the Committee of Sponsoring Organizations of the Treadway Commission.

There are inherent limitations to the effectiveness of any

system of disclosure controls and procedures.

the participation of management, including our President/COO and Chief Financial Officer, based on the 2013 framework and criteria

established by the Committee of Sponsoring Organizations of the Treadway Commission.

There are inherent limitations to the effectiveness

of any system of disclosure controls and procedures.

Accordingly, even effective disclosure controls and procedures can only provide

reasonable assurance of achieving their control objectives.

Based upon this evaluation, our Chief Executive Officer concluded

that, due to deficiencies in the design of internal controls and lack of segregation of duties, our Disclosure Controls were not

effective as of December 31, 2019, such that the information required to be disclosed by us in reports filed under the Exchange

Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and

forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial

officers, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.

Our Chief Financial

Officer left in October 2019 and our Chief Executive Officer has been filling the role of principal financial officer, along with

our use of consulting personnel.

Management Report on Internal Controls

over Financial Reporting

Our management has identified material weaknesses in our internal

controls related to deficiencies in the design of internal controls and segregation of duties.

Management is planning to meet with

the Audit Committee to discuss remediation efforts, which are expected to be resolved during 2020, or until such time as management

is able to conclude that its remediation efforts are designed and operating effectively.

Our management is actively looking for

a Chief Financial Officer along with other accounting and finance personnel to assist in the remediation efforts.

Based upon this evaluation, our President and Chief Financial Officer

concluded that, due to deficiencies in the design of internal controls and lack of segregation of duties, our Disclosure Controls

were not effective as of December 31, 2020, such that the information required to be disclosed by us in reports filed under

the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s

rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal

financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.

Report on Internal Controls over Financial Reporting

management has identified material weaknesses in our internal controls related to deficiencies in the design of internal controls

and segregation of duties.

Management is planning to meet with the Audit Committee to discuss remediation efforts, which are expected

to be resolved during 2021, or until such time as management is able to conclude that its remediation efforts are designed and

operating effectively.

Our management is actively looking for additional accounting and finance personnel to assist in the remediation

Notwithstanding

the foregoing, our management, including our Chief Executive Officer, has concluded that the consolidated financial statements

included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations

and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

may in the future identify other material weaknesses or significant deficiencies in connection with our internal control over financial

Material weaknesses and significant deficiencies that may be identified in the future will need to be addressed as part

of our quarterly and annual evaluations of our internal controls over financial reporting under Sections 302 and 404 of the

Sarbanes-Oxley Act.

Any future disclosures of a material weakness, or errors as a result of a material weakness, could result in

a negative reaction in the financial markets and a decrease in the price of our common stock.

Changes in Internal Control over Financial

quarter ended December 31, 2019, there was no change in our internal control over financial reporting (as such term is

defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to

materially affect, our internal control over financial reporting.

the foregoing, our management, including our President and Chief Financial Officer, have concluded that the consolidated financial

statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results

of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United

may in the future identify other material weaknesses or significant deficiencies in connection with our internal control over

financial reporting.

Material weaknesses and significant deficiencies that may be identified in the future will need to be addressed

as part of our quarterly and annual evaluations of our internal controls over financial reporting under Sections 302 and 404

of the Sarbanes-Oxley Act.

Any future disclosures of a material weakness, or errors as a result of a material weakness, could

result in a negative reaction in the financial markets and a decrease in the price of our common stock.

in Internal Control over Financial Reporting.

the year ended December 31, 2020, the Company hired a new CFO to manage financial reporting, increase the segregation of

duties, and implement increased financial controls.

Other Information

On June 11, 2020, our Board of Directors

appointed Timothy A.

Hannibal, who currently serves as our Chief Revenue officer, to act as our Interim Chief Financial Officer.

In his role as Interim chief Financial Officer, Mr.

Hannibal will oversee our financial operations.

Hannibal will serve

in such capacity until we appoint a permanent Chief Financial Officer or until his earlier resignation or removal.

Any change to

Hannibal’s compensation as a result of his acting as Interim CFO has yet to be determined.

Hannibal has over

28 years’

experience in SaaS and cloud technology, driving revenue, go-to-market strategies, mergers and acquisitions and

executive management.

Hannibal Joined the Company in January 2019 and has since served as its Chief Revenue Officer.

to joining the Company, Mr.

Hannibal was an executive at Primrose Solutions (the predecessor to SCWorx) which he joined in September

At Primrose, Mr.

Hannibal was responsible for overseeing marketing, sales and operations, including executing the Company’s

business plan.

Hannibal has a successful track record of growth and management at both startup and national companies.

to joining Primrose, Mr.

Hannibal was the President and CEO of VaultLogix, a company he founded, for thirteen years.

was a leading SaaS company in the cloud backup industry before being acquired by J2 Global.

Directors, Executive Officers and Corporate Governance

The following table

presents information with respect to our officers, directors and significant employees as of the date of filing of this Report:

Chief Executive Officer and Chairman of the Board of Directors, Treasurer and Secretary

Interim Chief

following table presents information with respect to our officers, directors and significant employees as of the date of filing

of this Report:

& Chief Operating Officer

Financial Officer

Steven Wallitt

Background of Officers and Directors

The following is a

brief account of the education and business experience during at least the past five years of our officers and directors, indicating

each person’s principal occupation during that period, and the name and principal business of the organization in which such

occupation and employment were carried out.

Marc Schessel

Schessel, 57, is SCWorx’s founder and Chairman and

Chief Executive Officer.

He founded SCWorx’s predecessor (Primrose LLC) in 2012 and has been Chairman and CEO of SCWorx since

Commencing his work in supply chain during his ten years in the Marine Corps, Mr.

Schessel was awarded the Naval Achievement

medal along with the Naval Commendation medal for services rendered in creating the first automated supply and logistics software

(M triple S) which was ultimately put in service at leading corporations such as Sears and IBM.

Since leaving the Marine Corps,

Schessel has continued his work in refining programmatic solutions for the most complex and critical supply chains in the country — the

healthcare industry.

Working in all facets of the Healthcare Supply Chain, Mr.

Schessel spent over ten years as a Vice President

of Supply Chain for a large NYC based Integrated Delivery Network before forming his own consultancy — focused

on delivering automated solutions to Providers, Business-to-Business (B2B) e-commerce companies (GHX), tier one consulting firms,

GPOs, distributors, payors and manufacturers.

Schessel also served as a consultant to the United Nations — developing

an automated Emergency Medical Response program that, based on the event, forecasts the items, quantities and logistical delivery

networks crucial for responders, allowing countries by region to better plan, stock and store critical supplies.

over 28 years’

of Officers and Directors

following is a brief account of the education and business experience during at least the past five years of our officers and

directors, indicating each person’s principal occupation during that period, and the name and principal business of the

organization in which such occupation and employment were carried out.

Hannibal has over 29 years’

experience in SaaS and cloud technology, driving revenue, go-to-market strategies, mergers and

acquisitions and executive management.

Hannibal Joined the Company in January 2019 and has since served as its Chief

Revenue Officer, and was appointed.

Hannibal Joined the Company in January 2019 as our Chief Revenue Officer.

He was appointed

interim Chief Financial Officer on June 10, 2020.

On August 10, 2020, Mr.

Hannibal was appointed President, Chief Operating Officer

and a member of the Board of Directors.

Prior to joining the Company, Mr.

Hannibal was an executive at Primrose Solutions (the predecessor to the SCWorx) which he joined in September of 2016.

Primrose, Mr.

Hannibal was responsible for overseeing marketing, sales and operations, including executing the

Company’s business plan.

Hannibal has a successful track record of growth and management at both startup and

national companies.

Hannibal was an executive at Primrose Solutions (the

predecessor to the SCWorx) which he joined in September of 2016.

At Primrose, Mr.

Hannibal was responsible for overseeing marketing,

sales and operations, including executing the Company’s business plan.

Hannibal has a successful track record of growth

and management at both startup and national companies.

Prior to joining Primrose, Mr.

Hannibal was the President and CEO of VaultLogix, a company he founded,

for thirteen years.

VaultLogix was a leading SaaS company in the cloud backup industry before being acquired by J2

Miller, 59, joined

our board on October 24, 2018.

He has been a member of the board of directors of InterCloud Systems, Inc., a publicly traded IT

infrastructure services company, since November 2012.

In addition, he has, since June 2017, acted as an independent business consultant.

He was the Chief Financial Officer of Tekmark Global Solutions, LLC, a provider of information technology, communications and

consulting services, from September 1997 until June 2017.

Since May 2017, he has been a director of Notis Global, Inc., a diversified

holding company, in the industrial hemp industry, that manufactures, markets and sells hemp derivative products such as cannabidiol

(“CBD”) distillate and isolate.

Miller graduated from Rider University with a Bachelor of Science in Accounting

Miller is a Certified Public Accountant and boasts more than three decades of experience.

Steven Wallitt

Wallitt, 58, has worked as owner and director of a packaging

materials company since 1981.

He is responsible for decision making in all areas of the company, including sourcing the best and

most efficient methods for achieving maximum profitability and the highest quality standards.

He has extensive knowledge in evaluating

sales and marketing proposals.

Beginning in 2008, he has been an investor in both private and public companies, as well as early-stage

public companies with personal investments of $50,000 to more than $3,000,000.

He has consulted for many of these companies in

areas ranging from public market strategies, growth strategies, evaluating contract proposals, cost control and evaluating employee

responsibilities in order to achieve maximum efficiencies.

Since 2014, Mr.

Wallitt has been an advisory board member to Redtower

Capital, a California-based investment firm where he advises on all aspects of client identification, sales and marketing strategies

and profit maximization.

Since 2017, he has been a significant investor in Alliance MMA and SCWorx.

Wallitt holds a BA degree

in communications from Rider College, Lawrenceville, NJ.

Shefts, 62, has served

as a director and a member of our audit committee, compensation committee and nominating committee since May 15, 2020.

was a member of the board of directors and chairman of the audit committee of Alliance MMA, Inc.

from August 2016 to October 2017.

Hannibal was the President and CEO of VaultLogix,

a company he founded, for thirteen years.

VaultLogix was a leading SaaS company in the cloud backup industry before being acquired

by J2 Global.

Kohler was appointed CFO on November 1, 2020, at which time Mr.

Hannibal resigned as Interim CFO.

Kohler has over 15 years

of experience serving in a wide variety roles in the finance and accounting sectors.

Kohler is the founder and CEO of Kohler

Consulting, Inc., which he founded in 2012.

The firm, through Mr.

Kohler, provides outsourced CFO and advisory services to private

and public companies, with a focus on small cap and start-up businesses.

Irby is a co-founder of London Bay Capital and has been Chairman of the firm Since 2006.

London Bay Capital makes investments

in private companies, and also provides business advisory services.

Irby is a seasoned executive with a highly successful

track record in the financial services and investment banking industries in both the UK and the US from 1982 to the present.

Irby has served on the boards on several public and private companies including 17 years as a director of The McKesson Corporation

chairing both the Compensation and Finance Committees.

Schessel, is SCWorx’s founder and former Chief Executive Officer.

He continues to serve on the Board of Directors, though

he has not been renominated to serve on the Board after the Special Meeting in lieu of 2020 Annual Meeting to be held in May 2021.

He also serves as a consultant to the Company.

He founded SCWorx’s predecessor (Primrose LLC) in 2012 and has been Chairman

and CEO of SCWorx since then.

Commencing his work in supply chain during his ten years in the Marine Corps, Mr.

Schessel was awarded

the Naval Achievement medal along with the Naval Commendation medal for services rendered in creating the first automated supply

and logistics software (M triple S) which was ultimately put in service at leading corporations such as Sears and IBM.

Since leaving

the Marine Corps, Mr.

Schessel has continued his work in refining programmatic solutions for the most complex and critical supply

chains in the country — the healthcare industry.

Working in all facets of the Healthcare Supply Chain, Mr.

Schessel spent over ten years as a Vice President of Supply Chain for a large NYC based Integrated Delivery Network before forming

his own consultancy — focused on delivering automated solutions to Providers, Business-to-Business (B2B) e-commerce

companies (GHX), tier one consulting firms, GPOs, distributors, payors and manufacturers.

Schessel also served as a consultant

to the United Nations — developing an automated Emergency Medical Response program that, based on the event,

forecasts the items, quantities and logistical delivery networks crucial for responders, allowing countries by region to better

plan, stock and store critical supplies.

Shefts, has served as a director and a member of our audit committee, compensation committee and nominating committee since May

Shefts was a member of the board of directors and chairman of the audit committee of Alliance MMA, Inc.

2016 to October 2017.

Since 2004, Mr.

Shefts has served as the Chief Executive Officer of The Rushcap Group, Inc., a privately held investment and consulting

Shefts has served as the Chief Executive Officer of The Rushcap Group, Inc., a privately

held investment and consulting firm.

Since 2005, Mr.

Shefts has served as a Trustee of The Onyx & Breezy Foundation, a non-profit organization.

Shefts was the Director, President and co-owner of All-Tech Investment Group Inc., from 1987 to 2001, and Domestic Securities,

Inc., from 1993 to 2011, each an SEC-registered broker dealer.

Shefts has previously owned seats on both the New York Stock

Exchange and the Chicago Stock Exchange.

Shefts has been an arbitrator for the American Arbitration Association and FINRA Dispute

Resolution, Inc.

Shefts has served as a Trustee of The Onyx & Breezy Foundation, a non-profit

organization.

Previously, Mr.

Shefts was the Director, President and co-owner of All-Tech Investment Group Inc., from 1987 to

2001, and Domestic Securities, Inc., from 1993 to 2011, each an SEC-registered broker dealer.

Shefts has previously owned

seats on both the New York Stock Exchange and the Chicago Stock Exchange.

Shefts has been an arbitrator for the American Arbitration

Association and FINRA Dispute Resolution, Inc.

with an area of specialization in the field of financial services.

Shefts has held FINRA Series 7, 24 and

63 licenses and a Series 27 qualification as a Financial and Operations Principal.

Shefts is also certified as Financial Services

Auditor and a Certified Fraud Examiner.

Shefts has been a Director, EVP & Chief Financial officer of Arbor Entech Corp.

held FINRA Series 7, 24 and 63 licenses and a Series 27 qualification as a Financial and Operations Principal.

Shefts is also

certified as Financial Services Auditor and a Certified Fraud Examiner.

Shefts has been a Director, EVP & Chief Financial

officer of Arbor Entech Corp.

and Solar Products Sun-Tank, Inc., each a publicly traded company.

Shefts holds a BS in accounting from Brooklyn College of

The City University of New York.

Code of Business Conduct and Ethics

We have adopted a Code

of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting

officer or controller or persons performing similar functions and also to other employees.

Our Code of Business Conduct can be

found on our website at www.SCWorx.com.

Family Relationships

There are no family

relationships between any of our directors, executive officers or significant employees.

Involvement in Certain Legal Proceedings

During the past ten

years, none of our officers, directors, significant employees or control persons have been involved in any legal proceedings as

described in Item 401(f) of Regulation S-K.

Board Composition

The Board of Directors

currently consists of four directors.

Each director will serve in office until our 2020 annual meeting of stockholders or until

their successors have been duly elected and qualified, or until the earlier of their respective deaths, resignations, or retirements.

Our certificate of incorporation provides that that the number

of authorized directors will be determined in accordance with our bylaws.

Our bylaws provide that the number of authorized directors

shall be determined from time to time by a resolution of the Board of Directors, and any vacancies in our board and newly created

directorships may be filled only by our Board of Directors.

Term of Office

All of our directors

are elected on an annual basis to serve until the next annual meeting of shareholders or until the earlier of their death, resignation

Committees of the Board of Directors

Our Board of Directors

has established an audit committee, a compensation committee and a nominating and governance committee.

Each of these committees

will operate under a charter that has been approved by our Board of Directors.

Audit Committee

We have a separately-designated standing audit committee established

in accordance with Section 3(a)(58)(A) of the Exchange Act.

The Audit Committee has authority to review our financial records,

engage with our independent auditors, recommend policies with respect to financial reporting to the Board of Directors and investigate

all aspects of our business.

The members of the audit committee are Mr.

Shefts and Mr.

The audit committee

consists exclusively of directors who are financially literate.

Shefts holds a BS in accounting

from Brooklyn College of The City University of New York.

Wallitt, has worked as owner and director of a packaging materials company since 1981.

He is responsible for decision making in

all areas of the company, including sourcing the best and most efficient methods for achieving maximum profitability and the highest

quality standards.

He has extensive knowledge in evaluating sales and marketing proposals.

Beginning in 2008, he has been an investor

in both private and public companies, as well as early-stage public companies with personal investments of $50,000 to more than

He has consulted for many of these companies in areas ranging from public market strategies, growth strategies, evaluating

contract proposals, cost control and evaluating employee responsibilities in order to achieve maximum efficiencies.

Wallitt has been an advisory board member to Redtower Capital, a California-based investment firm where he advises on all

aspects of client identification, sales and marketing strategies and profit maximization.

Since 2017, he has been a significant

investor in Alliance MMA and SCWorx.

Wallitt holds a BA degree in communications from Rider College, Lawrenceville, NJ.

of Business Conduct and Ethics

have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer,

principal accounting officer or controller or persons performing similar functions and also to other employees.

Our Code of Business

Conduct can be found on our website at www.SCWorx.com.

Relationships

are no family relationships between any of our directors, executive officers or significant employees, except that Mr.

who is currently a director, is the father-in-law of Chad Otens and Theodore Dembowski, two of our significant software developers.

in Certain Legal Proceedings

the past ten years, none of our officers, directors, significant employees or control persons have been involved in any legal

proceedings as described in Item 401(f) of Regulation S-K.

Board of Directors currently consists of five directors.

Each director will serve in office until the Special Meeting in lieu

of 2020 annual meeting of stockholders (to be held in May 2021) or until their successors have been duly elected and qualified,

or until the earlier of their respective death, resignation or removal

certificate of incorporation provides that that the number of authorized directors will be determined in accordance with our bylaws.

Our bylaws provide that the number of authorized directors shall be determined from time to time by a resolution of the Board

of Directors, and any vacancies in our board and newly created directorships may be filled only by our Board of Directors.

of our directors are elected on an annual basis to serve until the next annual meeting of shareholders or until the earlier of

their death, resignation or removal.

of the Board of Directors

Board of Directors has established an audit committee, a compensation committee and a nominating and governance committee.

of these committees will operate under a charter that has been approved by our Board of Directors.

have a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.

The Audit Committee has authority to review our financial records, engage with our independent auditors, recommend policies with

respect to financial reporting to the Board of Directors and investigate all aspects of our business.

The members of the audit

committee are Mr.

Wallitt and Mr.

The audit committee consists exclusively of directors who are financially

In addition, Mr.

Miller will be considered an “audit committee

financial expert”

as defined by the SEC’s rules and regulations.

All members of the Audit Committee currently satisfy

the independence requirements and other established criteria of Nasdaq.

Compensation Committee

The Compensation Committee

oversees our executive compensation and recommends various incentives for key employees to encourage and reward increased corporate

financial performance, productivity and innovation.

Shefts will be considered an “audit committee financial expert”

as defined by the SEC’s

rules and regulations.

All members of the Audit Committee currently satisfy the independence requirements and other established

criteria of Nasdaq.

Compensation Committee oversees our executive compensation and recommends various incentives for key employees to encourage and

reward increased corporate financial performance, productivity and innovation.

The members of the compensation committee are Mr.

Shefts and Mr.

