What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-09-24 · 164 added, 203 removed, 380 unchanged (49% of the section changed)

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partnerships.

We currently host our solutions,

serve our customers, and support our operations in the United States through an agreement with a third party hosting and infrastructure

We currently host our

solutions, serve our customers, and support our operations in the United States through an agreement with a third party hosting and infrastructure

provider, RackSpace.

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These estimates relate to revenue recognition, the assessment of recoverability

of goodwill and intangible assets, the assessment of useful lives and the recoverability of property, plant and equipment, the valuation

and recognition of stock-based compensation expense, recognition and measurement of deferred income tax assets and liabilities, the assessment

of unrecognized tax benefits, and others.

Actual results could differ from those estimates, and material effects on our consolidated operating

results and consolidated financial position may result.

Refer to Note 3, Summary of Significant Accounting Policies, in the accompanying

consolidated financial statements, for a full description of our accounting policies.

of goodwill and intangible assets, the assessment of useful lives and the recoverability of property, plant and equipment, the allowances

for credit losses, the valuation and recognition of stock-based compensation expense, recognition and measurement of deferred income tax

assets and liabilities, the assessment of unrecognized tax benefits, equity of convertible debt, and others.

Actual results could differ

from those estimates, and material effects on our consolidated operating results and consolidated financial position may result.

to Note 3, Summary of Significant Accounting Policies, in the accompanying consolidated financial statements, for a full description of

our accounting policies.

Basis of Presentation

The accompanying consolidated

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

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

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.

financial statements have been prepared in accordance with GAAP and the rules and regulations of the U.S.

Securities and Exchange Commission

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.

Principles of Consolidation

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no collateral.

Significant customers are

those which represent more than 10% of the Company’s revenue for each period presented, or the Company’s accounts receivable

balance as of each respective balance sheet date.

For each significant customer, revenue as a percentage of total revenue and accounts

receivable as a percentage of total net accounts receivable are as follows:

Significant customers are those

which represent more than 10% of the Company’s revenue for each period presented, or the Company’s accounts receivable balance

as of each respective balance sheet date.

For each significant customer, revenue as a percentage of total revenue and accounts receivable

as a percentage of total net accounts receivable are as follows:

For the years ended

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ratings), adjusted to reflect current economic conditions and knowledge or customer relationships.

Management considers the following factors when determining the collectability of specific customer accounts:

customer creditworthiness, past transaction history with the customer, current industry trends, changes in customer payment terms, and

specific customer situations.

The Company’s normal collection cycle ranges between thirty and 60 days.

Estimated uncollectible amounts

are charged to earnings and a credit to a valuation allowance.

Balances which remain outstanding after reasonable collection efforts are

written off through a charge to the valuation allowance and a credit to accounts receivable The Company has assessed all receivables are

collectable and did not record an allowance for credit losses as of December 31, 2023 and 2022.

Management considers the following

factors when determining the collectability of specific customer accounts:

customer creditworthiness, past transaction history with the

customer, current industry trends, changes in customer payment terms, and specific customer situations.

The Company’s normal collection

cycle ranges between thirty and 60 days.

Estimated uncollectible amounts are charged to earnings and a credit to a valuation allowance.

Balances which remain outstanding after reasonable collection efforts are written off through a charge to the valuation allowance and

a credit to accounts receivable The Company recorded an allowance for credit losses of $20,000 as of December 31, 2024.

The Company has

assessed all receivables are collectable and did not record an allowance for credit losses as of December 31, 2023.

We determine if an arrangement

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than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.

For further discussion of

goodwill, refer to Note 5, Goodwill.

For further discussion of goodwill,

refer to Note 5, Goodwill.

Revenue Recognition

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are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer.

Management has identified

the following performance obligations in our contracts with customers:

Management has identified the

following performance obligations in our contracts with customers:

Data Normalization:

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

A contract will typically

include Data Normalization, SaaS and Maintenance, which are distinct performance obligations and are accounted for separately.

A contract will typically include

Data Normalization, SaaS and Maintenance, which are distinct performance obligations and are accounted for separately.

The transaction

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Costs to Fulfill a Contract

Costs to fulfill a contract typically include costs related to satisfying

performance obligations as well as general and administrative costs that are not explicitly chargeable to customer contracts.

These expenses

are recognized and expensed when incurred in accordance with Accounting Standard Codification (“ASC”) 340-40.

Costs to fulfill a contract

typically include costs related to satisfying performance obligations as well as general and administrative costs that are not explicitly

chargeable to customer contracts.

These expenses are recognized and expensed when incurred in accordance with Accounting Standard Codification

(“ASC”) 340-40.

Cost of Revenue

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corporation from a limited liability company during 2018.

We use the asset and liability method of accounting for income taxes

in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of:

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

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.