Nominating and Governance Committee

The Nominating and

Corporate Governance Committee identifies and nominates candidates for membership on the Board of Directors, oversees Board of

Directors’

committees, advises the Board of Directors on corporate governance matters and any related matters required by

the federal securities laws.

and Governance Committee

Nominating and Corporate Governance Committee identifies and nominates candidates for membership on the Board of Directors, oversees

Board of Directors’

committees, advises the Board of Directors on corporate governance matters and any related matters required

by the federal securities laws.

The members of the Nominating Committee are Mr.

Miller and Mr.

Shefts and Mr.

Wallitt, and all currently satisfy

the independence requirements and other established criteria of Nasdaq.

The Nominating and

Governance Committee will consider stockholder recommendations for candidates for the Board of Directors.

Our bylaws provide

that, in order for a stockholder’s nomination of a candidate for the board to be properly brought before an annual meeting

of the stockholders, the stockholder’s nomination must be delivered to the Secretary of our company no later than 120 days

prior to the one-year anniversary date of the prior year’s annual meeting.

Charters for all three

committees are available on our website at www.SCWorx.com.

Changes in Nominating Procedures

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the

Exchange Act requires our executive officers and directors and persons who beneficially own more than 10% of a registered class

of our equity securities to file with the SEC initial statements of beneficial ownership, statements of changes in beneficial ownership

and annual statements of changes in beneficial ownership with respect to their ownership of our securities, on Forms 3, 4 and 5,

respectively.

Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with

copies of all Section 16(a) reports they file.

Based solely on our

review of the copies of such reports received by us, and on written representations by our officers and directors regarding their

compliance with the applicable reporting requirements under Section 16(a) of the Exchange Act, and without conducting an independent

investigation of our own, we believe that with respect to the fiscal year ended December 31, 2019, our officers and directors,

and all of the persons known to us to beneficially own more than 10% of our common stock filed all required reports on a timely

Nominating and Governance Committee will consider stockholder recommendations for candidates for the Board of Directors.

bylaws provide that, in order for a stockholder’s nomination of a candidate for the board to be properly brought before

an annual meeting of the stockholders, the stockholder’s nomination must be delivered to the Secretary of our company no

later than 120 days prior to the one-year anniversary date of the prior year’s annual meeting.

for all three committees are available on our website at www.SCWorx.com.

in Nominating Procedures

16(a) Beneficial Ownership Reporting Compliance

16(a) of the Exchange Act requires our executive officers and directors and persons who beneficially own more than 10% of a registered

class of our equity securities to file with the SEC initial statements of beneficial ownership, statements of changes in beneficial

ownership and annual statements of changes in beneficial ownership with respect to their ownership of our securities, on Forms

3, 4 and 5, respectively.

Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish

us with copies of all Section 16(a) reports they file.

solely on our review of the copies of such reports received by us, and on written representations by our officers and directors

regarding their compliance with the applicable reporting requirements under Section 16(a) of the Exchange Act, and without conducting

an independent investigation of our own, we believe that with respect to the fiscal year ended December 31, 2020, our officers

and directors, and all of the persons known to us to beneficially own more than 10% of our common stock filed all required reports

on a timely basis except for an initial Form 4 filing by our newly appointed CFO due to his needing to apply for Edgar codes.

Executive Compensation

The following summary

compensation table sets forth information concerning compensation for services rendered in all capacities during 2019 and 2018

awarded to, earned by or paid to our executive officers.

The value attributable to any option awards and stock awards reflects

the grant date fair values of stock awards calculated in accordance with FASB Accounting Standards Codification Topic 718.

further in Note 10, Stockholders’

Equity, to our consolidated year-end financial statements, the assumptions made in the

valuation of these option awards and stock awards is set forth therein.

Pension Value and

following summary compensation table sets forth information concerning compensation for services rendered in all capacities during

2020 and 2019 awarded to, earned by or paid to our executive officers.

The value attributable to any option awards and stock awards

reflects the grant date fair values of stock awards calculated in accordance with FASB Accounting Standards Codification Topic

As described further in Note 9, Stockholders’

Equity, to our consolidated year-end financial statements, the assumptions

made in the valuation of these option awards and stock awards is set forth therein.

and Principal

Pension Value

Non-Qualified

Name and Principal

Marc Schessel (1)

Chairman and Chief Executive Officer

Timothy Hannibal (6)

Chief Financial Officer

James Schweikert (2)

Deferred Compensation

Other Compensation

and Former Chief Executive Officer

Chief Operating Officer and director

Financial Officer

Schweikert (4)

Chief Operating Officer

John Price (3)

Former Chief Financial Officer

Robert Mazzeo (4)

Former Chief Executive Officer

Ira Raines (5)

Former President

Schessel has been Chairman and Chief Executive Officer of SCWorx Corp (f/k/a Alliance MMA, Inc.) since February 1, 2019.

Chief Financial Officer

Schessel was appointed Chairman and Chief Executive Officer of SCWorx Corp (f/k/a Alliance MMA, Inc.) on February 1, 2019.

On January 19, 2020 Mr.

Schessel resigned as Chief Executive Officer but remains as Chairman.

Hannibal was hired as Chief Revenue Officer on February 1, 2019 and was appointed Interim Chief Financial Officer on June

On August 10, 2020 Mr.

Hannibal was appointed President and Chief Operating Officer.

Kohler was hired as Chief Financial Officer on November 1, 2020.

Schweikert was appointed Chief Operating Officer on May 31, 2019.

Schweikert’s employment was terminated by mutual agreement on April 29, 2020.

Price was President and Chief Financial Officer of

Alliance MMA, until the acquisition on February 1, 2019, at which time he was appointed our Chief Financial Officer.

on October 25, 2019.

The 2018 amounts paid to Mr.

Price were paid by Alliance MMA.

Mazzeo served as Chief Executive Officer from February

7, 2018 through May 25, 2018.

Rainess was hired as Executive Vice President, Business

Affairs on May 15, 2017 and was appointed President on February 15, 2018, and we terminated his employment agreement on December

Previously, Mr.

Rainess served as an independent consultant and received monthly consulting fees which are included in

All Other Compensation.

Hannibal was hired as Chief Revenue Officer on February

1, 2019 and was appointed Interim Chief Financial Officer on June 10, 2020.

Employment Agreements

On February 1, 2019, we

entered into an employment agreement with Marc Schessel, (the Schessel Employment Agreement), whereby Mr.

Schessel agreed to serve

as our Chief Executive Officer for a period of three years, subject to renewal, in consideration for an annual salary of $400,000.

Schessel is eligible for merit-based increases to his compensation as established by the Board of Directors in its sole discretion.

The Schessel Employment Agreement also provides for discretionary performance-based bonuses to be determined by the Compensation

Committee of the Board of Directors.

Schessel may also receive annual restricted stock unit grants at the discretion of the

Compensation Committee.

On May 31, 2019, we entered

into an employment agreement with employment agreement with James (Tad) Schweikert, (the Schweikert Employment Agreement, whereby

Schweikert agreed to serve as our Chief Operating Officer for a period of three years, subject to renewal, in consideration

for an annual salary of $250,000.

Additionally, under the terms of the Schweikert Employment Agreement, Mr.

Schweikert was to

receive 30,303 restricted stock units on January 2, 2020 and was also to receive 225,000 restricted stock units, which were to

vest in three equal instalments beginning May 31, 2020.

Schweikert’s employment was terminated by mutual agreement on

April 29, 2020.

Schweikert’s employment was terminated by mutual

agreement on April 29, 2020.

Price was President and Chief Financial Officer of Alliance MMA, until the acquisition on February 1, 2019, at which time

he was appointed our Chief Financial Officer.

He resigned on October 25, 2019.

Directors’

The following summary

compensation table sets forth information concerning compensation for services rendered in all capacities during 2019 and 2018

awarded to, earned by or paid to our directors.

The value attributable to any stock option awards reflects the grant date fair

values of stock awards calculated in accordance with ASC Topic 718.

Fees Earned or Paid in Cash

Non-equity Incentive Plan Compensation

Non-qualified Deferred Compensation

All Other Compensation

Robert Christie (2)

Steven Wallitt (3)

Francis Knuettel (4)

Former Director

Ira Ritter (5)

Former Director

Joseph Gamberale (6)

Former Director

Burt Watson (8)

Former Director

Miller was appointed as a Director on October 24, 2018

Christie was appointed as a Director on February 1, 2019 and resigned April 29, 2020.

following summary compensation table sets forth information concerning compensation for services rendered in all capacities during

2020 and 2019 awarded to, earned by or paid to our directors.

The value attributable to any stock option awards reflects the grant

date fair values of stock awards calculated in accordance with ASC Topic 718.

Incentive Plan Compensation

Non-qualified

Deferred Compensation Earnings

Other Compensation

Gamberale (6)

Shefts was appointed as a Director on May 15, 2020.

Wallitt was appointed as a Director on October 4, 2019.

Irby was appointed as a Director on March 16, 2021.

Knuettel was appointed as a Director on February 1, 2019 and resigned on December 31, 2019.

Ritter was appointed as a Director on February 1, 2019 and resigned on December 31, 2019.

Joseph Gamberale

was appointed as a Director on February 12, 2015 and resigned on February 1, 2019.

His other compensation includes the costs

of health insurance premiums paid on Mr.

Gamberale’s behalf.

Gamberale was appointed as a Director on February 12, 2015 and resigned on February 1, 2019.

His other compensation includes

the costs of health insurance premiums paid on his behalf.

K Miller was appointed as a Director on October 24, 2018 and resigned September 25, 2020.

Christie was appointed as a Director on February 1, 2019 and resigned April 29, 2020.

Tracy was appointed as a Director on September 30, 2016 and resigned February 1, 2019.

(8) Burt Watson was appointed as a Director on September 30, 2016

and resigned February 1, 2019.

Security Ownership of Certain Beneficial Owners

and Management and Related Stockholder Matters

The following table sets forth certain information regarding

beneficial ownership of our common stock as of June 3, 2020:

(i) by each of our directors, (ii) by each of the named executive

officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially

own more than five percent (5%) of any class of our outstanding shares.

As of June 3, 2020, there were 9,385,582 shares of our

common stock outstanding.

Amount and Nature of Beneficial Ownership

as of June 3, 2020 (1)

His other compensation includes

the costs of health insurance premiums paid on his behalf.

Watson was appointed as a Director on September 30, 2016 and resigned February 1, 2019.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information regarding beneficial

ownership of our common stock as of May 15, 2021:

(i) by each of our directors, (ii) by each of the named executive officers, (iii) by

all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially own more than five

percent (5%) of any class of our outstanding shares.

As of May 15, 2021, there were 10,029,433 shares of our common stock outstanding.

and Nature of Beneficial Ownership as of May 15, 2021 (1)

Executive Officers and Directors

Options/Warrants

Current (as of June 3, 2020)

Timothy Hannibal

Charles Miller

Steven Wallitt

Directors and Executive

Officers as a Group (4 Persons)

Ira Ritter (8)

Joseph Gamberale

Robert Christie

Francis Knuettel

John Price (9)

Represents beneficial ownership of less than 1% of our outstanding stock.

In determining beneficial ownership of our common stock as of

a given date, the number of shares shown includes shares of common stock that may be acquired upon the exercise of stock options

within 60 days of March 30, 2020.

In determining the percent of common stock owned by a person or entity on March 30, 2020, (a)

the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired

within 60 days of June 3, 2020 upon the exercise of stock options, and (b) the denominator is the sum of (i) the total shares of

common stock outstanding on March 30, 2020 and (ii) the total number of shares that the beneficial owner may acquire upon exercise

of stock options within 60 days of March 30, 2020.

Unless otherwise indicated, the address of each of the individuals and entities

named below is c/o SCWorx Corp., 590 Madison Avenue, 21 st Floor, New York, New York 10022.

addition to the 51,400 common shares held directly, the options and warrants include 53,333 restricted stock units which vest

options and warrants include 21,541 shares upon exercise of warrants related to the Series A Preferred stock, 100,000 warrants

granted in April 2020.

addition to the 447 shares of common stock held directly, the options and warrants include options to purchase 13,393 shares of

common stock, 13,158 shares of common stock issuable upon the conversion of Series A Preferred stock and 6,549 shares to be issued

upon exercise of Series A Preferred warrants.

(5) In addition to the 1,032,606 shares of common stock held

directly, the options and warrants include restricted stock units for 164,500 shares of common stock which vest upon the filing

of the Company’s Form 10-K for the year ended December 31, 2019.

addition to the 3,290 shares of common stock held directly, the options and warrants include restricted stock units for

53,333 shares of common stock which vest monthly for six months and options to purchase 25,893 shares of common

The options and warrants include options to purchase 25,893 shares of common stock.

The options and warrants include options to purchase 34,210 shares of common stock.

Employee Grants of Plan Based Awards and Outstanding Equity

Awards at Fiscal Year-End

Prior to the completion

of our initial public offering, our Board of Directors adopted the Alliance MMA 2016 Equity Incentive Plan (the “2016 Plan”)

pursuant to which we may grant shares of our common stock to our directors, officers, employees or consultants.

Our stockholders

approved the 2016 Plan at our annual meeting of stockholders held September 1, 2017, and on January 30, 2019 approved the Amended

and Restated 2016 Plan, which permits the issuance of up to 3,000,000 shares.

Unless earlier terminated by the Board of Directors,

the 2016 plan will terminate, and no further awards may be granted, after July 30, 2026.

As of December 31, 2019, the following sets forth the stock option

awards to our officers and directors.

Outstanding Equity Awards at December

Option Awards

Number of securities underlying unexercised options exercisable

Number of securities underlying unexercised options unexercisable

Equity incentive plan awards:

and Executive Officers as a Group (6 persons)

beneficial ownership of less than 1% of our outstanding stock.

determining beneficial ownership of our common stock as of a given date,

the number of shares shown includes shares of common stock that may be acquired upon the exercise of stock options within 60 days

of May 15, 2021.

In determining the percent of common stock owned by a person or entity on May 15, 2021, (a) the numerator is

the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days

of May 15, 2021 upon the exercise of stock options, and (b) the denominator is the sum of (i) the total shares of common stock

outstanding on May 15, 2021 and (ii) the total number of shares that the beneficial owner may acquire upon exercise of stock options within

60 days of May 15, 2021.

Unless otherwise indicated, the address of each of the individuals and entities named below is c/o SCWorx

Corp., 590 Madison Avenue, 21st Floor, New York, New York 10022.

addition to the 11,131 shares of common stock held directly, also includes 7,895 shares

of common stock held by a relation of Mr.

Tracy has voting and disposition

power over the shares.

Total holdings also includes 63,435 Common Shares issuable upon

conversion of Series A Preferred Stock

addition to the 11,704 shares of common stock held directly, also includes 7,968 shares

held by the Rushcap Group, Inc., of which Mr.

Shefts and his spouse, Wanda Shefts,

are the sole stockholders.

Shefts has voting and dispositive power over the

shares held by the Rushcap Group, Inc.

holdings includes 13,158 Common Shares issuable upon conversion of Series A Preferred

Schessel resigned as Chief Executive Officer on January 9, 2021 but remains as Chairman

as of the date of this filing.

Grants of Plan Based Awards and Outstanding Equity Awards at Fiscal Year-End

to the completion of our initial public offering, our Board of Directors adopted the Alliance MMA 2016 Equity Incentive Plan (the

“2016 Plan”) pursuant to which we may grant shares of our common stock to our directors, officers, employees or consultants.

Our stockholders approved the 2016 Plan at our annual meeting of stockholders held September 1, 2017, and on January 30, 2019

approved the Amended and Restated 2016 Plan, which permits the issuance of up to 3,000,000 shares.

Unless earlier terminated by

the Board of Directors, the 2016 plan will terminate, and no further awards may be granted, after July 30, 2026.

following sets forth the stock option awards to our officers and directors as of December 31, 2020.

Equity Awards at December 31, 2020

of securities underlying unexercised options exercisable

of securities underlying unexercised options unexercisable

incentive plan awards:

Number of securities underlying unexercised unearned options

Option exercise price

Option expiration date

Number of shares or units of stock that have not vested

Market value of shares or units of stock that have not vested

Equity incentive plan awards:

exercise price

expiration date

of shares or units of stock that have not vested

value of shares or units of stock that have not vested

incentive plan awards:

Number of unearned shares, units or other rights that have not vested

Equity incentive plan awards:

incentive plan awards:

Market or payout value of unearned shares, units or other rights that have not vested

Current Officers

Marc Schessel

Timothy Hannibal

Former Officers

James Schweikert

Certain Relationships and Related Transactions,

and Director Independence

Certain Relationships and Related Transactions

The Company’s

founder and majority stockholder had provided cash advances on an unsecured and non-interest-bearing basis, during the first few

years of operation.

Beginning in 2016, the founder began receiving distributions from the Company.

The amounts owed to, and due

from, the shareholder have been netted in the accompanying consolidated balance sheets.

In January 2019, this shareholder surrendered

1,401 common shares to the Company as settlement of the $1,409,284 net amount due to the Company.

As of December 31, 2019 and

2018, the net balance due from the founder was $0 and $1,409,284, respectively.

The balance did not carry a maturity date, and

there were no repayment terms.

In October 2016, the

Company entered into an unsecured loan agreement with Mark Munro, then a minority shareholder for up to $1,000,000 of borrowings

for operating expenses.

In November 2016 and January 2018, the Company entered into additional note agreements with Mr.

provide up to an additional $2,000,000 of aggregate borrowings for which the Company had guaranteed payment from its subsidiary

if the Company was unable meet its obligations.

The interest rate for the notes was 10% per annum, and the notes had a maturity

date in January 2021.

One of the notes bore interest at 10% for the first 90 days and was then adjusted to 18% per annum.

As previously disclosed,

on August 20, 2018, the Company entered into a SEA with Alliance MMA, as amended on December 18, 2018, in connection therewith

Munro agreed to accept shares of Series A Convertible Preferred Stock having a face value equal to the total amount owed to

him of approximately $1.9 million in full satisfaction of such indebtedness (including principal and accrued interest).

As of December 31,

2019 and 2018, the notes payable - related party totaled $0 and $1,591,491, respectively.

On September 30, 2019, Mr.

to accept 17,000 shares of the Company’s common stock in 2020 as full settlement of the remaining $192,000 of principal.

The Company incurred

interest expense of $23,720 and $220,091 for the years ended December 31, 2019 and 2018, respectively, which was accrued and converted

to Series A Preferred Stock in 2019.

In addition, Mr.

also provided office space to the Company at no cost through January 2019.

Director Independence

The rules of the Nasdaq

Capital Market, or the Nasdaq Rules, require a majority of a listed company’s board of directors to be composed of independent

directors within one year of listing.

In addition, the Nasdaq Rules require that, subject to specified exceptions, each member

of a listed company’s audit, compensation and nominating and governance committees be independent.

Under the Nasdaq Rules,

a director will qualify as an independent director only if, in the opinion of our Board of Directors, that person does not have

a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

The Nasdaq Rules also require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Exchange

Act, as amended.

In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company

may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee,

accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries

or otherwise be an affiliated person of the listed company or any of its subsidiaries.

In considering the independence of compensation

committee members, the Nasdaq Rules require that our Board of Directors must consider additional factors relevant to the duties

of a compensation committee member, including the source of any compensation we pay to the director and any affiliations with our

Our Board of Directors

undertook a review of the composition of our Board of Directors and its committees and the independence of each director.

upon information requested from and provided by each director concerning his background, employment and affiliations, including

family relationships, our Board of Directors has determined that each of our directors other than Mark Schessel, CEO, is independent

based on the definition of independence in the Nasdaq listing standards.

Principal Accountant Fees and

The Audit Committee

of the Board of Directors has selected Withum, an independent registered public accounting firm, to audit our financial statements

for the year ending December 31, 2019.

Withum has served as our independent registered public accounting firm since January 2018.

Principal Accountant Fees and Services

During 2019 and 2018, fees for services

provided by Withum were as follows:

For the year ended

Audit-Related Fees

All Other Fees

Audit fees for 2019

include amounts related to the audit of our annual consolidated financial statements and quarterly review of the consolidated

financial statements included in our Quarterly Reports on Form 10-Q.

Audit fees for 2018 include amounts related to the audit

of SCWorx Corp.’s annual consolidated financial statements and quarterly review of its consolidated financial statements

prior to the acquisition,

Audit Related Fees

include amounts related to accounting consultations and services.

Tax Fees include fees

billed for tax compliance, tax advice and tax planning services.

All Other Fees

There were no other

fees billed by Withum for services rendered to our company, other than the services described above, in 2019 and 2018.

Audit Committee of the Board of Directors had selected Friedman LLP (“Friedman”), an independent registered public

accounting firm, to audit the financial statements of the Company for the year ending December 31, 2018.

Friedman had served as

our independent registered public accounting firm since January 2016.

Certain Relationships and Related Transactions, and Director Independence

Relationships and Related Transactions

Company incurred interest expense of $23,720 to Mark Munro, a related party during the year ended December 31, 2019, which was

accrued and converted to Series A Preferred Stock in 2019.

July 24, 2020, the Company’s then Chief Executive Officer, Marc Schessel, transferred 20,000 of his personally held common

shares to Mark Shefts, a Director as compensation for acting as a director.

The company deemed this transfer to be in consideration

for services and recorded a non-cash expense of $115,100 for the fair value of the shares transferred.

in accounts payable at December 31, 2020 are amounts due to officers of the Company in the amount of $153,838.

in accounts receivable at December 31, 2020 are amounts due from a former officer and director of the Company in the amount of

On January 19, 2020, Marc.

Schessel’s employment as CEO

of SCWorx, Corp., a Delaware corporation, ceased by mutual agreement, and the Company and Mr.

Schessel concurrently entered into a consulting

agreement under which Mr.

Schessel will provide consulting services to the Company.

The Consulting Agreement provides for annual consulting

fees of $295,000.

In addition, such agreement provides for cash and equity bonuses based on revenue generation.

The Consulting Agreement

is for a term of two years, but may be terminated by the Company for “cause”

(as defined) or by either party for any reason

or no reason upon sixty days prior notice.

The Consulting Agreement also contains non-competition and non-solicitation provisions which

are applicable during the term of the Consulting Agreement and for a period of two years thereafter.

rules of the Nasdaq Capital Market, or the Nasdaq Rules, require a majority of a listed company’s board of directors to

be composed of independent directors within one year of listing.

In addition, the Nasdaq Rules require that, subject to specified

exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent.

Under the Nasdaq Rules, a director will qualify as an independent director only if, in the opinion of our Board of Directors,

that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities

of a director.

The Nasdaq Rules also require that audit committee members satisfy independence criteria set forth in Rule 10A-3

under the Exchange Act, as amended.

In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee

of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or

any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed

company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries.

In considering

the independence of compensation committee members, the Nasdaq Rules require that our Board of Directors must consider additional

factors relevant to the duties of a compensation committee member, including the source of any compensation we pay to the director

and any affiliations with our company.

Board of Directors undertook a review of the composition of our Board of Directors and its committees and the independence of

each director.

Based upon information requested from and provided by each director concerning his background, employment and affiliations,

including family relationships, our Board of Directors has determined that each of our directors other than Mark Schessel, and

Tim Hannibal, is independent based on the definition of independence in the Nasdaq listing standards.

Principal Accountant Fees and Services

2018, fees for services provided by Friedman were as follows:

For the year ended

Audit-Related Fees

All Other Fees

There were no other fees billed by Friedman for services rendered

to the Company, other than the services described above, in 2018.

The Audit Committee has determined that the rendering of non-audit

services by Friedman was compatible with maintaining their independence.

The Audit Committee

pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm.

services may include audit services, audit-related services, tax and other services.

Pre-approval is generally provided for up

to one year, and any pre-approval is detailed as to the particular service or category of services.

The Audit Committee of the Board of Directors has selected BF Borgers

CPA PC, an independent registered public accounting firm, to audit our financial statements for the year ending December 31, 2020.

Borgers CPA PC has served as our independent registered public accounting firm since April 2021.

Prior to April 2021, the Company’s

independent registered public accounting firm was Sadler Gibb & Associates, LLC, and for the year ending December 31, 2019, Withum

served as the Company’s independent registered public accounting firm.

Accountant Fees and Services

2020 and 2019, fees for services provided by Sadler Gibb were as follows:

the year ended December 31,

Audit-Related

2020 and 2019, fees for services provided by Withum were as follows:

the year ended December 31,

Audit-Related

fees for 2020 and 2019 include amounts related to the audit of our annual consolidated financial statements and quarterly review

of the consolidated financial statements included in our Quarterly Reports on Form 10-Q.

Related Fees include amounts related to accounting consultations and services.

Fees include fees billed for tax compliance, tax advice and tax planning services.

were no other fees billed for services rendered to our company, other than the services described above, in 2020 and 2019.

Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting

These services may include audit services, audit-related services, tax and other services.

Pre-approval is generally provided

for up to one year, and any pre-approval is detailed as to the particular service or category of services.

The independent registered

4 unchanged sentences

Exhibits and Financial Statement Schedules

(a) The following documents are filed as a part of this report:

(1) Financial Statements .

following documents are filed as a part of this report:

(1) Financial

See Index to Consolidated Financial Statements, which appears on page F-1 hereof.

The consolidated financial statements listed

in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item.

(2) Financial Statement Schedules .

Schedules are omitted because the required information is not present or is not present in amounts sufficient to require submission

of the schedule or because the information required is given in the consolidated financial statements or the notes thereto.

The consolidated financial statements

listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item.

(2) Financial

Statement Schedules .

Schedules are omitted because the required information is not present or is not present in amounts sufficient

to require submission of the schedule or because the information required is given in the consolidated financial statements or

the notes thereto.

(3) Exhibits .

The information

required by this Item 15 is incorporated by reference to the Index to Exhibits accompanying this Annual Report on Form 10-K.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf

by the undersigned, thereunto duly authorized.

Chief Executive Officer

June 12, 2020

Pursuant to the requirements

of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant

in the capacities and on the dates indicated.

Chief Executive Officer and Director

(Principal Executive Officer)

June 12, 2020

/s/ Timothy Hannibal

The information required by this Item 15 is incorporated by reference to the Index to Exhibits accompanying this Annual Report

on Form 10-K.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

Timothy Hannibal

Principal Financial Officer

June 12, 2020

/s/ Charles K.

Miller, Director

June 12, 2020

/s/ Mark Shefts

Mark Shefts, Director

June 12, 2020

/s/ Steven Wallitt

Steven Wallitt, Director

June 12, 2020

Index to Consolidated Financial Statements

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Chief Operating Officer

Financial Officer

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the Registrant in the capacities and on the dates indicated.

Timothy Hannibal

Chief Operating Officer

Financial Officer

Steven Wallitt

to Consolidated Financial Statements

Financial Statements

balance sheets as of December 31, 2020 and 2019

Consolidated Statements of Operations for the years ended December 31, 2019 and 2018

statements of operations for the years ended December 31, 2020 and 2019

statements of changes in stockholders’

Equity/(Deficit) for the years ended December 31, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018

Notes to Consolidated Financial Statements

Report of Independent

Registered Public Accounting Firm

equity for the years ended December 31, 2020 and 2019

statements of cash flows for the years ended December 31, 2020 and 2019

to consolidated financial statements

of Independent Registered Public Accounting Firm

the shareholders and the board of directors of SCWorx Corp.

on the Financial Statements

have audited the accompanying consolidated balance sheet of SCWorx Corp.

(the "Company") as of December 31, 2020, the related

statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively

referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then

ended, in conformity with accounting principles generally accepted in the United States.

Doubt about the Company’s Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue

as a going concern.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

BF Borgers CPA PC

Borgers CPA PC

have served as the Company's auditor since 2021

of Independent Registered Public Accounting Firm

To the Stockholders’

and the Board

of Directors of SCWorx Corp.:

and the Board of Directors

of SCWorx Corp.:

Opinion On The Financial Statements

We have audited the accompanying consolidated

balance sheets of SCWorx Corp.

(the "Company") as of December 31, 2019 and 2018, and the related consolidated statements

of operations, changes in stockholders’

equity (deficit), and cash flows for each of the years then ended, and the related

notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial

statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019

and 2018, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

balance sheet of SCWorx Corp.

(the "Company") as of December 31, 2019, and the related consolidated statements of operations,

changes in stockholders’

equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred

to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all

material respects, the consolidated financial position of the Company as of December 31, 2019, and the results of their operations and

their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying consolidated financial

statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated

financial statements, the entity has suffered recurring losses from operations, has negative cash flows from operations, and has

an accumulated deficit, that raise substantial doubt about its ability to continue as a going concern.

Management’s plans

in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements,

the entity has suffered recurring losses from operations, has negative cash flows from operations, and has an accumulated deficit, that

raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also

described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)

(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

1 unchanged sentence

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we were

required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit we were

required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on

the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor

Our audit included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

We have served as the Company's auditor since

/s/ WithumSmith+Brown, PC

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June 12, 2020

Consolidated Balance Sheets

Balance Sheets

receivable - net

expenses and other assets

current assets

Accounts receivable, net of allowance of $344,412 and $0, respectively

Prepaid and other assets

Convertible notes receivable, at fair value

Interest receivable

Investment in warrants, at fair value

Total current assets

Intangible assets

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

LIABILITIES AND

STOCKHOLDERS’

payable and accrued liabilities

Accounts payable and accrued liabilities –

related party

Shareholder advance

Deferred revenue

current liabilities

Accounts payable and accrued liabilities

Contract liabilities

Total current liabilities

long-term liabilities

Notes payable - related party

Total long-term liabilities

Total liabilities

Commitments and contingencies

and contingencies

Stockholders’

equity/(deficit):

Series A Convertible Preferred stock, $0.001 par value;

A Convertible Preferred stock, $0.001 par value;

900,000 shares authorized;

578,567 and 0 shares issued and outstanding, respectively

Common stock, $0.001 par value;

84,872 and 578,567 shares issued and outstanding,

stock, $0.001 par value;

45,000,000 shares authorized;

9,895,600 and 7,390,261 shares issued and outstanding, respectively

Additional paid-in capital

Accumulated deficit

paid-in capital

(20,196,823 )

Total stockholders’

equity/(deficit)

Total liabilities and stockholders’

equity/(deficit)

The accompanying notes are an integral

part of these consolidated financial statements.

Consolidated Statements of Operations

For the year ended

(12,794,473 )

stockholders’

liabilities and stockholders’

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

Statements of Operations

For the years ended

Operating expenses:

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Interest income

Gain (Loss) on fair value of convertible notes receivable

Gain (Loss) on fair value of warrant asset

Gain on fair value of convertible notes receivable

Gain on fair value of warrant asset

Loss on settlement of accounts payable

Other expense

Gain on exchange of debt for common stock

Gain on exchange of debt for common

stock –

related party

Total other income (expense)

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(11,312,500 )

Provision for income taxes

Provision for (benefit from) income taxes

$ (7,402,350 )

$ (11,312,500 )

Net loss per share, basic and diluted

Weighted average common shares outstanding, basic and diluted

The accompanying notes are an integral

part of these consolidated financial statements.

Consolidated Statements of Changes in

Stockholders’

Equity/(Deficit)

Members’

Preferred Stock

Additional paid-in

Balances, January 1, 2018

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

Statements of Changes in Stockholders’

ended December 31, 2020

December 31, 2019

$ (12,794,473 )

of Series A Convertible Preferred Stock into common stock

of Accounts Payable

issued in cashless exercise of warrants

issued in cashless exercise of options

exercised for cash

issued to current and former employees and directors

based compensation

issued for equity financing

balance, December 31, 2020

$ (20,196,823 )

ended December 31, 2019

December 31, 2018

$ (1,481,973 )

Conversion from LLC to Corporation

Cancelled shares due to issuance of common stock

Shares issued to vendor

Issuance of common stock

Balances, December 31, 2018

of common shares in settlement of due from stockholder balance

A Convertible Preferred share issuance (Alliance MMA)

of common stock in settlement of Series A Convertible Preferred Stock contractual fee

of Series A Convertible Preferred Stock into common stock

of common stock

A Convertible Preferred share issuance

of notes payable - related party into Series A Convertible Preferred share issuance

of disputed contractual claim

of warrants in settlement of lease dispute

issued in cashless exercise of warrants

compensation related to founder’s transfers of common shares to contractors

compensation related to employee and contractor equity awards

stock issued in settlement of litigation

and warrant dividend

(11,312,500 )

Surrender of common stock in settlement of due from stockholder balance

Series A Convertible Preferred Stock issuance (Alliance MMA)

Issuance of common stock

Conversion of notes payable - related party into Series A Convertible Preferred Stock

Exercise of warrants

Settlement of disputed contractual claim

Issuance of warrants in settlement of lease dispute

Shares issued in cashless exercise of warrants

Stock-based compensation related to founder’s transfers of common stock to contractors

Stock-based compensation related to employee, director and contractor equity awards

Stock and warrant dividend

Conversion of Series A Convertible Preferred Stock into common stock

Issuance of common stock in settlement of Series A Convertible Preferred Stock contractual fee

Common stock issued in settlement of litigation

(11,312,500 )

balance, December 31, 2019

$ (12,794,473 )

Ending balance, December 31, 2019

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

Statements of Cash Flows

the years ended December 31,

flows from operating activities:

$ (7,402,350 )

The accompanying notes are an integral

part of these consolidated financial statements.

Consolidated Statements of Cash Flows

For the year ended

Cash flows from operating activities:

$ (11,312,500 )

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of intangibles

Reserve for bad debt

Gain (loss) on fair value of warrant assets

Gain (loss) on change in fair value of convertible notes receivable

Settlement of disputed contractual claim

Issuance of warrants in settlement of lease dispute

Stock based compensation - employee grants

Non cash interest income

Non cash interest expense

Common stock issued in settlement of litigation

Issuance of common stock in settlement of Series A Convertible Preferred Stock contractual fee

Gain on exchange of debt for common stock

Amortization of note discount

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses

Accounts payable and accrued liabilities

Contract liabilities

Net cash used in operating activities

Cash flows from investing activities:

Cash acquired in reverse acquisition

Investment in AMMA warrant

Advances to shareholder

Purchase of convertible notes receivable - Alliance MMA

Purchase of fixed assets

(Increase) in interest receivable

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from notes payable - related party

Proceeds from exercise of warrants

Proceeds from sale of common shares

Proceeds from additional borrowings from related party

Net cash provided by financing activities

Net increase in cash

Cash, beginning of period

Cash, end of period

Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for income taxes

Non-cash investing and financing activities:

Settlement of disputed contractual claim with issuance of common stock

Issuance of warrant in settlement of vendor liability

Cashless exercise of warrant

Surrender of common stock in settlement of due from shareholder balance

Stock and warrant dividend

Warrants issued to company

Conversion of notes payable-related party and interest into Series A Convertible Preferred Stock

Issuance of common shares for preferred stock penalty

Interest receivable converted to common stock

Conversion of notes payable related party into common stock

Issuance of preferred and common stock in connection with acquisition of Alliance MMA, net of cash

Measurement period goodwill adjustment

Conversion of Series A Convertible Preferred Stock into common shares

Common stock issued in settlement of litigation

Right-of-use operating lease assets obtained in exchange for operating lease liabilities

The accompanying notes are an integral

part of these consolidated financial statements.

Notes to Consolidated Financial Statements

to reconcile net loss to net cash used in operating activities:

of intangibles

on settlement of accounts payable

(loss) on change in fair value of warrant assets

of disputed contractual claim

of warrants in settlement of lease dispute

stock issued in settlement of litigation

on exchange of debt for common stock

of common stock in settlement of Series A Convertible Preferred Stock contractual fee

(loss) on change in fair value of convertible notes receivable

cash interest income

cash interest expense

in operating assets and liabilities (net of amounts acquired):

expenses and other assets

payable and accrued liabilities

cash used in operating activities

flows from investing activities:

acquired in reverse acquisition

in AMMA warrant

to shareholder

of convertible notes receivable - Alliance MMA

of fixed assets

cash provided by investing activities

flows from financing activities:

from equity financing

from loan payable

from notes payable - related party

from exercise of warrants

cash provided by financing activities

(decrease) increase in cash

beginning of period

end of period

disclosures of cash flow information:

paid for interest

paid for income taxes

investing and financing activities:

exercise of warrant

exercise of options

of accounts payable with issuance of common stock

advances for purchase of inventory

of warrant in settlement of vendor liability

of Series A Convertible Preferred Stock into common shares

stock issued in settlement of litigation

of common stock in settlement of due from shareholder balance

and warrant dividend

issued to company

of preferred stock penalty

receivable converted to common stock

of notes payable-related party into common stock

of notes payable-related party and interest into Series A Convertible Preferred Stock

of preferred and common stock in connection with acquisition of Alliance MMA, net of cash

period goodwill adjustment

of disputed contractual claim with issuance of common stock

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

to Consolidated Financial Statements

Description of Business

Nature of Business

(n/k/a SCW FL Corp.) (“SCW LLC”) was a privately held limited liability company which was organized in Florida on

November 17, 2016.

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

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becoming the Company’s subsidiary.

Business Combination and Related

In June 2018, SCWorx

Acquisition Corp.

entered into a Securities Purchase Agreement (“SPA”) with Alliance, as amended on December 18, 2018,

under which SCWorx Acquisition Corp.

agreed to purchase up to $1,250,000 in principal amount of Alliance’s convertible notes

and warrants to purchase up to 1,128,356 [59,387 shares reflective of one for nineteen stock split] [bracketed amounts disclosed

represent post- reverse split adjusted shares or per share amounts] shares of Alliance common stock.

The initial $750,000 tranche

of the notes was convertible into shares of Alliance common stock at an initial conversion price of $0.3725 [$7.0775 post-split]

and the related 503,356 [26,492 post-split] warrants have an exercise price of $0.3725 [$7.0775 post-split].

The conversion price

on the $750,000 convertible note was reduced to $0.215 [$4.085 post-split] per share in January 2019.

The remaining $500,000 tranche

of the notes was convertible into shares of Alliance common stock at a conversion price of $0.20 [$3.80 post-split] and the related

625,000 [32,895 post-split] warrants had an exercise price of $0.30 [$5.70 post-split].

All of these notes (an aggregate of $1,250,000

in principal amount) converted automatically into Alliance common stock upon the closing of the Company’s acquisition on

February 1, 2019 and were distributed to certain of the Company’s common stockholders.

Pursuant to the SPA,

between June 29, 2018 and October 16, 2018, Alliance sold SCWorx Acquisition Corp.

convertible notes in the aggregate principal

amount of $750,000 and warrants to purchase 503,356 [26,492 post-split] shares of Alliance common stock, for an aggregate purchase

price of $750,000.

Each of the notes bore interest at 10% annually and had a one year term.

The warrants had an exercise price

of $0.3725, [$7.0775 post-split] a term of five years and were vested upon grant.

As noted above, these notes automatically converted

into Alliance common stock upon the closing of the Company’s acquisition on February 1, 2019.

On August 20, 2018,

the Company and its stockholders entered into a Stock Exchange Agreement with Alliance, as amended on December 18, 2018 (“SEA”).