We use the asset and liability

method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense

is recognized for the amount of:

(i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary

differences resulting from matters that have been recognized in an entity’s financial statements or tax returns.

Deferred tax assets

and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences

are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the

results of operations in the period that includes the enactment date.

Valuation allowances are provided

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We have no material uncertain tax positions for any of the reporting periods presented.

On December 22, 2017, the

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

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.

corporate income tax

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

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

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stock-based compensation expense for such modification is accounted for as a repurchase of the original award and the issuance of a new

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

The Company estimates the forfeiture rate based on historical experience of its stock-based awards that are granted, exercised and

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.

Calculating stock-based compensation

expense requires the input of highly subjective assumptions, including the expected term of the stock-based awards, stock price volatility,

and the pre-vesting option forfeiture rate.

The Company estimates the expected life of options granted based on historical exercise patterns,

which are believed to be representative of future behavior.

The Company estimates the volatility of the Company’s common stock on

the date of grant based on historical volatility.

The assumptions used in calculating the fair value of stock-based awards represent the

Company’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.

As a result, if factors change and the Company uses different assumptions, its stock-based compensation expense could be materially different

in the future.

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares

expected to vest.

The Company estimates the forfeiture rate based on historical experience of its stock-based awards that are granted,

exercised and cancelled.

If the actual forfeiture rate is materially different from the estimate, stock-based compensation expense could

be significantly different from what was recorded in the current period.

The Company also grants performance based restricted stock awards

to employees and consultants.

These awards will vest if certain employee\consultant-specific or company-designated performance targets

are achieved.

If minimum performance thresholds are achieved, each award will convert into a designated number of the Company’s

common stock.

If minimum performance thresholds are not achieved, then no shares will be issued.

Based upon the expected levels of achievement, stock-based

compensation is recognized on a straight-line basis over the requisite service period.

The expected levels of achievement are reassessed

over the requisite service periods and, to the extent that the expected levels of achievement change, stock-based compensation is adjusted

in the period of change and recorded on the statements of operations and the remaining unrecognized stock-based compensation is recorded

over the remaining requisite service period.

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.

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insurance coverage that is intended to reduce our financial exposure and may enable us to recover any payments above the applicable policy

In connection with the Class

Action claims and investigations described in Item 3.

Legal Proceedings of this Annual Report on Form 10-K, the Company is obligated to

indemnify its officers and directors for costs incurred in defending against these claims and investigations.

Contingencies

From time to time, we may be involved in legal and administrative proceedings

and claims of various types.

We record a liability in our consolidated financial statements for these matters when a loss is known or

considered probable and the amount can be reasonably estimated.

Management reviews these estimates in each accounting period as additional

information becomes known and adjusts the loss provision when appropriate.

If the loss is not probable or cannot be reasonably estimated,

a liability is not recorded in the consolidated financial statements.

If a loss is probable but the amount of loss cannot be reasonably

estimated, we disclose the loss contingency and an estimate of possible loss or range of loss (unless such an estimate cannot be made).

From time to time, we may be

involved in legal and administrative proceedings and claims of various types.

We record a liability in our consolidated financial statements

for these matters when a loss is known or considered probable and the amount can be reasonably estimated.

Management reviews these estimates

in each accounting period as additional information becomes known and adjusts the loss provision when appropriate.

If the loss is not

probable or cannot be reasonably estimated, a liability is not recorded in the consolidated financial statements.

If a loss is probable

but the amount of loss cannot be reasonably estimated, we disclose the loss contingency and an estimate of possible loss or range of loss

(unless such an estimate cannot be made).

We do not recognize gain contingencies until they are realized.

Legal costs incurred in connection with loss contingencies are expensed

Legal costs incurred in connection

with loss contingencies are expensed as incurred.

Refer to Note 8, Commitments and Contingencies, for further information.

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.

The Company regularly evaluates estimates and assumptions related to allowance for credit losses, 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.

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.

The Company regularly evaluates estimates and assumptions related

to allowance for credit losses, 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

To the extent there are material differences between the estimates and the actual results, future results of operations will

Recently Issued Accounting Pronouncements

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Results of Operations

The COVID-19 Pandemic has disrupted our

business and the business of our hospital customers.

Our operations and business

have experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic which spread throughout the United States

and the world.

The Company has followed the recommendations of local health authorities to minimize exposure risk for its team members

since the outbreak.

In addition, the Company’s

customers (hospitals) 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 were 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 were not able to focus resources on expanding the utilization of the Company’s

services, which has adversely impacted the Company’s 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.

Year Ended December 31, 2024 Compared to

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Cost of revenues

General and administrative

Operating expenses

Other income (expense)

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$ (3,981,144 )

$ (2,133,738 )

Revenue for the year ended

December 31, 2024 was $2,989,599, compared to $3,804,943 in revenue for the year ended December 31, 2023.