Under the SEA, the Company’s shareholders agreed to sell all of the issued and outstanding common stock of the Company, in

exchange for which Alliance agreed to issue at the closing 100,000,000 shares of Alliance common stock to the Company’s stockholders.

Pursuant to the SPA,

between November 16, 2018 and December 31, 2018, the Company purchased additional Alliance convertible notes in the aggregate principal

amount of $275,000 and warrants to purchase 356,250 [18,750 post-split] shares of Alliance common stock, for an aggregate purchase

price of $275,000.

Each of the Notes bore interest at 10% annually and matured one year from the issue date.

These warrants had

an exercise price of $0.30 [$5.70 post-split], a term of five years and were vested upon grant.

This brought the total amount funded

by the Company to $1,035,000 as of December 31, 2018.

In January 2019, SCWorx purchased $215,000 of additional Alliance convertible

notes under the aggregate $1,250,000 SPA.

These notes automatically converted into Alliance common stock upon the closing of the

Company’s acquisition on February 1, 2019 and were purchased under the aggregate $1,250,000 terms of the SPA.

In anticipation of

the acquisition of the Company, Alliance filed an original listing application with the Nasdaq Capital Market to list the common

stock of the combined company.

On February 1, 2019, Nasdaq approved the listing of Alliance’s common stock (on a combined

basis with SCWorx), with the result being that the newly combined company’s common stock is now newly listed on the Nasdaq

Capital Market.

On February 1, 2019,

changed its name to SCW FL Corp.

to allow Alliance to change its name to SCWorx Corp.

Alliance completed the acquisition

of SCWorx Corp.

(n/k/a SCW FL Corp.), at which point Alliance changed its name to SCWorx Corp., changed its ticker symbol to “WORX”,

and effected a one-for-nineteen reverse stock split of its common stock, which combined the 100,000,000 Alliance shares of common

stock issued to the Company’s shareholders into 5,263,158 shares of common stock of the newly combined company (refer to

Note 3, Summary of Significant Accounting Policies, for additional detail).

perspective, Alliance acquired SCW FL Corp., and as a result, historical equity awards including stock options and warrants are

carried forward at their historical basis.

From an accounting

perspective, Alliance was acquired by SCW FL Corp.

in a reverse merger and as a result, the Company has completed preliminary purchase

accounting for the transaction.

Operations of the Business

SCWorx is a leading

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”)

March 16, 2020, in response to the COVID-19 pandemic, SCWorx established a wholly-owned subsidiary, Direct-Worx, LLC.

Combination and Related Transactions

February 1, 2019, Alliance MMA completed the acquisition of SCWorx, changed its name to SCWorx Corp., changed its ticker symbol

to “WORX”, and effected a one-for-nineteen reverse stock split of its common stock which combined the 100,000,000

Alliance shares of common stock issued to the Company’s shareholders into 5,263,158 shares of common stock of the newly

combined company.

a legal perspective, Alliance MMA acquired SCWorx FL Corp, and as a result, historical equity awards including stock options and

warrants are carried forward at their historical basis.

an accounting perspective, Alliance MMA was acquired by SCWorx FL Corp in a reverse merger and as a result, the Company has completed

purchase accounting for the transaction.

of the Business

is a leading 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.

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”).

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and cost visibility, synchronous Charge Description Master (“CDM”) and control of vendor rebates and contract administration

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:

● virtualized Item Master File repair, expansion and automation;

● CDM management;

● contract management;

● request for proposal automation;

● rebate management;

● big data analytics modeling;

● 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.

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

SCWorx’s software modules perform separate functions as follows:

Item Master File repair, expansion and automation;

for proposal automation;

data analytics modeling;

integration and warehousing.

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.

In March 2020, in response to the COVID-19 pandemic, SCWorx established a wholly-owned subsidiary, Direct-Worx, LLC, which

will utilize the SCWorx database to identify trends within the purchasing supply chain and use this information to source and provide

critical, difficult-to-find items for the healthcare industry.

Items may become difficult to source due to unexpected disruptions

within the supply chain, such as the COVID-19 pandemic.

Through the date of filing the Company has not sold any PPE and as of December 31, 2019 did not have any

These products currently include:

Test Kits —

the Company has identified multiple potential sources for Rapid Test Kits for COVID-19.

Protective Equipment (PPE) includes items include masks, gloves, gowns, shields, etc.

This is a new business

for us, and there is no assurance that we will be able to complete any sales of these products or that any such sales will be

sufficient to offset the negative effects of the COVID-19 pandemic on our business.

The sale of PPE and rapid test kits for COVID-19

represent a new business for the Company and is subject to the myriad risks associated with any new venture.

The Company has

yet to complete the sale of any COVID-19 rapid test kits.

Through the date of filing we have not generated any material revenue

from the sale of PPE.

SCWorx, as part of

the acquisition of Alliance MMA, operates an online event ticketing platform focused on serving regional MMA (“mixed martial

arts”) promotions.

Liquidity and Going Concern

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.

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.

March 16, 2020, in response to the COVID-19 pandemic, SCWorx established a wholly-owned subsidiary, Direct-Worx, LLC, with the

intention of utilizing the SCWorx database to identify trends within the purchasing supply chain and then use this information

to assist the Company in its endeavors to provide critical, difficult-to-find items for the healthcare industry.

Company sought to provide COVID-19 Rapid Test Kits and PPE —

Personal Protective Equipment to the healthcare industry.

includes items such as masks, gloves, gowns, shields, etc.

Company has extensive experience in the healthcare industry and industry contacts, and a database of items specifically designated

to assist the healthcare industry in fulfilling its inventory demands.

sale of PPE and rapid test kits for COVID-19 represented a new business for the Company and is subject to the myriad risks associated

with any new venture.

The Company encountered great difficulty in attempting to secure reliable sources of supply for both COVID-19

Rapid Test Kits and PPE The Company currently has no contracted supply of Rapid Test Kits or PPE.

During the year ended December

31, 2020, the Company has completed only minimal sales of COVID-19 rapid test kits and PPE.

In addition, changes in market conditions

and FDA processes governing the sale of COVID-19 serology tests could have the effect of rendering the COVID-19 serology tests

held by the Company not saleable in the United States, which could have a material adverse effect on the Company’s financial

condition and results of operations.

There can be no assurance that the Company will be able to generate any significant revenue

from the sale of PPE products or rapid test kits, and as of the date of this report, the Company has not generated any material

revenue from the sale of PPE or rapid test kits.

Company is no longer actively seeking to procure and sell Test Kits or PPE.

Instead, the Company is focused on selling its

current inventory of PPE and Test Kits.

The Company may receive commissions for acting as an intermediary with respect to the

sale of PPE and/or Test Kits.

However, there is no assurance the Company will realize any material revenue from these activities.

as part of the acquisition of Alliance MMA, operates an online event ticketing platform focused on serving regional MMA (“mixed

martial arts”) promotions.

of the COVID-19 Pandemic

Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19

pandemic spreading throughout the United States and the world.

The New York and New Jersey area, where the Company is headquartered,

was at one of the early epicenters of the coronavirus outbreak in the United States.

The outbreak has since spread to the rest

of the country and is adversely impacting new customer acquisition.

The Company has been following the recommendations of local

health authorities to minimize exposure risk for its team members since the outbreak.

addition, the Company’s customers (hospitals) have also experienced extraordinary disruptions to their businesses and supply

chains, while experiencing unprecedented demand for health care services related to COVID-19.

As a result of these extraordinary

disruptions to the Company’s customers’

business, the Company’s customers are currently focused on meeting the

nation’s health care needs in response to the COVID-19 pandemic.

As a result, the Company believes that its customers have

not been able to focus resources on expanding the utilization of the Company’s services, which has adversely impacted the

Company’s future growth prospects, at least until the adverse effects of the pandemic subside.

In addition, the financial

impact of COVID-19 on the Company’s hospital customers could cause the hospitals to delay payments due to the Company for

services, which could negatively impact the Company’s cash flows.

Company is endeavoring to mitigate these impacts to revenue through the sale of personal protective equipment (“PPE”)

and COVID-19 rapid test kits to the health care industry, including many of the Company’s hospital customers.

The Company’s

Chief Executive Officer and employees have experience in the healthcare industry and industry contacts, and a database of items

designed to assist the healthcare industry in fulfilling its inventory demands.

March 16, 2020, in response to the COVID-19 pandemic, SCWorx established a wholly-owned subsidiary, Direct-Worx, LLC to endeavor

to source and provide critical, difficult-to-find items for the healthcare industry.

Items have become difficult to source due

to unexpected disruptions within the supply chain, such as the COVID-19 pandemic.

Notwithstanding these efforts, the Company

has to date realized only a minimal amount of revenue from the sale of PPE and Test Kits.

Liquidity and Going Concern

The accompanying consolidated financial statements have been

prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

GAAP”), which contemplates continuation

of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.

The consolidated financial statements do not include any adjustment that might become necessary should the Company be unable to

continue as a going concern.

The Company has

suffered recurring losses from operations and incurred a net loss of $11,312,500 for the year ended December 31, 2019 and

$380,603 for the year ended December 31, 2018.

The accumulated deficit as of December 31, 2019 was $12,794,473 The Company

has not yet achieved profitability and expects to continue to incur cash outflows from operations.

It is expected that its

operating expenses will continue to increase and, as a result, the Company will eventually need to generate significant

increases in product revenues to achieve profitability.

These conditions indicate that there is substantial doubt about the

Company’s ability to continue as a going concern within one year after the financial statement issuance date.

As of the filing date

of this Report, management believes that there may not be sufficient capital resources from operations and existing financing arrangements

in order to meet operating expenses and working capital requirements for the next twelve months.

Accordingly, we are

evaluating various alternatives, including reducing operating expenses, securing additional financing through debt or equity securities

to fund future business activities and other strategic alternatives.

There can be no assurance that the Company will be able to

generate the level of operating revenues in its business plan, or if additional sources of financing will be available on acceptable

terms, if at all.

If no additional sources of financing are available, our future operating prospects may be adversely affected.

and Going Concern

accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles

GAAP”), which contemplates continuation of the Company as a going concern and the realization of assets and

satisfaction of liabilities in the normal course of business.

The consolidated financial statements do not include any adjustment

that might become necessary should the Company be unable to continue as a going concern.

The Company has suffered recurring

losses from operations and incurred a net loss of $7,402,350 for the year ended December 31, 2020 and $11,312,500 for the year ended December

The accumulated deficit as of December 31, 2020 was $20,196,823 The Company has not yet achieved profitability and expects to

continue to incur cash outflows from operations.

It is expected that its operating expenses will continue to increase and, as a result,

the Company will eventually need to generate significant increases in product revenues to achieve profitability.

These conditions indicate

that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statement

issuance date.

of the filing date of this Report, the Company has only limited cash on hand, and management believes that there may not be sufficient

capital resources from operations and existing financing arrangements in order to meet operating expenses and working capital

requirements for the next twelve months.

we are evaluating various alternatives, including reducing operating expenses, securing additional financing through debt or equity

securities to fund future business activities and other strategic alternatives.

There can be no assurance that the Company will

be able to generate the level of operating revenues in its business plan, or if additional sources of financing will be available

on acceptable terms, if at all.

If no additional sources of financing are available, our future operating prospects may be adversely

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Summary of Significant Accounting

Basis of Presentation and Principles

of Consolidation

The accompanying consolidated financial statements have been

prepared in accordance to U.S.

GAAP and the rules and regulations of the U.S.

Summary of Significant Accounting Policies

of Presentation and Principles of Consolidation

accompanying consolidated financial statements have been prepared in accordance to U.S.

GAAP and the rules and regulations of

Securities and Exchange Commission (“SEC”).

The accompanying consolidated

financial statements include the accounts of SCWorx and its wholly-owned subsidiaries.

All material intercompany balances and

transactions have been eliminated in consolidation.

Reverse Stock Split

On February 1, 2019,

the Company effected a 1-for-19 reverse stock split with respect to the outstanding shares of its common stock.

The reverse stock

split was deemed effective on February 4, 2019.

The reverse stock split did not affect the total number of shares of common stock

that the Company is authorized to issue, which is 45,000,000 shares.

The reverse stock split also did not affect the total number

of shares of Series A preferred stock that the Company is authorized to issue, which is 900,000 shares.

Share and per share data

have been adjusted for all periods presented to reflect the reverse stock split unless otherwise noted.

Reclassifications

A reclassification

has been made to the consolidated balance sheet and consolidated statement of changes in stockholders’

equity/(deficit) to

break out the total Series A Convertible Preferred Stock par value of $819 and additional paid in capital of $7,980,126.

for the quarter ended March 31, 2019, the entire balance was disclosed as Series A Convertible Preferred Stock.

This change in

classification does not affect the previously reported total stockholders’

equity balance.

In addition, the authorized common

stock has been restated to reflect the correct amount of 45,000,000 authorized shares of common stock.

In addition, certain

prior period amounts have been reclassified for consistency with the current period presentation.

These reclassifications had no

effect on reported results of operations or cash flows.

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.

There were no amounts in excess of the FDIC insured limit for both the years ended December 31, 2019 and 2018,

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 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 we 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.

Concentration of Credit and Other

Financial instruments

that potentially subject the Company to significant concentrations of credit risk consist principally of cash, accounts receivable,

due from shareholder, convertible notes receivable and warrants.

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

The Company believes that any concentration of credit risk in its due from shareholder and convertible notes receivable

was substantially mitigated by the shareholder’s material interest in the Company, ability to sell off portions of the interest,

if necessary, and the closing of the acquisition of SCWorx by Alliance and conversion of the notes payable - related party into

shares of Series A Convertible Preferred Stock and the settlement of the due from stockholder balance with the surrender of 1,401

SCWorx shares of common stock in January 2019.

accompanying consolidated financial statements include the accounts of SCWorx and its wholly-owned subsidiaries.

intercompany balances and transactions have been eliminated in consolidation.

February 1, 2019, the Company effected a 1-for-19 reverse stock split with respect to the outstanding shares of its common stock.

The reverse stock split was deemed effective on February 4, 2019.

The reverse stock split did not affect the total number of shares

of common stock that the Company is authorized to issue, which is 45,000,000 shares.

The reverse stock split also did not affect

the total number of shares of Series A preferred stock that the Company is authorized to issue, which is 900,000 shares.

and per share data have been adjusted for all periods presented to reflect the reverse stock split unless otherwise noted.

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.

Amounts in excess of the FDIC insured limit for the years ended December 31, 2020 and 2019 were $113,361 and zero, respectively.

Value of Financial Instruments

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 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 we 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.

Concentration

of Credit and Other Risks

instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, accounts

receivable, due from shareholder, convertible notes receivable and warrants.

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.

The Company believes that any concentration of credit risk in its due from shareholder and convertible

notes receivable was substantially mitigated by the shareholder’s material interest in the Company, ability to sell off

portions of the interest, if necessary, and the closing of the acquisition of SCWorx by Alliance and conversion of the notes payable

- related party into shares of Series A Convertible Preferred Stock and the settlement of the due from stockholder balance with

the surrender of 1,401 SCWorx shares of common stock in January 2019.

year ended December 31, 2020 the Company had two customers representing 22% and 17% of aggregate revenues.

For the year ended

December 31, 2019, the Company had two customers representing 19% and 10% of aggregate revenues.

For the year ended December 31,

2018, the Company had three customers representing 20%, 16% and 12% of aggregate revenues.

At December 31, 2019, the Company had

four customers representing 17%, 14%, 10% and 10% of aggregate accounts receivable.

At December 31, 2018, the Company had three

At December 31, 2020, we had three

customers representing 35%, 32% and 10% of aggregate accounts receivable.

Allowance for Doubtful Accounts

The Company continually

monitors customer payments and maintains a reserve for estimated losses resulting from its customers’

inability to make

required payments.

In determining the reserve, the Company evaluates the collectability of its accounts receivable based upon

a variety of factors.

In cases where the Company becomes aware of circumstances that may impair a specific customer’s ability

to meet its financial obligations, the Company records a specific allowance against amounts due.

For all other customers, the

Company recognizes allowances for doubtful accounts based on its historical write-off experience in conjunction with the length

At December 31, 2019, the Company had four customers representing

17%, 14%, 10% and 10% of aggregate accounts receivable.

for Doubtful Accounts

Company continually monitors customer payments and maintains a reserve for estimated losses resulting from its customers’

inability to make required payments.

In determining the reserve, the Company evaluates the collectability of its accounts receivable

based upon a variety of factors.

In cases where the Company becomes aware of circumstances that may impair a specific customer’s

ability to meet its financial obligations, the Company records a specific allowance against amounts due.

For all other customers,

the Company recognizes allowances for doubtful accounts based on its historical write-off experience in conjunction with the length

of time the receivables are past due, customer creditworthiness, geographic risk and the current business environment.

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doubtful accounts as of December 31, 2020 and 2019 of $183,277 and $344,412, respectively.

The Company determines

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 the Company’s right to

use an underlying asset for the lease term and lease liabilities represent the Company’s 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 the Company’s leases do not provide an implicit rate, the Company uses

its incremental borrowing rate based on the information available at commencement date in determining the present value of lease

The Company’s 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 the Company will exercise that option.

Lease expense for lease payments is recognized

on a straight-line basis over the lease term.

The Company has lease agreements with lease components only, none with non-lease

components, which are generally accounted for separately (refer to Note 8, Leases, for additional detail).

inventory balance at December 31, 2020 is related to the Company’s Direct-Worx, LLC subsidiary and consisted of approximately

87,000 gowns and approximately 47,000 test kits.

These items are carried on the consolidated balance sheet at cost.

affiliated with a shareholder advanced the $475,000 in cash to the supplier of the test kits and the amount due is recorded in

shareholder advance.

is valued at the lower of cost or market value.

When market value is determined to be less than cost, the Company records an allowance.

As of December 31, 2020 and 2019, the Company had allowances of $0.

Company determines 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 the Company’s

right to use an underlying asset for the lease term and lease liabilities represent the Company’s 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 the Company’s leases do not provide an implicit rate, the Company

uses its incremental borrowing rate based on the information available at commencement date in determining the present value of

lease payments.

The Company’s 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 the Company will exercise that option.

Lease expense for lease payments is

recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease components only, none with

non-lease components, which are generally accounted for separately (refer to Note 7, Leases, for additional detail).

Company includes the results of operations of a business it acquires in its consolidated results as of the date of acquisition.

The Company allocates the fair value of the purchase consideration of its acquisition to the tangible assets, liabilities and

intangible assets acquired, based on their estimated fair values.

The excess of the fair value of purchase consideration over

the fair values of these identifiable assets and liabilities is recorded as goodwill.

The primary items that generate goodwill

include the value of the synergies between the acquired businesses and the Company.

Intangible assets are amortized over their

estimated useful lives.

The fair value of contingent consideration (earn out) associated with acquisitions is remeasured each

reporting period and adjusted accordingly.

Acquisition and integration related costs are recognized separately from the business

combination and are expensed as incurred.

For additional information regarding the Company’s acquisitions, refer to Note

5, Business Combinations.

The Company includes

the results of operations of a business it acquires in its consolidated results as of the date of acquisition.

The Company allocates

the fair value of the purchase consideration of its acquisition to the tangible assets, liabilities and intangible assets acquired,

based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable

assets and liabilities is recorded as goodwill.

The primary items that generate goodwill include the value of the synergies between

the acquired businesses and the Company.

Intangible assets are amortized over their estimated useful lives.

The fair value of contingent

consideration (earn out) associated with acquisitions is remeasured each reporting period and adjusted accordingly.

and integration related costs are recognized separately from the business combination and are expensed as incurred.

For additional

information regarding the Company’s acquisitions, refer to Note 5, Business Combinations.

Goodwill and Purchased Identified

Intangible Assets

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 third quarter,

and Purchased Identified Intangible Assets

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.

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is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.

Identified intangible assets

Identified finite-lived

intangible assets consist of ticketing software and promoter relationships resulting from the February 1, 2019 business combination.

The Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging

from 5 to 7 years.

The Company makes judgments about the recoverability of finite-lived intangible assets whenever facts and circumstances

indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable.

If such facts and circumstances exist, the Company assesses recoverability by comparing the projected undiscounted net cash flows

associated with the related asset or group of assets over their remaining lives against their respective carrying amounts.

if any, are based on the excess of the carrying amount over the fair value of those assets.

If the useful life is shorter than

originally estimated, the Company would accelerate the rate of amortization and amortize the remaining carrying value over the

new shorter useful life.

For further discussion

of goodwill and identified intangible assets, refer to Note 5, Business Combinations.

Property and Equipment

Property and equipment

are recorded at cost, less accumulated depreciation.

Depreciation is calculated using the straight-line method over the related

assets’

intangible assets

finite-lived intangible assets consist of ticketing software and promoter relationships resulting from the February 1, 2019 business

The Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful

lives, ranging from 5 to 7 years.

The Company makes judgments about the recoverability of finite-lived intangible assets whenever

facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets

may not be recoverable.

If such facts and circumstances exist, the Company assesses recoverability by comparing the projected

undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective

carrying amounts.

Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets.

the useful life is shorter than originally estimated, the Company would accelerate the rate of amortization and amortize the remaining

carrying value over the new shorter useful life.

further discussion of goodwill and identified intangible assets, refer to Note 5, Business Combinations.

and Equipment

and equipment are recorded at cost, less accumulated depreciation.

Depreciation is calculated using the straight-line method over

the related assets’

estimated useful lives.

Equipment, furniture and fixtures are being amortized over a period of three years.

Expenditures that materially

increase asset life are capitalized, while ordinary maintenance and repairs are expensed as incurred.

Depreciation expense

for the years ended December 31, 2019 and 2018 was $6,453 and $0, respectively.

Revenue Recognition

Equipment, furniture and fixtures are being amortized over a period of three

that materially increase asset life are capitalized, while ordinary maintenance and repairs are expensed as incurred.

expense for the years ended December 31, 2020 and 2019 was $29,043 and $6,453, respectively.

Company recognizes revenue in accordance with Topic 606 to depict the transfer of promised goods or services in an amount that

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distinct goods or services that are promised to the customer.

The Company has identified the following

performance obligations in its 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”):

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

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,

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,

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.

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

Data Normalization and Professional

The Company’s

Data Normalization and Professional Services are typically 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.

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.

Normalization and Professional Services

Company’s Data Normalization and Professional Services are typically 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.

and Maintenance

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.

Company does have some contracts that have payment terms that differ from the timing of revenue recognition, which requires the

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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.

periods prior to the adoption of ASC 606, the Company recognized revenues when persuasive evidence of an arrangement existed, delivery

had occurred, the sales price was fixed or determinable, and the collectability of the resulting receivable was reasonably assured.

The adoption of Topic 606 did not result in a cumulative effect adjustment to the Company’s opening retained earnings since

there was no significant impact upon adoption of Topic 606.

There was also no material impact to revenues, or any other financial

statement line items for the year ended December 31, 2018 as a result of applying ASC 606.

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.

of December 31, 2019, the Company had $1,056,637 of remaining performance obligations recorded as contract liabilities.

expects to recognize sales relating to these existing performance obligations of $1,056,637 during the remainder of 2020.

There were no revenues

that were recognized from performance obligations that were partially satisfied prior to January 1, 2018.

Costs to Fulfill

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.

periods prior to the adoption of ASC 606, the Company recognized revenues when persuasive evidence of an arrangement existed,

delivery had occurred, the sales price was fixed or determinable, and the collectability of the resulting receivable was reasonably

The adoption of Topic 606 did not result in a cumulative effect adjustment to the Company’s opening retained earnings

since there was no significant impact upon adoption of Topic 606.

There was also no material impact to revenues, or any other

financial statement line items for the year ended December 31, 2018 as a result of applying ASC 606.

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.

PPE Inventory sales

from the sale of inventory are typically recognized upon shipment to a customer as long as the Company has met all performance obligations

related to the sale in accordance to Topic 606.

Brokered PPE sales

revenues are recognized once the customer obtains physical possession of the product(s).

Because the Company acts as an agent in arranging

the relationship between the customer and the supplier, PPE revenues are presented net of related costs, including product procurement,

warehouse and shipping fees, etc.

Remaining Performance Obligations

of December 31, 2020, we had $2,025,333 of remaining performance obligations recorded as deferred revenue.

We expect to recognize

sales relating to these existing performance obligations of during 2021.

to Fulfill a Contract

to fulfill a contract typically include costs related to satisfying performance obligations as well as general and administrative

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with ASC 340-40.

Cost of Revenue

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.

Contract Balances

Contract assets arise

when the revenue associated prior to the Company’s unconditional right to receive a payment under a contract with a customer

( i.e ., unbilled revenue) and are derecognized when either it becomes a receivable or the cash is received.

There were no

contract assets as of December 31, 2019 and 2018 and January 1, 2018.

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 $1,056,637 and $816,714 as of December 31, 2019 and 2018, respectively, and $946,539 as of January 1,

Revenue recognized in 2018 included the $946,539 of contract liabilities outstanding as of January 1, 2018 and revenues

in 2019 included $816,714 of contract liabilities outstanding as of December 31, 2018.

The Company converted

to a corporation from a limited liability company during 2018.

The Company uses the

asset and liability method of accounting for income taxes in accordance with Accounting Standard Codification (“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

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 December 31, 2019, 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

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

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.

On December 22, 2017,

the Tax Cuts and Jobs Act of 2017, (the “Tax Act”) was enacted.

The Tax Act significantly revised the U.S.

income tax regime by, including but not limited to, lowering the U.S.

corporate income tax rate from 34% to 21% effective January

1, 2018, implementing a territorial tax system, imposing a one-time transition tax on previously untaxed accumulated earnings and

profits of foreign subsidiaries, and creating new taxes on foreign sourced earnings.

The Company completed the accounting for tax

effects of the Tax Act under ASC 740.

assets arise when the revenue associated prior to the Company’s unconditional right to receive a payment under a contract

with a customer ( i.e ., unbilled revenue) and are derecognized when either it becomes a receivable or the cash is received.

There were no contract assets as of December 31, 2020 and 2019.

liabilities arise when customers remit contractual cash payments in advance of our company satisfying our 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 $2,025,333 and $1,056,637 as of December 31, 2020 and 2019, respectively.

Company converted to a corporation from a limited liability company during 2018.

Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standard Codification

(“ASC”) Topic 740, “Income Taxes.”

Under this method, income tax expense is recognized for the amount

(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.

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 December 31, 2020 and 2019, 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.

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.

December 22, 2017, the Tax Cuts and Jobs Act of 2017, (the “Tax Act”) was enacted.

The Tax Act significantly revised

corporate income tax regime by, including but not limited to, lowering the U.S.

corporate income tax rate from 34% to

21% effective January 1, 2018, implementing a territorial tax system, imposing a one-time transition tax on previously untaxed

accumulated earnings and profits of foreign subsidiaries, and creating new taxes on foreign sourced earnings.

The Company completed

the accounting for tax effects of the Tax Act under ASC 740.

There were no impacts to the years ended December 31, 2020 and 2019.

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

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

Company accounts for stock-based compensation expense in accordance with the authoritative guidance on share-based payments.

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.

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.

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.

These awards will vest if certain employee\consultant-specific or company-designated performance targets are achieved.

performance thresholds are achieved, each award will convert into a designated number of the Company’s common stock.

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 9, 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 income statement.

Basic EPS is computed by dividing

the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during

Equity, for additional

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 income statement.

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

6 unchanged sentences

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 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’

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 financial statements.

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.

potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.

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.

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.

In connection with the Class Action and derivative claims and investigations

described in Note 8, Commitments and Contingencies, the Company is obligated to indemnify its officers and directors for costs incurred

in defending against these claims and investigations.

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 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

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 GAAP requires management to make estimates and assumptions that

affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes.

regularly evaluates estimates and assumptions related to the allowance for doubtful accounts, the estimated useful lives and

recoverability of long-lived assets, equity component of convertible debt, stock-based compensation, 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

In February 2016, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, Leases

(Topic 842) (“ASU 2016-02”).

ASU 2016-02 requires a lessee to record a right-of-use asset and a corresponding lease

liability, initially measured at the present value of the lease payments, on the balance sheet for all leases with terms longer

than 12 months, as well as the disclosure of key information about leasing arrangements.

Disclosures are required to provide the

amount, timing and uncertainty of cash flows arising from leases.

A modified retrospective transition approach is provided for

lessees of capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented

in the financial statements, with certain practical expedients available.

ASU 2016-02 is effective for fiscal years beginning after

December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.

In July 2018, the FASB issued

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 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.

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

preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions

that affect the amounts reported and disclosed in the 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, equity component of convertible debt, stock-based compensation, and deferred income tax asset valuation

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.

results could differ materially from those estimates.

Issued Accounting Pronouncements

February 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016-02, Leases (Topic 842) (“ASU 2016-02”).

ASU 2016-02 requires a lessee to record a right-of-use asset

and a corresponding lease liability, initially measured at the present value of the lease payments, on the balance sheet for all

leases with terms longer than 12 months, as well as the disclosure of key information about leasing arrangements.

are required to provide the amount, timing and uncertainty of cash flows arising from leases.

A modified retrospective transition

approach is provided for lessees of leases existing at, or entered into after, the beginning of the earliest comparative period

presented in the financial statements, with certain practical expedients available.

ASU 2016-02 is effective for fiscal years

beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.

2018, the FASB issued ASU No.

2018-11, Leases (Topic 842) Targeted Improvements (“ASU 2018-11”).

ASU 2018-11 allows all entities adopting

ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new

leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings

in the period of adoption.

ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component

if certain conditions are met.

The Company adopted the provisions of ASU 2016-02 and ASU 2018-11 in the quarter beginning January

The adoption resulted in the recognition of additional disclosures and a right of use asset of approximately $53,000 included

as a component of prepaid expenses and other assets and a lease liability of approximately $53,000, which is included as a component

of accounts payable and accrued liabilities.

In October 2018, the

FASB issued ASU No.

allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an

entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening

balance of retained earnings in the period of adoption.

ASU 2018-11 also allows lessors to not separate non-lease components from

the associated lease component if certain conditions are met.

We adopted the provisions of ASU 2016-02 and ASU 2018-11 in the

quarter beginning January 1, 2019.

The adoption resulted in the recognition of additional disclosures and a right of use asset

of approximately $53,000 included as a component of prepaid expenses and other assets and a lease liability of approximately $53,000,

which is included as a component of accounts payable and accrued liabilities at December 31, 2019.

The Company did not have any

right of use assets or lease liabilities at December 31, 2020.

October 2018, the FASB issued ASU No.

2018-17, Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest

Entities (“ASU 2018-17”).

ASU 2018-17 provides that indirect interests held through related parties in common

control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service

providers are variable interests.

ASU 2018-17 is effective for annual and interim periods beginning after December 15, 2019, with

early adoption permitted.

The Company adopted this new standard in the first quarter of fiscal 2020 and the adoption of the standard

did not have a material impact on its consolidated financial statements.

In August 2018, the

FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements

for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements.

ASU 2018-13 is effective in the first quarter of fiscal 2020, and earlier adoption is permitted.

The Company adopted this new standard

in the first quarter of fiscal 2020 and the adoption of the standard did not have a material impact on its consolidated financial

In January 2017, the

FASB issued ASU No.

Targeted Improvements to Related Party

Guidance for Variable Interest Entities (“ASU 2018-17”).

ASU 2018-17 provides that indirect interests held

through related parties in common control arrangements should be considered on a proportional basis for determining whether fees

paid to decision makers and service providers are variable interests.

ASU 2018-17 is effective for annual and interim periods

beginning after December 15, 2019, with early adoption permitted.

We adopted this new standard in the first quarter of fiscal

2020, and the adoption of the standard did not have a material impact on our consolidated financial statements.

August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes

to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure

requirements on fair value measurements.

ASU 2018-13 is effective in the first quarter of fiscal 2020, and earlier adoption is

We adopted this new standard in the first quarter of fiscal 2020, and the adoption of the standard did not have a material

impact on our consolidated financial statements.

January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment (“ASU

2017-04”), which eliminates step two from the goodwill impairment test.

Under ASU 2017-04, an entity should recognize an

impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill

allocated to that reporting unit.

The Company adopted this new standard in the first quarter of fiscal 2020 and the adoption of

the standard did not have a material impact on its consolidated financial statements.

In June 2018, the FASB

issued ASU No.

Simplifying the Test for Goodwill

Impairment (“ASU 2017-04”), which eliminates step two from the goodwill impairment test.

Under ASU 2017-04, an

entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair

value up to the amount of goodwill allocated to that reporting unit.

We adopted this new standard in the first quarter of fiscal

2020, and the adoption of the standard did not have a material impact on our consolidated financial statements.

June 2018, the FASB issued ASU No.

2018-07, Stock-based Compensation:

Improvements to Nonemployee Share-based Payment Accounting, which amends

the existing accounting standards for share-based payments to nonemployees.

This ASU aligns much of the guidance on measuring and

classifying nonemployee awards with that of awards to employees.

Under the new guidance, the measurement of nonemployee equity

awards is fixed on the grant date.

The effective date for the standard is for interim periods in fiscal years beginning after December

15, 2018, with early adoption permitted, but no earlier than the Company’s adoption date of Topic 606.

The new guidance is

required to be applied retrospectively with the cumulative effect recognized at the date of initial application.

The Company adopted

this new standard in the first quarter of fiscal 2019 and the adoption of the standard did not have a material impact on its consolidated

financial statements.

In June 2016, the FASB

issued ASU No.

Improvements to Nonemployee Share-based Payment

Accounting, which amends the existing accounting standards for share-based payments to nonemployees.

This ASU aligns much

of the guidance on measuring and classifying nonemployee awards with that of awards to employees.

Under the new guidance, the

measurement of nonemployee equity awards is fixed on the grant date.

The effective date for the standard is for interim periods

in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than our adoption date of Topic

The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application.

We adopted this new standard in the first quarter of fiscal 2019, and the adoption of the standard did not have a material impact

on our consolidated financial statements.

June 2016, the FASB issued ASU No.

2016-13 (“ASU 2016-13”) “Financial Instruments - Credit Losses”

(“ASC 326”):

Measurement of Credit Losses on Financial Instruments”

which requires the measurement and recognition of expected credit

losses for financial assets held at amortized cost.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected

loss model which requires the use of forward-looking information to calculate credit loss estimates.

It also eliminates the concept

of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through

an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

These changes will result

in earlier recognition of credit losses.

In November 2019, the FASB issued ASU 2019-10 “Financial Instruments –

Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)”

(“ASC 2019-10”), which defers

the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal

years, for public entities which meet the definition of a smaller reporting company.

The Company will adopt ASU 2016-13 effective

January 1, 2023.

Management is currently evaluating the effect of the adoption of ASU 2016-13 on the consolidated financial statements.

The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at

the time of adoption.

which requires the measurement and recognition of expected

credit losses for financial assets held at amortized cost.

ASU 2016-13 replaces the existing incurred loss impairment model with

an expected loss model which requires the use of forward-looking information to calculate credit loss estimates.

It also eliminates

the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be

recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

changes will result in earlier recognition of credit losses.

In November 2019, the FASB issued ASU 2019-10 “Financial Instruments

Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)”

(“ASC 2019-10”),

which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within

those fiscal years, for public entities which meet the definition of a smaller reporting company.

The Company will adopt ASU 2016-13

effective January 1, 2023.

Management is currently evaluating the effect of the adoption of ASU 2016-13 on the consolidated financial

The effect will largely depend on the composition and credit quality of our investment portfolio and the economic

conditions at the time of adoption.

Related Party Transactions

Due from Shareholder/Member

The Company’s founder

and then majority stockholder, Marc Schessel, had provided cash advances on an unsecured and non-interest-bearing basis, during

the first few years of operation.

Beginning in 2016, the founder began receiving distributions from the Company.

The amounts owed

to, and due from, the shareholder have been netted in the accompanying consolidated balance sheets.

In January 2019, this shareholder

surrendered 1,401 common shares to the Company as settlement of the balance due.

As of December 31, 2019 and 2018, the net balance

due from the founder was $0 and $1,409,284, respectively.

The balance did not carry a maturity date and there were no repayment

Due to Shareholder

In October 2016, the

Company entered into an unsecured loan agreement with a minority shareholder for up to $1,000,000 of borrowings for operating expenses.

In November 2016 and January 2018, the Company entered into additional note agreements with the minority shareholder to provide

up to an additional $2,000,000 of aggregate borrowings for which the Company had guaranteed payment from its subsidiary if the

Company was unable to repay the note.

The interest rate for the notes was 10% per annum and the notes had a maturity date in January

One of the notes bore interest at 10% for the first 90 days and was then adjusted to 18% per annum.

As previously disclosed,

on August 20, 2018, the Company entered into a SEA with Alliance MMA, as amended on December 18, 2018, in connection therewith

this minority shareholder agreed to accept shares of Series A Convertible Preferred Stock having a face value equal to the total

amount owed to him of approximately $2.1 million in full satisfaction of such indebtedness (including principal and accrued interest).

As of December 31,

2019 and 2018, the notes payable - related party totaled $0 and $1,591,491 respectively.

On September 30, 2019, the note holder

agreed to accept 17,000 shares of the Company’s common stock in 2020 as full settlement of the remaining $192,000 of principal.

The Company incurred

interest expense of $23,720 and $218,991 for the years ended December 31, 2019 and 2018, respectively, which was accrued and converted

to Series A Preferred Stock in 2019.

In addition, this shareholder

also provided office space to the Company at no cost through January 2019.

Company incurred interest expense of $23,720 to Mark Munro, a related party during the year ended December 31, 2019, which was

accrued and converted to Series A Preferred Stock in 2019.

During April, 2020, a company

affiliated with a shareholder advanced $475,000 in cash to the supplier of test kits for their purchase.

The amount due is recorded in

shareholder advance.

July 24, 2020, the Company’s then Chief Executive Officer, Marc Schessel, transferred 20,000 of his personally held common

shares to Mark Shefts, a Director as compensation for acting as a director.

The company deemed this transfer to be in consideration

for services and recorded a non-cash expense of $115,100 for the fair value of the shares transferred.

in accounts payable at December 31, 2020 are amounts due to officers of the Company in the amount of $153,838.

in accounts receivable at December 31, 2020 are amounts due from a former officer and director of the Company in the amount of

Business Combinations

Purchase accounting

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.

In accordance with purchase accounting rules

under ASC 805, the purchase consideration was $11,765,491.

The acquisition was

accounted for under the acquisition method of accounting.

The assets acquired, liabilities assumed and purchase allocation, which

is based on valuations of management, is as follows:

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.

In accordance

with purchase accounting rules under ASC 805, the purchase consideration was $11,765,491.

acquisition was accounted for under the acquisition method of accounting.

The assets acquired, liabilities assumed and purchase

allocation, which is based on valuations of management, is as follows:

Identifiable intangible assets:

3 unchanged sentences

Account payable

Current liabilities - discontinued operations

Aggregate purchase price

Identified intangible

assets consist of the following:

intangible assets consist of the following:

December 31, 2020

3 unchanged sentences

Total intangible assets

Amortization expense for the years ended December 31, 2019 and

2018, was $34,781 and $0, respectively.