The decline in revenue is primarily

related to a slight decrease in overall revenues from SaaS customer sales during the period due to fluctuations in our customer base.

This decrease was primarily

due to the expiration and non-renewal of certain customer contracts.

Cost of Revenues

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related to a decrease in labor costs during the current year.

General and administrative expenses decreased $817,337 to $2,719,740

for the year ended December 31, 2023, as compared to $3,537,077 in the same period of 2022.

This decrease was primarily due decreases

in non-cash stock compensation expense of approximately $780,000, legal and professional fees of approximately $87,000, inventory write-downs

of approximately $157,000 and bad debt expense of approximately $30,000, partially offset by to an increase in accruals for legal settlement

of approximately $462,000.

We expect general and administrative expenses (excluding non-cash compensation expenses) to remain relatively

flat during 2024 with the exception of increases in our sales force.

We had other losses of $2,530,482

During the year ended December 31, 2023 consisting of write-down of goodwill of $2,524,034 and interest expense of $6,448.

We had other income of $276,036

during the year ended December 31, 2022 related primarily to the forgiveness of PPP loans.

Overall gross profit for the year ended December 31, 2024 decreased by approximately

41% from the prior year due to non-renewals of contracts outpacing cost reductions.

Operating Expenses

expenses decreased $714,329 to $2,005,411 for the year ended December 31, 2024, as compared to $2,719,740 in the same period of 2023.

This decrease was primarily due to decreases in non-cash stock compensation expense of approximately $361,000, salaries and wages of $43,000,

and bad debt expense of approximately $23,000, partially offset by an increase in Accounting fees of approximately $89,000 and legal and

professional fees of approximately $53,000.

Accounting fees increased

in the current year due to the Company’s change of independent registered accounting firm.

Legal fees increased during the current

year as the company strived to settle the remaining pending litigation matters.

The Company expects neither of these increases will continue

Other income of $123,201 during

the year ended December 31, 2024 consisted of a gain on forgiveness of payables of $227,402, partially offset by interest expense of $104,201.

We had other losses of $2,530,482 during the year ended December 31, 2023 consisting of write-down of goodwill of $2,524,034 and interest

expense of $6,448.

Liquidity and Capital Resources

Going Concern

Management has concluded on

our consolidated financial statements for the year ended December 31, 2023 that conditions exist that raise substantial doubt about our

ability to continue as a going concern since we may not have sufficient capital resources from operations and existing financing arrangements

to meet our operating expenses and working capital requirements.

As of December 31, 2023, we had a working capital deficit of $1,898,625

and accumulated deficit of $29,839,841.

During the year ended December 31, 2023, we had a net loss of $3,981,144 and used $806,164 of

cash in operations.

We have historically incurred operating losses and may continue to incur operating losses for the foreseeable future.

We believe that these conditions raise substantial doubt about our ability to continue as a going concern.

This may hinder our future

ability to obtain financing or may force us to obtain financing on less favorable terms than would otherwise be available.

If we are unable

to develop sufficient revenues and additional customers for our products and services, we may not generate enough revenue to sustain our

business, and we may fail, in which case our stockholders would suffer a total loss of their investment.

There can be no assurance that

we will be able to continue as a going concern.

Recent Fundraising

As of December 31, 2024, we

had only limited cash on hand, a working capital deficit of $1,333,171 and accumulated deficit of $30,976,066.

During the year ended December

31, 2023, the Company issued an aggregate 134,056 shares of common stock for aggregate gross proceeds of $572,906 as under its existing

equity line of credit.

We are currently experiencing

a working capital deficiency, have limited cash on hand, and we are experiencing negative cash flows from operations.

31, 2024, we had a net loss of $1,136,225 and used $1,084,292 of cash in operations.

We have historically incurred operating losses and

may continue to incur operating losses for the foreseeable future.

We believe that these conditions raise substantial doubt about our

ability to continue as a going concern.

This may hinder our ability to obtain financing or may force us to obtain financing on less favorable

terms than would otherwise be available.

If we are unable to develop sufficient revenues and additional customers for our products and

services, we may not generate enough revenue to sustain our business, and we may fail, in which case our stockholders would suffer a total

loss of their investment.

There can be no assurance that we will be able to continue as a going concern.

As of year-end, we experienced

a working capital deficiency, had limited cash on hand, and we are experiencing negative cash flows from operations.

Consequently, we

have an immediate need for additional capital to fund our operations and the implementation of our business plan.

had an immediate need for additional capital to fund our operations and the implementation of our business plan.

Based on our current business

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cash per month over the next twelve months, or approximately $800,000.

Currently we have only limited cash on hand, and consequently,

we are unable to implement our current business plan.

Accordingly, we have an immediate need for additional capital to fund our operating

In order to remedy this liquidity

deficiency, we have cut spending and are actively seeking to raise additional funds through the sale of equity and debt securities.

we will need to generate substantial positive operating cash flows.