As of December 31,

2019, the estimated future amortization expense on an annual basis of amortizable intangible assets is as follows:

estimated future amortization expense for the next five years and thereafter is as follows:

Year ending December 31,

The changes to the

carrying value of goodwill from January 1, 2019 through December 31, 2019 are reflected below:

December 31, 2018

Preliminary goodwill related to the acquisition of Alliance MMA

Measurement period adjustment

December 31, 2019

During the measurement

period the Company adjusted the original goodwill amount by $99,815.

Convertible Notes Receivable

On June 28, 2018, SCWorx

Acquisition Corp.

entered into a SPA with Alliance MMA, under which SCW LLC agreed to buy up to $1,000,000 in principal amount

of convertible notes and warrants to purchase up to 35,323 shares of common stock.

The notes were originally convertible into shares

of common stock at a conversion price of $7.0775 and bore interest at 10% annually.

The warrants were originally exercisable for

shares of common stock at an exercise price of $7.0775.

Under the SPA, SCWorx

Acquisition Corp.

agreed to fund (i) $500,000 at the initial closing, (ii) a second tranche of $250,000 upon the signing of a business

combination agreement with the Company and (iii) a third tranche of $250,000 upon mutual agreement of Alliance MMA and SCWorx.

On December 18, 2018, SCWorx agreed to increase the total amount

of principal from $1,000,000 to $1,250,000 and to reduce the conversion price of the final $500,000 installment of the aggregate

$1,250,000 note purchase to $3.80 per share.

The warrant exercise price for the related warrants to purchase 32,895 shares was

reduced to $5.70 per share.

Pursuant to the SPA,

during 2018, SCWorx purchased convertible notes from Alliance MMA in the principal amount of $1,035,000 and warrants to purchase

an aggregate of 45,242 shares of common stock, for an aggregate purchase price of $1,035,000.

The note for $750,000 bears interest

at 10% annually and matured on July 31, 2019.

This note was amended in January 2019 to reduce the conversion price to $4.09 per

The related warrant to acquire 26,492 shares of common stock has an exercise price of $7.0775, a term of five years and

was vested upon grant.

The note for $275,000 has a conversion price of $3.80, bore interest at 10% annually and matured on June

The warrant to acquire 18,750 shares of common stock has an exercise price of $5.70, a term of five years and was vested

During the first quarter

of 2019, SCWorx purchased additional convertible notes from Alliance MMA in the principal amount of $215,000 and warrants to purchase

an aggregate of 14,145 shares of common stock, for an aggregate purchase price of $215,000.

The note for $215,000 had a conversion

price of $3.80, bore interest at 10% annually and matured on June 22, 2019.

The warrant to acquire 14,145 shares of common stock

had an exercise price of $5.70, a term of five years and was vested upon grant.

The Alliance acquisition closed on February 1, 2019 and the

principal, commitment costs and accrued interest related to the purchased Alliance convertible notes automatically converted into

362,280 shares of Alliance common stock.

In January 2019, the SCWorx board of directors declared a dividend of the 362,280 when-converted

shares of Alliance common stock, and related warrants, to the SCWorx shareholders, two of whom waived their rights to the dividend,

resulting in the shares being distributed to shareholders who participated in the November 2018 stock offering by SCWorx Corp.

of $1,250,000.

As of December 31,

2018, the Company held a convertible note receivable from Alliance MMA with a balance of $837,317.

The Company also received warrants

from the transaction which were valued at $67,000.

Fair Value of Financial Instruments

FASB ASC 820-10 defines

fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal

or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement

ASC 820-10 also establishes a framework for measuring the fair value of assets and liabilities according to a hierarchy that

prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

The fair value hierarchy gives

the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority

to unobservable inputs (Level 3).

The hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs

by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market participants would

use in pricing the asset or liability based on market data obtained from sources independent of the Company.

Unobservable inputs

are inputs that are derived from assumptions based on management’s estimate of assumptions that market participants would

use in pricing the asset or liability based on the best information available under the circumstances.

The hierarchy is broken

down into the following three levels, based on the reliability of inputs:

Unadjusted quoted prices

in active markets for identical assets or liabilities that are accessible at the measurement date.

Significant other observable

inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not

active or other inputs that are observable or can be corroborated by observable market data.

Significant unobservable

inputs for assets or liabilities that are derived from assumptions based on management’s estimate of assumptions that market

participants would use in pricing the assets or liabilities.

Fair value is determined

on a recurring basis based on appraisals by qualified licensed appraisers and is adjusted for management’s estimates of costs

to sell and holding period discounts.

The following table

presents information as of December 31, 2018 about significant unobservable inputs (Level 3) used in the valuation of assets measured

at fair value on a recurring basis:

Financial Instrument

Valuation technique

Significant Unobservable inputs

Convertible notes receivable

Monte Carlo Simulation

Probability of conversion and interest rates on comparable financial instruments

Investment in warrants

Black-Scholes Option Pricing Model

Common Stock volatility and discount

The fair value of the

convertible notes receivable (and related discount) at the date of issuance was determined using the Monte Carlo simulation, probability

of conversion and comparable interest rates.

The assumptions used

to measure the fair value of the convertible notes receivable as of original issuance date and, as of December 31, 2018 were as

Issuance date

December 31, 2018

Risk-free interest rate

2.41% - 2.47 %

Probability of conversion into equity

Expected volatility

.09 - .59 years

The Company has recorded

a warrant asset in relation to the contingent call option upon the occurrence of a “fundamental transaction”, as defined

The fair value of the warrant asset (and related discount) at the date of issuance was determined using the Black-Scholes

option pricing model, which was deemed not to be materially different than the fair value as would have been determined using an

open simulation model such as the Monte Carlo.

The Black-Scholes model uses a combination of observable inputs (Level 2) and unobservable

inputs (Level 3) in calculating fair value.

The assumptions used

to measure the fair value of the warrants as of original issuance date and as of December 31, 2018 were as follows:

Issuance dates

Risk-free interest rate

Expected dividend yield

Expected volatility

Fair value of common stock

The balances and levels

of the assets measured at fair value on a non-recurring basis at December 31, 2018 are presented in the following table:

Quoted prices in

active markets

for identical

Significant other

observable inputs

Financial assets:

Convertible notes receivable

Investment in warrants

In relation to the acquisition, the Company no longer held these

investments at December 31, 2019.

A gain was recorded for $427,282 related to an increase in fair value and is included in other

summary of the changes in the Company’s convertible notes receivable at fair value using significant unobservable inputs

(Level 3) as of and for the year ended December 31, 2019 is as follows:

Convertible notes receivable, December 31, 2018

Notes issued (face value $215,000), at fair value

Increase in fair value

Conversion of notes into common stock

Investment in notes receivable, December 31, 2019

summary of the changes in the Company’s investment in warrants measured at fair value using significant unobservable inputs

(Level 3) as of and for the year ended December 31, 2019 is as follows:

Investment in warrants, December 31, 2018

Warrants issued to the Company

Increase in fair value

Conversion of warrants into common stock

Investment in warrants, December 31, 2019

The values of the investment in warrants at issuance and as

of December 31, 2019 were $152,000 and $0, respectively, with a gain from the change in fair value of $55,000 for the year ended

December 31, 2019 and is a component of other income in the accompanying consolidated statement of operations.

Operating Leases

The Company leases

office facilities under operating leases.

The Company’s principal executive office in New York City is under a month to

month arrangement.

The Company’s also had a lease which was set to expire in March 2020 and was renewed through May 2021.

Leases with a probable term of 12 months or less are not recorded on the balance sheet;

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 ( e.g., common-area maintenance costs) from lease components ( e.g.,

fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components

as a single lease component.

The Company uses its incremental borrowing rate for purposes of discounting lease payments.

The Company adopted

FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) electing the practical expedient that allows

the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019.

the year ended December 31, 2020, the Company determined that while its ticketing platform was still active, the negative impact that

COVID 19 had on the overall MMA industry where it is currently being utilized had potentially lessened its useful life as currently deployed.

Because of this potential impact, management has chosen to shorten the projected useful life of these assets and accelerate their amortization

expense for the years ended December 31, 2020 and 2019, was $205,219 and $34,781, respectively.

changes to the carrying value of goodwill for the years ended December 31, 2020 and 2019 are reflected below:

goodwill related to the acquisition

period adjustment

the measurement period the Company adjusted the original goodwill amount by $99,815 during the year ended December 31, 2019.

of CARES funding

May 5, 2020, the Company obtained a $293,972 unsecured loan payable through the Paycheck Protection Program (“PPP”), which

was enacted as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES ACT”).

The funds were received from

Bank of America through a loan agreement pursuant to the CARES Act.

The CARES Act was established in order to enable small businesses

to pay employees during the economic slowdown caused by COVID-19 by providing forgivable loans to qualifying businesses for up to 2.5

times their average monthly payroll costs.

The amount borrowed under the CARES Act and used for payroll costs, rent, mortgage interest,

and utility costs during the 24 week period after the date of loan disbursement is eligible to be forgiven provided that (a) the Company

uses the PPP Funds during the eight week period after receipt thereof, and (b) the PPP Funds are only used to cover payroll costs (including

benefits), rent, mortgage interest, and utility costs.

While the full loan amount may be forgiven, the amount of loan forgiveness will

be reduced if, among other reasons, the Company does not maintain staffing or payroll levels or less than 60% of the loan proceeds are

used for payroll costs.

Principal and interest payments on any unforgiven portion of the PPP Funds (the “PPP Loan”) will

be deferred to the date the SBA remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply

for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness period for six months and will accrue interest

at a fixed annual rate of 1.0% and carry a two year maturity date.

There is no prepayment penalty on the CARES Act Loan.

expects the loan to be fully forgiven.

Company’s principal executive office in New York City is under a month to month arrangement.

The Company also had a lease

in Greenwich, CT which expired in March 2020 and is now month-to-month.

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 sheet, 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 bases over the lease term.

The Company’s only two remaining

leases are month-to-month.

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.

The Company uses its incremental borrowing rate

for purposes of discounting lease payments.

Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) electing the practical expedient that

allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019.

As such, the disclosures

required under ASC 842 are not presented for periods before the date of adoption.

For the comparative periods prior to adoption,

the Company presented the disclosures which were required under ASC 840.

The Company elected the optional transition method and

adopted the new guidance on January 1, 2019 on a modified retrospective basis with no restatement of prior period amounts.

under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations,

lease classifications and accounting of initial direct costs for all asset classes at the time of adoption.

The Company also elected

not to separate lease components from non-lease components and to exclude short-term leases from its condensed consolidated balance

The Company’s adoption of the new standard as of January 1, 2019 resulted in the recognition of right-of-use assets

of approximately $53,000 and liabilities of approximately $53,000.

There was no impact to the accumulated deficit upon adoption

of Topic 842.

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 sheet, 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).

Company’s leases have remaining lease terms of one to 15 months, none of which include options to extend the leases without

a new arrangement.

As of December 31,

2019, assets recorded under operating leases were $11,065, which is included as a component of prepaid expenses and other assets.

Operating lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value

of lease payments over the lease term.

The discount rate used to determine the commencement date present value of lease payment

is our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount

equal to the lease payments in a similar economic environment.

Certain adjustments to the right-of-use asset may be required for

items such as initial direct costs paid or incentives received.

For the year ended

December 31, 2019, the components of lease expense were as follows:

Operating lease cost

Total lease cost

Other information related

to leases was as follows:

Cash paid for amounts included in the measurement of operating lease liabilities:

Operating cash flows for operating leases

Weighted Average Remaining Lease term (months) –

For the comparative periods prior to adoption, the

Company presented the disclosures which were required under ASC 840.

The Company elected the optional transition method and adopted the

new guidance on January 1, 2019 on a modified retrospective basis with no restatement of prior period amounts.

As allowed under the new

accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications

and accounting of initial direct costs for all asset classes at the time of adoption.

The Company also elected not to separate lease

components from non-lease components and to exclude short-term leases from its consolidated balance sheet.

The Company’s adoption

of the new standard as of January 1, 2019 resulted in the recognition of right-of-use assets of approximately $53,000 and liabilities

of approximately $53,000.

There was no impact to the accumulated deficit upon adoption of Topic 842.

of December 31, 2020, assets recorded under operating leases were $0.

Operating lease right of use assets and lease liabilities

are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The discount rate

used to determine the commencement date present value of lease payment is the Company’s incremental borrowing rate, which

is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar

economic environment.

Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid

or incentives received.

the year ended December 31, 2020 and 2019, the components of lease expense were as follows:

For the years ended

information related to leases was as follows:

For the years ended

paid for amounts included in the measurement of operating lease liabilities:

cash flows for operating leases

average remaining lease term (months) –

operating leases

Weighted Average Discount Rate –

average discount rate–

operating leases

The maturity analysis

of the Company’s annual undiscounted cash flows of operating lease liabilities as of December 31, 2019 are as follows:

The maturity analysis of the

Company’s annual undiscounted cash flows of operating lease liabilities as of December 31, 2019 are as follows:

Operating Lease

4 unchanged sentences

There were no commitments

for non-cancelable operating leases as of December 31, 2018 and as of December 31, 2019 there were non-cancellable lease

liabilities of $11,365.

As of December 31,

2019, the Company has no additional operating leases, other than that noted above, and no financing leases.

for non-cancelable operating leases as of December 31, 2020 and as of December 31, 2019 there were non-cancellable lease liabilities

of December 31, 2020 and 2019, the Company has no additional operating leases, other than those noted above, and no financing

Commitments and Contingencies

In the normal course

of business, the Company is subject to various contingencies.

The Company records a contingency in the consolidated financial statements

when it is probable that a liability will be incurred and the amount of the loss is reasonably estimable, or otherwise disclosed,

in accordance with ASC Topic 450, Contingencies (“ASC Topic 450”).

Significant judgment is required in both the determination

of probability and the determination as to whether a loss is reasonably estimable.

In the event the Company determines that a loss

is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range

of possible loss, then the Company will include disclosures related to such matter as appropriate and in compliance with ASC Topic

To the extent there is a reasonable possibility that the losses could exceed the amounts already accrued, the Company will,

when applicable, adjust the accrual in the period in which the determination is made, disclose an estimate of the additional loss

or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount

of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.

conducting our business, we may become involved in legal proceedings.

We 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.

April 29, 2020, a securities class action case was filed in the United States District Court for the Southern District of New

York against us and our CEO.

The action is captioned Daniel Yannes, individually and on behalf of all others similarly situated,

Plaintiff vs.

Schessel, Defendants.

May 27, 2020, a second securities class was filed in the United States District Court for the Southern District of New York against

us and our CEO.

The action is captioned Caitlin Leeburn, individually and on behalf of all others similarly situated, Plaintiff

Schessel, Defendants.

June 23, 2020, a third securities class was filed in the United States District Court for the Southern District of New York against

us and our CEO.

The action is captioned Jonathan Charles Leonard, individually and on behalf of all others similarly situated,

Schessel, Defendants.

three lawsuits allege that our company and our CEO mislead investors in connection with our April 13, 2020 press release with

respect to the sale of COVID-19 rapid test kits.

The plaintiffs in these actions are seeking unspecified monetary damages.

three class actions were consolidated on September 18, 2020 and Daniel Yannes was designated lead plaintiff.

A consolidated Amended

Complaint (“CAC”) was filed on October 19, 2020.

The Defendants filed a motion to dismiss the CAC on November 18,

2020, and the briefing on that motion was complete on January 8, 2021.

We are still awaiting a ruling on the motion, and we intend

to continue vigorously defending against this lawsuit.

June 15, 2020, a shareholder derivative claim was filed in the United States District Court for the Southern District of New York

against Marc S.

Schessel, Steven Wallitt (current directors), and Robert Christie and Charles Miller (former directors) (“Director

Defendants”).

The action is captioned Javier Lozano, derivatively on behalf of SCWorx Corp., Plaintiff, v.

Miller, Steven Wallitt, Defendants, and SCWorx Corp., Nominal Defendant.

This lawsuit alleges that the Director Defendants

breached their fiduciary duties to the Company, including by misleading investors in connection with our April 13, 2020 press

release with respect to the sale of COVID-19 rapid test kits, failing to correct false and misleading statements and failing to

implement proper disclosure and internal controls.

The Plaintiff, on our behalf, is seeking an award of monetary damages, improvements

in our disclosure and internal controls, and legal fees.

The Director Defendants intend to vigorously defend against these proceedings.

This derivative action is also still pending, and the plaintiff in such action has agreed to voluntarily stay the case until a

ruling on a motion to dismiss, which we intend to file in the securities class action case.

August 21, 2020, a shareholder derivative claim was filed in the United States District Court for the Southern District of New

York against Marc S.

Schessel, Steven Wallitt (current directors), and Robert Christie and Charles Miller (former directors) (“Director

Defendants”).

The action is captioned Josstyn Richter, derivatively on behalf of SCWorx Corp., Plaintiff, v.

Miller, Steven Wallitt, Defendants, and SCWorx Corp., Nominal Defendant.

This lawsuit alleges that the Director Defendants

breached their fiduciary duties to the Company, including by misleading investors in connection with our April 13, 2020 press

release with respect to the sale of COVID-19 rapid test kits, failing to correct false and misleading statements and failing to

implement proper disclosure and internal controls.

The Plaintiff, on our behalf, is seeking an award of monetary damages, improvements

in our disclosure and internal controls, and legal fees.

The Director Defendants intend to vigorously defend against these proceedings.

August 27, 2020, the Lozano and Richter derivative actions were consolidated and jointly stayed until a ruling on a motion to

dismiss which we filed in the securities class action case.

September 30, 2020, a shareholder derivative action was filed in the Supreme Court State of New York, New York County against

Schessel and Steven Wallitt (current directors) and Charles Miller (a former director).

The action is captioned Hemrita

Zarins, derivatively on behalf of SCWorx Corp.

Schessel, Charles Miller, Steven Wallitt and SCWorx, Nominal Defendant.

This lawsuit alleges that the Director Defendants breached their fiduciary duties to the Company, including by misleading investors

in connection with the Company’s April 13, 2020 press release with respect to the sale of COVID-19 rapid test kits, failing

to correct false and misleading statements and failing to implement proper disclosure and internal controls.

The Plaintiff, on

our behalf, is seeking an award of monetary damages, improvements in our disclosure and internal controls, and legal fees.

October 28, 2020, Zarins withdrew this action and refiled an action in the Chancery Court in the State of Delaware on October

Zarins named as Defendants Marc S.

Schessel, Robert Christie (a former director), Steven Wallitt and SCWorx, Nominal

The allegations, as well as the relief sought, in the Delaware Chancery Court proceeding are substantially the same

as that filed in the New York State Action.

This action has been stayed pending the ruling on the motion to dismiss in the aforementioned

securities class action.

The Director Defendants intend to vigorously defend against these proceedings.

addition, following the April 13, 2020 press release and related disclosures (related to COVID-19 rapid test kits), the Securities

and Exchange Commission made an inquiry regarding the disclosures we made in relation to the transaction involving COVID-19 test

On April 22, 2020, the Securities and Exchange Commission ordered that trading in the securities of our company be suspended

because of “questions and concerns regarding the adequacy and accuracy of publicly available information in the marketplace”

(the “SEC Trading Halt”).

The SEC Trading Halt expired May 5, 2020, at 11:59 PM EDT.

We are fully cooperating with

the SEC’s investigation and are providing documents and other requested information.

April 2020, we received related inquiries from The Nasdaq Stock Market and the Financial Industry Regulatory Authority (FINRA).

We have been fully cooperating with these agencies and providing information and documents, as requested.

On May 5, 2020, the

Nasdaq Stock Market informed us that it had initiated a “T12 trading halt,”

which means the halt will remain in place

until we have fully satisfied Nasdaq’s request for additional information.

We fully cooperated with Nasdaq and responded

to all of Nasdaq’s information requests as they were issued.

The T12 trading halt was lifted on August 10, 2020.

in April 2020, we were contacted by the U.S.

Attorney’s Office for the District of New Jersey, which is seeking information

and documents from our officers and directors relating primarily to the April 13, 2020 press release concerning COVID-19 rapid

We are fully cooperating with the U.S.

Attorney’s Office in its investigation.

connection with these actions and investigations, the Company is obligated to indemnify its officers and directors for costs incurred

in defending against these claims and investigations.

Because the Company currently does not have the resources to pay for these

costs, its directors and officers liability insurance carrier has agreed to indemnify these persons even though the $750,000 retention

under such policy has not yet been met.

The Company estimates it is currently obligated to pay approximately $700,000 of the retention,

which payments could have a material adverse effect on the Company.

The $700,000 has been accrued in accounts payable and accrued

liabilities in these financial statements.

f/k/a Alliance MMA, Inc.,

619536/2019 (N.Y.

Ct., Suffolk County)

On October 3, 2019, David Klarman, a former employee of Alliance, served

a complaint against SCWorx seeking $400,000.00 for a breach of his employment agreement with Alliance.

Klarman claims

that Alliance ceased paying him his salary in March 2018 as well as other alleged contractual benefits.

does not believe that it owes the amount demanded and intends to vigorously defend against these claims.

On March 6, 2020,

SCWorx filed an answer and counterclaims against Mr.

On September 18, 2020, the Court granted Klarman's counsel's motion

to withdraw as counsel due to "irreconcilable differences."

The Court stayed the case for 45 days after service of

the Court's order.

Klarman's wife, Marie Klarman, Esq., filed a Notice of Appearance on November 6, 2020 and filed a motion

on November 9, 2020 seeking various forms of relief -- in violation of the Court's Individual Rules and the Commercial Division Rules.

We opposed Klarman’s motion on December 31, 2020 and the case was marked fully submitted on January 21, 2021.

and Order dated March 26, 2021, the Court granted Klarman’s motion to dismiss four (4) of fourteen (14) defenses, denied Klarman’s

motion to dismiss SCWorx’s counterclaims against him;

denied Klarman’s motion for summary judgment and denied Klarman’s

motion to strike allegations contained in the Affirmative Defenses and Counterclaims based on his contention that such allegations were

“scandalous”

or prejudicial.

On April 7, 2021, Klarman filed a Reply to the Counterclaims, denying the material allegations

and interposed numerous affirmative defenses.

The Court has issued a preliminary conference order, setting a discovery cut-off of

October 2022.

this time, we are unable to predict the duration, scope, or possible outcome of these investigations and lawsuits.

Stockholders’

The Company has 45,000,000

common shares authorized with a par value of $0.001 per share.

On July 17, 2019, we

issued 65,789 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion

of 25,000 of such shares of Series A Convertible Preferred Stock.

On September 9, 2019,

we issued 200,000 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion

of 76,000 of such shares of Series A Convertible Preferred Stock.

On September 16, 2019,

we issued 43,081 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion

of 16,371 of such shares of Series A Convertible Preferred Stock.

On September 16, 2019,

we issued 108,422 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion

of 41,200 of such shares of Series A Convertible Preferred Stock.

On September 25, 2019,

we issued 73,156 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to

such holders pursuant to the terms of such of the Series A Convertible Preferred Stock.

The shares had a fair value of $250,000.

On September 30, 2019,

we issued 24,843 shares of our common stock to a former employee in settlement of litigation.

The shares of common stock had a

fair value of $75,000.

On November 11, 2019

we issued 200,000 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed

to such holders pursuant to the terms of such of the Series A Convertible Preferred Stock.

Company has 45,000,000 common shares authorized with a par value of $0.001 per share.

of Shares Pursuant to Conversion of Series A Preferred Stock

On July 17, 2019, we issued

65,789 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 25,000 of such

shares of Series A Convertible Preferred Stock.

On September 9, 2019, we issued

200,000 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 76,000 of

such shares of Series A Convertible Preferred Stock.

On September 16, 2019, we

issued 43,081 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 16,371

of such shares of Series A Convertible Preferred Stock.

On September 16, 2019, we

issued 108,422 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 41,200

of such shares of Series A Convertible Preferred Stock.

On September 25, 2019, we

issued 73,156 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders

pursuant to the terms of such of the Series A Convertible Preferred Stock.

The shares had a fair value of $250,000.

On November 20, 2019,

we issued 25,000 shares of our common stock to a former employee in per the terms of a settlement agreement.

The shares of common

stock had a fair value of $73,250.

5, 2019, we issued 50,000 shares of our common stock to a director as compensation.

On September 30, 2019, we

issued 24,843 shares of our common stock to a former employee in settlement of litigation.

The shares of common stock had a fair value

On December 11, 2019

we issued 6,579 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to

such holders pursuant to the terms of such of the Series A Convertible Preferred Stock.

On November 11, 2019 we issued

200,000 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant

to the terms of such of the Series A Convertible Preferred Stock.

The shares had a fair value of $584,000.

On December 23, 2019 we issued 9,211 shares of our common stock

to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant to the terms of such

of the Series A Convertible Preferred Stock.

On November 20, 2019, we issued

25,000 shares of our common stock to a former employee in per the terms of a settlement agreement.

The shares of common stock had a fair

value of $73,250.

On December 5, 2019, we issued

50,000 shares of our common stock to a director as compensation.

The shares of common stock had a fair value of $135,000.

On December 11, 2019 we issued

6,579 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant

to the terms of such of the Series A Convertible Preferred Stock.

The shares had a fair value of $21,053.

Series A Preferred Stock

On December 19, 2018,

the Company authorized Series A Preferred Shares consisting of 900,000 authorized shares, with a par value of $0.001.

On December 23, 2019 we issued

9,211 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant

to the terms of such of the Series A Convertible Preferred Stock.

The shares had a fair value of $26,343.

January 2020, the Company issued 5,264 shares of common stock to a holder of its Series A Convertible Preferred Stock upon the

conversion of 2,000 of such shares of Series A Convertible Preferred Stock.

February 2020, the Company issued an aggregate of 172,369 shares of common stock to holders of its Series A Convertible Preferred

Stock upon the conversion of an aggregate of 65,500 of such shares of Series A Convertible Preferred Stock.

April 2020, the Company issued an aggregate of 1,043,935 shares of common stock to holders of its Series A Convertible Preferred

Stock upon the conversion of an aggregate of 396,695 of such shares of Series A Convertible Preferred Stock.

May 2020, the Company issued an aggregate of 51,316 shares of common stock to holders of its Series A Convertible Preferred Stock

upon the conversion of an aggregate of 19,500 of such shares of Series A Convertible Preferred Stock.

August 2020, the Company issued 13,158 shares of common stock to a holder of its Series A Convertible Preferred Stock upon the

conversion of 5,000 of such shares of Series A Convertible Preferred Stock.

October 2020, the Company issued 13,158 shares of common stock to a holder of its Series A Convertible Preferred Stock upon the

conversion of 5,000 of such shares of Series A Convertible Preferred Stock.

of Shares to Current and Former Employees and Directors

January 8, 2020, the Company issued 50,000 shares of common stock to a former employee per the terms of a settlement agreement.

March 12, 2020, the Company issued 16,667 shares of common stock to an employee pursuant to a vesting schedule.

April 15, 2020, the Company issued 3,913 shares of common stock to an employee pursuant to a vesting schedule.

April 16, 2020, the Company issued 5,264 shares of common stock valued at $36,584.80 or $6.95 per share to a director pursuant

to a vesting schedule.

April 21, 2020, the Company issued 30,303 shares of common stock to a former employee pursuant to a vesting schedule.

June 24, 2020, the Company issued 25,000 shares of common stock to an employee pursuant to a vesting schedule.

August 25, 2020, the Company issued 87,255 shares of common stock valued at $142,226 to a former employee per the terms of a settlement

agreement, settling $125,000 of accrued expenses and recorded a loss on settlement of $17,226.

Transfer of Common Stock to Consultants

On or about February 1, 2019,

1, 2019, the Company’s founder and CEO as well as another shareholder transferred an aggregate of approximately 1,379,000

and 144,000 shares of common stock, respectively to certain consultants of the Company, of which approximately 983,000 and 144,000

shares of common stock, respectively were sold to consultants in exchange for promissory notes.

The Company accounted for

these share transfers as stock-based compensation expense based upon the Black-Scholes model as if these were stock option grants

made by the Company.

The Company used the following inputs in the Black-Scholes option pricing model, expected life of 5

years, risk-free interest rate of 2.51%, volatility 92% and dividend yield of 0%.

As a result, the Company recognized approximately

$3.6 million of stock-based compensation expense during the first quarter of 2019 related to these share transfers.

Additionally,

approximately 396,000 shares of common stock were transferred by the founder and CEO to contractors for no consideration.

Company accounted for these share transfers as stock-based compensation based upon the underlying common stock price of $4.37

as of the date of transfer.

The Company recognized approximately $1.7 million of stock-based compensation expense related

to these transfers during the first quarter of 2019.

Stock Incentive Plan

In connection with

Alliance’s acquisition of SCW FL Corp., the Company adopted Alliance’s Second Amended and Restated 2016 Equity Incentive

Plan (“2016 Plan”).

The 2016 Plan allows the Company to grant shares of the Company’s common stock to the Company’s

directors, officers, employees and consultants.

On January 30, 2019, the Alliance shareholders approved the amendment of the 2016

Plan to increase the number of shares of common stock available for issuance thereunder to 3,000,000 shares of common stock.

the Company’s founder and CEO as well as another shareholder transferred an aggregate of approximately 1,379,000 and 144,000 shares

of common stock, respectively to certain consultants of the Company, of which approximately 983,000 and 144,000 shares of common stock,

respectively were sold to consultants in exchange for promissory notes.

The Company accounted for these share transfers as stock-based

compensation expense based upon the Black-Scholes model as if these were stock option grants made by the Company.

The Company used

the following inputs in the Black-Scholes option pricing model, expected life of 5 years, risk-free interest rate of 2.51%, volatility

92% and dividend yield of 0%.

As a result, the Company recognized approximately $3.6 million of stock-based compensation expense during

the first quarter of 2019 related to these share transfers.

Additionally, approximately 396,000 shares of common stock were transferred

by the founder and CEO to contractors for no consideration.

The Company accounted for these share transfers as stock-based compensation

based upon the underlying common stock price of $4.37 as of the date of transfer.

The Company recognized approximately $1.7 million

of stock-based compensation expense related to these transfers during the first quarter of 2019.

of Shares Pursuant to Exercises of Common Stock Warrants

April 14, 2020, a holder of common stock warrants exercised 7,000 warrants for a cash payment of, $38,570.

of Shares Pursuant to Cashless Exercises of Common Stock Warrants

April 2020, holders of common stock warrants exercised an aggregate of 520,925 warrants using a cashless exercise into 321,155

shares of common stock.

May 2020, holders of common stock warrants exercised an aggregate of 56,982 warrants using a cashless exercise into 26,034 shares

of common stock.

August 2020, holders of common stock warrants exercised an aggregate of 116,448 warrants using a cashless exercise into 68,715

shares of common stock.

of Shares Pursuant to Cashless Exercises of Stock Options

April 2020, holders of common stock options exercised an aggregate of 105,028 options using a cashless exercise into 57,534 shares

of common stock.

August 2020, holders of common stock options exercised an aggregate of 55,263 options using a cashless exercise into 28,890 shares

of common stock.

of Shares Pursuant to Settlement of Accounts Payable

April 16, 2020, the Company issued 100,000 shares of common stock in full settlement of $640,517 of accounts payable.

had a fair value of $6.95 per share.

May 12, 2020, the Company issued 104,567 shares of common stock in full settlement of $93,150 of accounts payable and recorded

a loss on settlement of $509,160.

The shares had a fair value of $5.76 per share.

June 24, 2020, the Company issued 80,000 shares of common stock and warrants to purchase 100,000 shares of common stock, of which 50,000

shall be exercisable at $3.80 per share and the remaining 50,000 shall be exercisable at $5.80 per share, in each case for a term of

5 years, in connection with the termination of a consulting arrangement and in full settlement of any and all claims again the Company.

The Company had previously accrued $195,000 in connection with this consulting arrangement.

The stock had a fair value of $2.37 per share.

August 27, 2020, the Company issued 17,000 shares of common stock valued at $40,800 in full settlement of $48,790 of accounts

The shares had a fair value of $2.20 per share.

The Company recorded a gain on settlement of accounts payable of $7,990.

September 10, 2020, the Company issued 140,000 shares of common stock valued at $806,400 in full settlement of $88,950 of accounts

payable and recorded a loss on settlement of $717,450.

The shares had a fair value of $5.76 per share.

of Shares for Equity Financing

December 31, 2020, The Company issued 36,842 shares of common stock and 46,053 five year warrants to purchase shares of common

stock at $4.00 per share pursuant to the prior receipt of $140,000 in equity financing.

Preferred Stock

Issuance of Series A Preferred Stock

On December 19, 2018, the

Company authorized Series A Preferred Shares consisting of 900,000 authorized shares, with a par value of $0.001.

May 2020, the Company received $515,000 of a committed $565,000 from the sale of 135,527 shares of common stock (at a price of $3.80

per share) and warrants to purchase 169,409 shares of common stock, at an exercise price of $4.00 per share.

As of December 31, 2020,

the full amount has not been received and only $140,000 worth of the shares and warrants have been issued.

The remaining $375,000 is

included in equity financing within current liabilities on the consolidated balance sheet.

Incentive Plan

connection with Alliance’s acquisition of SCW FL Corp., the Company adopted Alliance’s Second Amended and Restated

2016 Equity Incentive Plan (“2016 Plan”).

The 2016 Plan allows the Company to grant shares of the Company’s

common stock to the Company’s directors, officers, employees and consultants.

On January 30, 2019, the Alliance shareholders

approved the amendment of the 2016 Plan to increase the number of shares of common stock available for issuance thereunder to

3,000,000 shares of common stock.

February 13, 2019, the Board of Directors of the Company granted an aggregate of 425,000 restricted stock units (“RSUs”)

under the 2016 Plan, of which an aggregate of 325,000 shares were granted to management and vest quarterly over the next three

years, and of which 100,000 were issued to a consultant and vest quarterly over one year.

U pon the effectiveness under the

Securities Act of a registration statement on Form S-8 with respect to the shares covered by the 2016 Plan, t hese

RSUs vest in twelve equal quarterly instalments, commencing on the grant date of February 13, 2019 and had a grant

date fair value of approximately $2.7 million.

The Company also granted an additional

525,000 RSUs which are subject to performance vesting, of which an aggregate of 225,000 shares were issued to management and 300,000

were issued to a consultant.

The 225,000 shares issued to management were cancelled in April 2020, when the person’s

employment with the Company terminated.

Additionally, the board of directors awarded stock options under the 2016 Plan to

each of the four independent board members to acquire an aggregate of 53,572 shares of the Company’s common stock and to

an employee to acquire 25,000 shares.

The stock options have a term of five years, an exercise price of $6.49 per share, vest quarterly

over four quarters beginning on the grant date of February 13, 2019 and had a grant date fair value of $431,000.

The Company determined

the fair value of the stock options using the Black-Scholes model with the following inputs:

expected life 10 years, risk-free

interest rate 0.25%, dividend yield 0% and expected volatility 90%.

On December 5, 2019,

the Company issued 50,000 RSU’s to a member of the board of directors.

The RSU’s vested immediately and had a fair

value of $135,000.

Additionally, on December 10, 2019, the board of directors awarded stock options under the 2016 Plan to each

of the three remaining independent directors to 50,000 shares of the Company’s common stock.

under the 2016 Plan, of which an aggregate of 325,000 shares were granted to management and vest quarterly over the next three years,

and of which 100,000 were issued to a consultant and vest quarterly over one year.

U pon the effectiveness under the Securities

Act of a registration statement on Form S-8 with respect to the shares covered by the 2016 Plan, t hese

RSUs vest in twelve equal quarterly instalments, commencing on the grant date of February 13, 2019 and had a grant date fair

value of approximately $2.7 million.

The Company also granted an additional 525,000 RSUs which

are subject to performance vesting, of which an aggregate of 225,000 shares were issued to management and 300,000 were issued to a consultant.

225,000 shares issued to management were cancelled in April 2020, when the person’s employment with the Company terminated.

Additionally,

the board of directors awarded stock options under the 2016 Plan to each of the four independent board members to acquire an aggregate

of 53,572 shares of the Company’s common stock and to an employee to acquire 25,000 shares.

The stock options have a term of five

years, an exercise price of $6.49 per share, vest quarterly over four quarters beginning on the grant date of February 13, 2019 and had

a grant date fair value of $431,000.

The Company determined the fair value of the stock options using the Black-Scholes model with the

following inputs:

expected life 10 years, risk-free interest rate 0.25%, dividend yield 0% and expected volatility 90%.

December 5, 2019, the Company issued 50,000 RSU’s to a member of the board of directors.

The RSU’s vested immediately and

had a fair value of $135,000.

Additionally, on December 10, 2019, the board of directors awarded stock options under the 2016 Plan to

each of the three remaining independent directors to 50,000 shares of the Company’s common stock.

The stock options have a term

of five years, an exercise price of $2.64 per share, vest immediately on the grant date of December 10, 2019 and had a grant date

fair value of $388,746.

The Company determined the fair value of the stock options using the Black-Scholes model with the following

of five years, an exercise price of $2.64 per share, vest immediately on the grant date of December 10, 2019 and had a grant date fair

value of $388,746.

The Company determined the fair value of the stock options using the Black-Scholes model with the following inputs:

expected life 10 years, risk-free interest rate 1.0%, dividend yield 0% and expected volatility 100%.

On June 28, 2019,

the Company terminated the aforementioned consultant and reversed the stock-based compensation expense recognized during the first

quarter 2019 totaling $162,250 as the consultant had not vested in any of the RSU’s.

On October 26, 2019,

the employment of the Employee who received the 250,000 RSU’s on February 13, 2019, terminated and the remaining stock based

compensation for the employee was cancelled as the employee had not vested in the shares.

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 year ended December 31, 2019 are:

On June 28, 2019, the Company

terminated the aforementioned consultant and reversed the stock-based compensation expense recognized during the first quarter 2019 totaling

$162,250 as the consultant had not vested in any of the RSU’s.

On October 26, 2019, the employment

of the Employee who received the 250,000 RSU’s on February 13, 2019, terminated and the remaining stock based compensation for the

employee was cancelled as the employee had not vested in the shares.

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 year

ended December 31, 2019 are:

Warrant Grants

5 unchanged sentences

Exercisable at December 31, 2019

As of December 31,

2019 and 2018, the total unrecognized expense for unvested stock options and restricted stock awards, net of actual forfeitures,

was approximately $3.2 million and $0, respectively, to be recognized over a three-year period for restricted stock awards and

one year for option grants from the date of grant.

Stock-based compensation expense for the

years ended December 31, 2019 and 2018 was as follows:

Year Ended December 31,

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 year ended December 31, 2020 are:

Warrant Grants

Stock Option Grants

Restricted Stock Units

Balance at December 31, 2019

Cancelled/Forfeited

Balance at December 31, 2020

Exercisable at December 31, 2020

The Company has classified the warrant as having

Level 2 inputs, and has used the Black-Scholes option-pricing model to value the warrant.