Our internal sources of funds will consist of cash flows from operations,

but not until we begin to realize substantial additional revenues from the sale of our products and services.

As previously stated, our

operations are generating negative cash flows, and thus adversely affecting our liquidity.

If we are able to secure sufficient funding

in the first half of 2024 to fully implement our business plan, we expect that our operations could begin to generate positive cash flows

by the end of 2024, which should ameliorate our liquidity deficiency.

If we are unable to raise additional funds in the near term, we

will not be able to fully implement our business plan, in which case there could be a material adverse effect on our results of operations

and financial condition.

In the event we do not generate sufficient funds from revenues or financing

through the issuance of common stock or from debt financing, we will be unable to fully implement our business plan and pay our obligations

as they become due, any of which circumstances would have a material adverse effect on our business prospects, financial condition, and

results of operations.

The accompanying financial statements do not include any adjustments that might be required should the Company

be unable to recover the value of its assets or satisfy its liabilities (see Note 2 to the Financial Statements – Liquidity and

Going Concern).

Based on our current limited

availability of funds, we expect to spend minimal amounts on expansion of our sales organization, software development and capital expenditures.

We expect to fund any future software development expenditures through a combination of cash flows from operations and proceeds from equity

and/or debt financing.

If we are unable to generate positive cash flows from operations, and/or raise additional funds (either through

debt or equity), we will be unable to fund our software development expenditures, in which case, there could be an adverse effect on our

business and results of operations.

deficiency and fund the future growth of our business, we entered into a securities purchase agreement on January 17, 2025 for gross proceeds

of $1,500,000.

We intend to utilize these funds to pursue growth through the expansion of our sales force, product offering and project

capabilities.

However, there can be no guarantee of success, and any shortfall may impact our ability to raise additional funds if needed.

Net cash used in operating activities

$ (1,084,292 )

Net cash provided by investing activities

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31, 2024 have resulted in negative cash flows from operations of $1,084,292.

If we are able to raise additional capital during first half

of 2024 and generate additional revenue through the acquisition of new customers, we believe we may begin to generate positive operating

We intend to use the additional capital raised during January

2025 to generate additional revenue through the acquisition of new customers, and believe we may begin to generate positive operating

cash flows by the end of 2025.

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Net cash used in operating

activities was $806,164 for the year ended December 31, 2023, mainly related to the net loss of $3,981,144, a decrease in deferred revenue

obligations of $201,250 and an increase in net accounts receivable of $16,780, partially offset by non-cash stock-based compensation

of $361,363 related to various equity awards to employees and non-employees, $48,000 in bad debt expense, a $25,647 decrease in prepaid

expenses and an increase of $433,966 in accounts payable and accrued liabilities.

activities was approximately $1,084,000 for the year ended December 31, 2024, mainly related to the net loss of approximately $1,136,000,

a gain on forgiveness of accounts payable of $227,000, and a $93,000 increase in accounts receivable, partially offset by amortization

of discounts on debt agreements of $50,000, common stock issued for settlement of payables and legal settlements of $346,000, and a $39,000

decrease in accounts payable and accrued liabilities, and credit loss expense of $25,000.

Net cash used in operating

activities was $540,036 for the year ended December 31, 2022, mainly related to the net loss of $1,847,406 and a gain on forgiveness of

PPP Loans of $279,191, partially offset by non-cash stock-based compensation of $1,141,932 related to various equity awards to employees

and non-employees, $78,125 in bad debt expense, and a $156,600 decrease in inventory valuation.

activities was approximately $806,000 for the year ended December 31, 2023, mainly related to the net loss of $3,981,000, a decrease in

deferred revenue obligations of $201,000 and an increase in net accounts receivable of $17,000, partially offset by non-cash stock-based

compensation of $361,000 related to various equity awards to employees and non-employees, $48,000 in bad debt expense, a $26,000 decrease

in prepaid expenses and an increase of $434,000 in accounts payable and accrued liabilities.

Investing Activities

The Company did not have

any investing activities during the year ended December 31, 2024.

The Company received $165,000

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all funds received by the Company were contributed upon the termination of the acquisition agreement.

The Company did not have any

investing activities during the year ended December 31, 2022.

Financing Activities

Net cash provided by financing

activities was approximately $1,100,000 for the year ended December 31, 2024, consisting of proceeds loans payable of $995,000, and the

sale of common stock of $168,000, partially offset by repayments of loans payable of $63,000.

Net cash provided by financing

activities was $483,000 for the year ended December 31, 2023.

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payable and $32,000 in payments on shareholder advance.

Net cash provided by financing

activities was $718,423 for the year ended December 31, 2022.

This consisted of proceeds of $725,050 from a common stock placement partially

offset by loan repayments of $6,627.

Contractual Cash Obligations

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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 7. Management’s Discussion and Analysis