The fair value at the issuance dates for

the above warrant was based upon the following management assumptions:

Issuance dates

Risk-free interest rate

Expected dividend yield

Expected volatility

Fair value of common stock

The Company’s outstanding warrants and options

at December 31, 2020 are as follows:

Warrants Outstanding

Warrants Exercisable

Exercise Price Range

Weighted Average

Contractual Life (in

Weighted Average

Exercise Price

Intrinsic Value

$3.80 - $141.17

Options Outstanding

Options Exercisable

Exercise Price Range

Weighted Average

Contractual Life (in

Weighted Average

Exercise Price

Intrinsic Value

$2.64 - $6.84

of December 31, 2020 and 2019, the total unrecognized expense for unvested stock options and restricted stock awards was approximately $2.5 million and $3.2, respectively, to be recognized over a three-year period for restricted stock

awards and one year for option grants from the date of grant.

compensation expense for the years ended December 31, 2020 and 2019 was as follows:

For the years ended December 31,

Stock-based compensation expense

Stock-based compensation expense categorized

by the equity components for the years ended December 31, 2019 and 2018 is as follows:

Year Ended December 31,

Stock option awards

Transfer of common stock by founders to contractors

Stock compensation is included in general and administrative

expenses on the consolidated statements of operations

compensation expense categorized by the equity components for the years ended December 31, 2020 and 2019 is as follows:

For the years ended

option awards

of common stock by founders to contractors

compensation is included in general and administrative expenses on the consolidated statements of operations

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:

As of December 31,

Stock options

Total common stock equivalents

By virtue of a merger

of the limited liability company into a corporation, the Company became a corporation during 2018.

The significant items comprising the Company’s net deferred

taxes as of December 31, 2019 and 2018 are as follows:

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.

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 years ended

common stock equivalents

virtue of a merger of the limited liability company into a corporation, the Company became a corporation during 2018.

significant items comprising the Company’s net deferred taxes as of December 31, 2020 and 2019 are as follows:

As of December 31,

Net operating loss

Stock options

Unrealized losses

Stock options and compensation

Deferred revenue

7 unchanged sentences

Net deferred tax asset (liability)

The components of the provision for (benefit

from) income taxes consist of the following:

components of the provision for (benefit from) income taxes consist of the following:

As of December 31,

1 unchanged sentence

$ (1,673,758 )

change in valuation allowance

The provision for (benefit

from) income taxes varies from the amount computed by applying the statutory rate for reasons summarized below:

As of December 31, 2019

As of December 31, 2018

Net loss before tax per financial statements

$ (1,575,843 )

Statutory rate

State tax rate

Conversion to C Corporation

Permanent items

change in valuation allowance

As of December 31,

2019 and 2018, the Company had federal net operating loss carryforwards of approximately $28.3 million and $56,416, respectively,

available to offset future taxable income.

As of December 31, 2019 and 2018, the Company had state loss carry-forwards of approximately

$10.8 million and $11,352, respectively.

provision for (benefit from) income taxes varies from the amount computed by applying the statutory rate for reasons summarized

of December 31,

loss before tax per financial statements

$ (11,312,500 )

in valuation allowance

of December 31, 2020 and 2019, the Company had federal net operating loss carryforwards of approximately $32.6 million and $28.3 million,

respectively, available to offset future taxable income.

As of December 31, 2020 and 2019, the Company had state loss carry-forwards

of approximately $15.1 million and $10.8, 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 December 31, 2019 and 2018 was $7,088,189 and $73,790, respectively.

The net change in valuation allowance for the years

ended December 31, 2019 and 2018 was an increase of $7,014,399 and $73,790, respectively.

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

The federal net operating loss carryforwards

can be carried forward indefinitely and state loss carryforwards begin to expire in 2039.

valuation allowance as of December 31, 2020 and 2019 was $8,893,457 and $7,088,189, respectively.

The net change in valuation allowance

for the years ended December 31, 2020 and 2019 was an increase of $1,805,268 and $7,014,399, respectively.

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.

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 December 31, 2019 and 2018.

The Company had no

unrecognized tax benefits during 2019 or 2018.

By statute, all tax years are open to examination by the major taxing jurisdictions

to which the Company is subject.

Legal Proceedings

In conducting

our business, we may become involved in legal proceedings.

We 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.

On April 29, 2020, a securities

class action case was filed in the United States District Court for the Southern District of New York against the Company and its

The action is captioned Daniel Yannes, individually and on behalf of all others similarly situated, Plaintiff vs.

Schessel, Defendants.

On May 27, 2020, a second

securities class was filed in the United States District Court for the Southern District of New York against the Company and its

The action is captioned Caitlin Leeburn, individually and on behalf of all others similarly situated, Plaintiff v.

Schessel, Defendants.

Both lawsuits allege that the Company and its CEO mislead investors in connection with

the Company’s April 13, 2020 press release with respect to the sale of COVID-19 rapid test kits.

The plaintiffs in these

actions are seeking unspecified monetary damages.

The Company intends to vigorously defend against these proceedings.

In connection

with these actions, the Company may be obligated to indemnify its CEO and any of its officers or directors who incur any liability

or expense incurred as a result of serving at our company’s request in such capacity.

In addition, following the

April 13, 2020 press release and related disclosures (related to COVID-19 rapid test kits), the Securities and Exchange Commission

made an inquiry regarding the disclosures the Company made in relation to the transaction involving COVID-19 test kits.

22, 2020, the Securities and Exchange Commission ordered that trading in the securities of the Company be suspended because of

“questions and concerns regarding the adequacy and accuracy of publicly available information in the marketplace”

“SEC Trading Halt”).

The SEC Trading Halt expired May 5, 2020, at 11:59 PM EDT.

The Company is fully cooperating

with the SEC’s investigation and is providing documents and other requested information.

In April 2020, the Company

received related inquiries from The Nasdaq Stock Market and the Financial Industry Regulatory Authority (FINRA).

The Company has

been fully cooperating with these agencies and providing information and documents, as requested.

On May 5, 2020, the Nasdaq Stock

Market informed the Company that it has initiated a “T12 trading halt,”

which means the halt will remain in place

until the Company has fully satisfied Nasdaq's request for additional information.

The Company continues to fully cooperate with

Nasdaq and respond to Nasdaq’s information requests as they are issued.

The T12 trading halt remains in effect as of the

filing of this Form 10-K.

Also in April 2020, the

Company was contacted by the U.S.

Attorney’s Office for the District of New Jersey, which is seeking information and documents

from the Company’s officers and directors relating primarily to the April 13, 2020 press release concerning COVID-19 rapid

The Company is fully cooperating with the U.S.

Attorney’s Office in its investigation.

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 December 31, 2020 and 2019.

Company had no unrecognized tax benefits during 2020 or 2019.

By statute, all tax years are open to examination by the major taxing

jurisdictions to which the Company is subject.

Subsequent Events

Formation of Direct-Worx

LLC subsidiary

On March 16, 2020, the Company formed

a new subsidiary, Direct-Worx LLC, a Delaware corporation.

Issuance of Shares Pursuant to Conversion

of Series A Preferred Stock

January 2020, three Series A Preferred stockholders converted 55,000 shares of Series A Preferred Stock into 144,738 shares of

common stock.

During February 2020,

two Series A Preferred stockholders converted 12,500 shares of Series A Preferred Stock into 32,895 shares of common stock.

During April 2020,

fifteen Series A Preferred stockholders converted 396,695 shares of Series A Preferred Stock into 1,043,935 shares of common stock.

May 2020, three Series A Preferred stockholders converted 19,500 shares of Series A Preferred Stock into 51,316 shares of

common stock.

Issuance of Shares Pursuant to Cashless

Exercises of Common Stock Warrants

During April 2020,

thirteen holders of common stock warrants exercised 520,925 warrants using a cashless exercise into 352,488 shares of common stock.

During May 2020, four

holders of common stock warrants exercised 56,982 warrants using a cashless exercise into 26,034 shares of common stock.

Issuance of Shares Pursuant to Exercises

of Common Stock Warrants

On April 14, 2020,

a holder of common stock warrants exercised 7,000 warrants for a cash payment of $38,570.

Issuance of Shares Pursuant to Cashless

Exercises of Stock Options

During April 2020,

five holders of common stock options exercised 108,978 options using a cashless exercise into 26,361 shares of common stock.

Issuance of Shares Pursuant to Settlement

of Accounts Payable

On April 16, 2020,

the Company issued 100,000 shares of common stock in full settlement of $640,517 of accounts payable.

On May 12, 2020, the

Company issued 104,567 shares of common stock in full settlement of $93,150 of accounts payable.

Issuance of Shares Pursuant to Stock

On March 12, 2020,

the Company issued 16,667 shares of common stock to an employee pursuant to a vesting schedule.

On April 15, 2020,

the Company issued 3,913 shares of common stock to a consultant of the company as stock compensation.

On April 16, 2020,

the Company issued 5,264 shares of common stock to a consultant of the company as stock compensation.

On April 21, 2020,

the Company issued 30,303 shares of common stock to an employee pursuant to a vesting schedule.

Issuance of Shares Pursuant to a Settlement

On January 8, 2020,

the Company issued 50,000 shares of common stock to a former employee per the terms of a separation settlement.

Issuance of Restricted Stock Units

On March 17, 2020,

the Company granted 80,000 restricted stock units to each of the members of the Board of Directors, for a total of 320,000 restricted

Such units vest fully on September 17, 2020.

On April 7, 2020, the

Company granted 1,569,000 restricted stock units to 36 individuals for services rendered.

Such shares vest in between six months

and two years from the date of grant.

On April 7, 2020,

the Company granted 329,000 restricted stock units to its Chief Executive Officer.

Such shares vest 50% upon the Company filing

its 2019 Form 10-K and 50% upon the Company filing its 2020 Form 10-K.

On May 15, 2020, the Company

granted 20,000 restricted stock units to three of the four members of the Board of Directors.

The fourth member, in connection

with his appointment to the board on May 15, 2020, was granted 100,000 restricted stock units.

The total amount of 160,000 restricted

stock units granted by the Company vest fully on September 17, 2020.

Securities Class Action and Investigations

On April 29, 2020, a securities

class action case was filed in the United States District Court for the Southern District of New York against the Company and

The action is captioned Daniel Yannes, individually and on behalf of all others similarly situated, Plaintiff vs.

Schessel, Defendants.

On May 27, 2020, a second

securities class was filed in the United States District Court for the Southern District of New York against the Company and its

The action is captioned Caitlin Leeburn, individually and on behalf of all others similarly situated, Plaintiff v.

Schessel, Defendants.

Both lawsuits allege that the Company and its CEO mislead investors in connection with

the Company’s April 13, 2020 press release with respect to the sale of COVID-19 rapid test kits.

The plaintiffs in these

actions are seeking unspecified monetary damages.

The Company intends to vigorously defend against these proceedings.

In connection

with these actions, the Company may be obligated to indemnify its CEO and any of its officers or directors who incur any liability

or expense incurred as a result of serving at our company’s request in such capacity.

In addition, following the

April 13, 2020 press release and related disclosures (related to COVID-19 rapid test kits), the Securities and Exchange Commission

made an inquiry regarding the disclosures the Company made in relation to the transaction involving COVID-19 test kits.

22, 2020, the Securities and Exchange Commission ordered that trading in the securities of the Company be suspended because of

“questions and concerns regarding the adequacy and accuracy of publicly available information in the marketplace”

“SEC Trading Halt”).

The SEC Trading Halt expired May 5, 2020, at 11:59 PM EDT.

The Company is fully cooperating

with the SEC’s investigation and is providing documents and other requested information.

In April 2020, the Company

received related inquiries from The Nasdaq Stock Market and the Financial Industry Regulatory Authority (FINRA).

The Company has

been fully cooperating with these agencies and providing information and documents, as requested.

On May 5, 2020, the Nasdaq Stock

Market informed the Company that it has initiated a “T12 trading halt,”

which means the halt will remain in place until

the Company has fully satisfied Nasdaq's request for additional information.

The Company continues to fully cooperate with Nasdaq

and respond to Nasdaq’s information requests as they are issued.

The T12 trading halt remains in effect as of the filing

of this Form 10-K.

Also in April 2020, the

Company was contacted by the U.S.

Attorney’s Office for the District of New Jersey, which is seeking information and documents

from the Company’s officers and directors relating primarily to the April 13, 2020 press release concerning COVID-19 rapid

The Company is fully cooperating with the U.S.

Attorney’s Office in its investigation.

Equity Offering

During May 2020 the

Company received $515,000 in connection with an equity financing.

This transaction is subject to

execution of definitive documents.

Company’s operations and business have experienced disruption due to the unprecedented conditions surrounding the COVID-19

pandemic spreading throughout the United States and the world.

The New York and New Jersey area, where the Company is headquartered,

is currently at one of the epicenters of the coronavirus outbreak in the United States.

The Company has been following the recommendations

of local health authorities to minimize exposure risk for its team members since the outbreak.

addition, the Company’s customers (hospitals) have also experienced extraordinary disruptions to their businesses and supply

chains, while experiencing unprecedented demand for health care services related to COVID-19.

As a result of these extraordinary

disruptions to our customers’

business, the Company’s customers are currently focused on meeting the nation’s

health care needs in response to the COVID-19 pandemic.

As a result, there is a significant risk that the Company’s customers

will not be able to focus any resources on expanding the utilization of the Company’s services, which could adversely impact

the Company’s future growth prospects, at least until the adverse effects of the pandemic subside.

In addition, the financial

impact of COVID-19 on the Company’s hospital customers could cause the hospital to delay payments due to us for services,

which could negatively impact the Company’s cash flows.

Receipt of CARES funding

On May 5, 2020, we received

$293,972 in financing from the U.S.

of CARES funding

March 17, 2021, we received $139,595 in financing from the U.S.

government’s Payroll Protection Program (“PPP”).

We entered into a loan

agreement with Bank of America.

We entered into a loan agreement with Bank of America.

This loan agreement was pursuant to the CARES Act.

The CARES Act was established in order to enable

small businesses to pay employees during the economic slowdown caused by COVID-19 by providing forgivable loans to qualifying

businesses for up to 2.5 times their average monthly payroll costs.

The amount borrowed under the CARES Act is eligible to be

forgiven provided that (a) the Company uses the PPP Funds during the eight week period after receipt thereof, and (b) the PPP

Funds are only used to cover payroll costs (including benefits), rent, mortgage interest, and utility costs.

The amount of loan

forgiveness will be reduced if, among other reasons, the Company does not maintain staffing or payroll levels.

Principal and interest

payments on any unforgiven portion of the PPP Funds (the “PPP Loan”) will be deferred for six months and will accrue

interest at a fixed annual rate of 1.0% and carry a two year maturity date.

There is no prepayment penalty on the CARES Act Loan.

EXHIBIT INDEX

Pursuant to the rules

and regulations of the SEC, the Company has filed certain agreements as exhibits to this Annual Report on Form 10-K.

These agreements

may contain representations and warranties by the parties.

These representations and warranties have been made solely for the benefit

of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties,

(ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject

to more recent developments, which may not be fully reflected in the Company’s public disclosure, (iii) may reflect the allocation

of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material

to investors.

Accordingly, these representations and warranties may not describe the Company’s actual state of affairs at

the date hereof and should not be relied upon.

Exhibit Description

Certificate of Incorporation, as amended February 1, 2019

Second Amended and Restated 2016 Equity Incentive Plan (Incorporated by reference to Annex A to the Company’s Definitive Proxy Statement filed with the SEC on January 17, 2019)

Supply Agreement with ProMedical Equipment Pty Ltd.

Dated April 10,2020 (terminated April 29, 2020)*

Purchase Order

with Rethink My Healthcare, Inc (terminated April 23, 2020).*

Supply Agreement dated April 29, 2020(name of supplier, unit price and total units redacted)*

Agreement dated April 16, 2020 (identity of service

provider redacted)*

Executive Employment Agreement between the Company and James T.

Schweikert, effective June 1, 2019 (terminated April 29, 2020) (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on June 13, 2019*

Executive Employment Agreement between the Company and Marc Schessel, effective February 1, 2019*

Subsidiaries of the Registrant*

Consent of Registered Public Accounting Firm, WithumSmith + Brown, PC*

The CARES Act was established

in order to enable small businesses to pay employees during the economic slowdown caused by COVID-19 by providing forgivable loans

to qualifying businesses for up to 2.5 times their average monthly payroll costs.

The amount borrowed under the CARES Act is eligible

to be forgiven provided that (a) the Company uses the PPP Funds during the eight week period after receipt thereof, and (b) the

PPP Funds are only used to cover payroll costs (including benefits), rent, mortgage interest, and utility costs.

The amount of

loan forgiveness will be reduced if, among other reasons, the Company does not maintain staffing or payroll levels.

and interest payments on any unforgiven portion of the PPP Funds (the “PPP Loan”) will be deferred for six months

and will accrue interest at a fixed annual rate of 1.0% and carry a two year maturity date.

There is no prepayment penalty on

the CARES Act Loan.

in Management

January 19, 2021, Marc.

Schessel’s employment as CEO of SCWorx, Corp.

ceased by mutual agreement, and the Company and

Schessel concurrently entered into a consulting agreement (“Consulting Agreement”) under which Mr.

Schessel will

provide consulting services to the Company.

The Consulting Agreement provides for annual consulting fees of $295,000.

such agreement provides for cash and equity bonuses based on revenue generation.

The Consulting Agreement is for a term of two

years, but may be terminated by the Company for “cause”

(as defined) or by either party for any reason or no reason

upon sixty days prior notice.

The Consulting Agreement also contains non-competition and non-solicitation provisions which are

applicable during the term of the Consulting Agreement and for a period of two years thereafter.

January 6, 2021, The Company issued 72,369 shares of common stock and 90,461 5 year warrants to purchase shares of common stock

at $4.00 per share pursuant to the prior receipt of $275,000 in equity financing.

February 8, 2021, the Company issued 52,632 shares of common stock to a holder of its Series A Convertible Preferred Stock upon

the conversion of 20,000 of such shares of Series A Convertible Preferred Stock.

January 25, 2021 and February 8, 2021, the Company issued a total of 8,832 shares of common stock to holders of fully vested restricted

to the rules and regulations of the SEC, the Company has filed certain agreements as exhibits to this Annual Report on Form 10-K.

These agreements may contain representations and warranties by the parties.

These representations and warranties have been made

solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to

such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in

such agreements and are subject to more recent developments, which may not be fully reflected in the Company’s public disclosure,

(iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different

from what may be viewed as material to investors.

Accordingly, these representations and warranties may not describe the Company’s

actual state of affairs at the date hereof and should not be relied upon.

of Incorporation, as amended February 1, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s 10-K filed

with the SEC on April 1, 2019)

and Restated By-laws (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 (File

333-213166) filed with the SEC on August 16, 2016)

Consulting Agreement dated January 19, 2020 with Marc Schessel*

Equity Financing and warrant agreement dated December 31, 2020*

Equity Financing and warrant agreement dated January 6, 2021*

USA Procurement Purchase agreement dated May 26, 2020*

USA Procurement Settlement Agreement dated March 12, 2021*

Consent of independent registered public accounting firm*

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

2 unchanged sentences

Section 1350 Certification of the Chief Financial Officer*

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Calculation Linkbase Document

XBRL Taxonomy Labels Linkbase Document

XBRL Taxonomy Presentation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith

Taxonomy Extension Schema Document

Taxonomy Calculation Linkbase Document

Taxonomy Labels Linkbase Document

Taxonomy Presentation Linkbase Document

Taxonomy Extension Definition Linkbase Document

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures