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    WORX   US78396V1098

SCWORX CORP.

(WORX)
Delayed Nasdaq  -  04:00 2022-09-30 pm EDT
0.7100 USD   -1.39%
09/06SCWorx Announces New Product and the Signing of Two New Hospital Customers
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09/06Scworx Corp. : Entry into a Material Definitive Agreement, Unregistered Sale of Equity Securities, Financial Statements and Exhibits (form 8-K)
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SCWORX CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/15/2022 | 02:26pm EDT

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




Corporate Information



SCWorx, LLC (n/k/a SCW FL Corp.) ("SCW LLC") was a privately held limited liability company which was organized in Florida on November 17, 2016. On December 31, 2017, SCW LLC acquired Primrose Solutions, LLC ("Primrose"), a Delaware limited liability company, which became its wholly-owned subsidiary and focused on developing functionality for the software now used and sold by SCWorx Corp. (the "Company" or "SCWorx"). The majority interest holders of Primrose were interest holders of SCW LLC and based upon Staff Accounting Bulletin Topic 5G, the technology acquired has been accounted for at predecessor cost of $0. To facilitate the planned acquisition by Alliance MMA, Inc., a Delaware corporation ("Alliance"), on June 27, 2018, SCW LLC merged with and into a newly-formed entity, SCWorx Acquisition Corp., a Delaware corporation ("SCW Acquisition"), with SCW Acquisition being the surviving entity. Subsequently, on August 17, 2018, SCW Acquisition changed its name to SCWorx Corp. On November 30, 2018, our company and certain of our stockholders agreed to cancel 6,510 shares of common stock. In June 2018, we began to collect subscriptions for common stock. From June to November 2018, we collected $1,250,000 in subscriptions and issued 3,125 shares of common stock to new third-party investors. In addition, on February 1, 2019, (i) SCWorx Corp. (f/k/a SCWorx Acquisition Corp.) changed its name to SCW FL Corp. (to allow Alliance to change its name to SCWorx Corp.) and (ii) Alliance acquired SCWorx Corp. (n/k/a SCW FL Corp.) in a stock-for-stock exchange transaction and changed Alliance's name to SCWorx Corp., which is our company's current name, with SCW FL Corp. becoming our subsidiary. On March 16, 2020, in response to the COVID-19 pandemic, SCWorx established a wholly-owned subsidiary, Direct-Worx, LLC.

Our principal executive offices are located at 590 Madison Avenue, 21st Floor, New York, New York, 10022. Our telephone number is (844) 472-9679. The Company also had a lease in Greenwich, CT which expired in March 2020 and became a month to month tenancy until it was terminated in April 2021.

In this Quarterly Report, the terms "SCWorx," the "Company," "we," "us" and "our" refer to SCWorx Corp., a Delaware corporation, unless the context requires otherwise. Unless specified otherwise, the historical financial results in this Annual Report are those of our company and our subsidiaries on a consolidated basis.




Our Business



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

SCWorx has developed and markets health care information technology solutions and associated services that improve healthcare processes and information flow within hospitals and other healthcare facilities. SCWorx's software enables a healthcare provider to simplify 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"). Customers use our software to achieve multiple operational benefits, such as supply chain cost reductions, decreased accounts receivables aging, accelerated and completed patient billing in less than 72 hours, contract optimization, increased supply chain management and total cost visibility via dynamic AI connections that automatically structures, repairs, synchronizes and maintains purchasing ("MMIS"), Clinical ("EMR") and finance ("CDM") systems. SCWorx's customers include some of the most prestigious healthcare organizations in the United States. SCWorx offers an advanced software solution for the management of health care providers' foundational business applications, empowering its customers to significantly reduce costs, drive better clinical outcomes and enhance their revenue. SCWorx supports the interrelationship between the three core healthcare provider systems: Supply Chain, Financial and Clinical. This solution integrates common keys within distinct and variable databases that allows the repaired foundational data to move seamlessly from one application to another enabling our Customers to drive supply chain cost reductions, optimize contracts, increase supply chain management ("SCM"), cost visibility, control rebates and contract administration fees.



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Currently, the business systems of hospitals are frequently deficient and often unconnected from each other. These deficiencies in part result from the vast amount of unstructured, manually created and managed data that proliferates within the hospital's supply chain, clinical and billing systems. SCWorx's solutions are designed to improve the flow of information quickly and accurately between the buy-side (supply chain purchasing systems), the consumption-side (clinical documentation systems like the electronic medical records ("EMR")) and billing and collection systems (patient billing systems). The currently poor state of interoperability limits the potential value of each independent system and requires significant expense and extensive human resource commitments from senior personnel to stay ahead of problems and complete basic administrative tasks. SCWorx provides an information service that ultimately leads to safer, more cost effective and financially efficient patient care.

SCWorx has demonstrated that in order for the core hospital systems to function properly there must be a Single Source of Truth ("SSOT") for all products utilized and ultimately billed for. The Item Master File ("IMF"), which is a database of all known products used in hospital and health care settings, must be accurate at all times and expanded upon to hold both clinical and financial attributes. An accurate and expanded Item Master File supports interoperability between the supply chain, clinical and financial systems by delivering, on demand, reports detailing the purchasing, utilization and revenue associated with each and every item used, allowing hospitals to better manage their business. The Single Source of Truth establishes a common vernacular and syntax, while assigning a consistent meaning across the healthcare provider's core systems and accurately migrating data from one application to another and removing disconnects between critical business systems.

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;




  ? EMR management;




  ? CDM management;




  ? contract management;




  ? request for proposal automation;




  ? rebate management;




  ? Integration of acquired management;




  ? big data analytics modeling;




  ? data integration and warehousing; and




  ? ScanWorx.



SCWorx continues to provide transformational data-driven solutions to some of the finest, most well-respected healthcare providers in the United States. Clients are geographically dispersed throughout the country. Our focus is to assist healthcare providers with issues they have pertaining to data interoperability.

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.



                                       22




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.

SCWorx, as part of the acquisition of Alliance MMA, owns an online event ticketing platform focused on serving regional MMA ("mixed martial arts") promotions which it has paused due to COVID-19.

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. We incorporate standard IT security measures, including but not limited to; firewalls, disaster recovery, backup, etc. Our operations are dependent upon the integrity, security and consistent operation of various information technology systems and data centers that process transactions, communication systems and various other software applications used throughout our operations. Disruptions in these systems could have an adverse impact on our operations. We could encounter difficulties in developing new systems or maintaining and upgrading existing systems. Such difficulties could lead to significant expenses or to losses due to disruption in our business operations.

In addition, our information technology systems are subject to the risk of infiltration or data theft. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage information technology systems change frequently and may be difficult to detect or prevent over long periods of time. Moreover, the hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise the security of our information systems. Unauthorized parties may also attempt to gain access to our systems or facilities through fraud or deception aimed at our employees, contractors or temporary staff. In the event that the security of our information systems is compromised, confidential information could be misappropriated, and system disruptions could occur. Any such misappropriation or disruption could cause significant harm to our reputation, lead to a loss of sales or profits or cause us to incur significant costs to reimburse third parties for damages.

Impact of the COVID-19 Pandemic

The Company's 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 outbreak adversely impacted new customer acquisition. 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.

The Company sought 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. On 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 had become difficult to source due to unexpected disruptions within the supply chain due to the COVID-19 pandemic. The products the Company sought to source included:



       ?   Test Kits - the Company currently has no contracted supply of Rapid
           Test Kits.




                                       23





       ?   PPE - Personal Protective Equipment (PPE) includes items such as masks,
           gloves, gowns, shields, etc. Currently the Company has no contracted
           supply of PPE.



Regarding PPE and Test Kits, during the second quarter of 2020 the Company limited its role to acting as an intermediary between buyers and sellers with commission based compensation. We are endeavoring to sell our existing inventory of PPE products primarily through use of our internal and external sales personnel.

Results of Operations - three months ended June 30, 2022




Our operating results for the three month period ended June 30, 2022 and 2021
are summarized as follows:


                                 Three Months Ended
                              June 30,        June 30,
                                2022            2021         Difference

Revenue                      $  992,424     $  1,095,824     $  (103,400 )
Cost of revenues                623,548          735,682        (112,134 )
General and administrative      932,239        1,605,686        (673,447 )
Other (expense) income                -                -               -
Provision for income taxes            -                -               -
Net loss                     $ (563,363 )   $ (1,245,544 )   $   682,181




Revenues


Revenue for the three months ended June 30, 2022 was $992,424 as compared to $1,095,824 for the three months ended June 30, 2021. This decrease was primarily due to normal fluctuations in our billing cycle. We expect near term revenues to remain relatively flat, unless and until we raise sufficient capital to fully implement our business plan.



Operating Expenses



Cost of revenues


Cost of revenues was $623,548 for the three months ended June 30, 2022 compared to $735,682 for the same period in 2021. The decrease was primarily the result of a reduction in salaries coupled with a decrease in cloud hosting expense.



General and administrative


General and administrative expenses decreased $673,447 to $932,239 for the three months ended June 30, 2022, as compared to $1,605,686 in the same period of 2021. The decrease is primarily attributable to approximate decreases in stock-based compensation of $432,00, legal and professional fees of $52,000, accounting fees of $141,000, bad debt reserve expense of $75,000 and inventory write-downs of $50,000. We expect general and administrative expenses to remain relatively flat during the rest of 2022, until we complete a capital raise, in which case we would expect expenses to grow as we ramp our sales force.



Net Loss


For the three months ended June 30, 2022, we incurred a net loss of $563,363 compared to a net loss of $1,245,544 for the same period in 2021.

Results of Operations - six months ended June 30, 2022




Our operating results for the six month period ended June 30, 2022 and 2021 are
summarized as follows:


                                   Six months ended
                               June 30,         June 30,
                                 2022             2021         Difference

Revenue                      $  2,023,373     $  2,244,081     $  (220,708 )
Cost of revenues                1,321,184        1,430,620        (109,436 )
General and administrative      2,031,693        2,806,948        (775,255 )
Other income (expense)            139,595                -         139,595
Provision for income taxes              -                -               -
Net loss                     $ (1,189,909 )   $ (1,993,487 )   $   803,578




                                       24





Revenues


Revenue for the six months ended June 30, 2022 was $2,023,373 as compared to $2,244,081 for the six months ended June 30, 2021. This decrease was primarily due to normal fluctuations in our billing cycle. We expect near term revenues to remain relatively flat, unless and until we raise sufficient capital to fully implement our business plan.



Operating Expenses



Cost of revenues


Cost of revenues was $1,321,184 for the six months ended June 30, 2022 compared to $1,430,620 for the same period in 2021. The decrease was primarily the result of a reduction in salaries coupled with a decrease in cloud hosting expense.



General and administrative


General and administrative expenses decreased $775,255 to $2,031,693 for the six months ended June 30, 2022, as compared to $2,806,948 in the same period of 2021. The decrease is primarily attributable to approximate decreases in stock-based compensation of $585,000, legal and professional fees of $81,000, accounting fees of $100,000, bad debt reserve expense of $43,000 and inventory write-downs of $50,000, partially offset by an increase in salaries and wage expense of $32,000. We expect general and administrative expenses to remain relatively flat during the rest of 2022, until we complete a capital raise, in which case we would expect expenses to grow as we ramp our sales force.



Other income


We had other income of $139,595 during the six months ended June 30, 2022 related to the forgiveness of a PPP Loan under the CARES Act.



Net Loss


For the six months ended June 30, 2022, we incurred a net loss of $1,189,909 compared to a net loss of $1,993,487 for the same period in 2021.

Liquidity and Capital Resources



Cash Flows


                                              Six months ended June 30,
                                                2022               2021

Net cash used in operating activities $ (47,584 ) $ (483,950 ) Net cash used in investing activities

                   -                -
Net cash provided by financing activities               -          139,595
Change in cash                              $     (47,584 )     $ (344,355 )




Operating Activities


Cash used in operating activities was approximately $48,000 for the six months ended June 30, 2022 (about $8,000 per month), mainly related to the net loss of approximately $1,190,000, a $64,000 increase in prepaid expenses, and a $140,000 gain on forgiveness of debt, partially offset by non-cash stock-based compensation of $645,000, debt expense of $78,000, an increase in accounts payable and accrued liabilities of $310,000 an increase in deferred revenue of $116,000 and a decrease in accounts receivable of $84,000.

Cash used in operating activities was approximately $484,000 for the six months ended June 30, 2021 (about $81,000 per month), mainly related to the net loss of approximately $1,993,000, a $41,000 increase in prepaid expenses, a $242,000 decrease in deferred revenue, and a $375,000 decrease in accounts payable and accrued expenses, partially offset by non-cash stock-based compensation of $1,230,000, a decrease in accounts receivable of $123,000, a decrease in inventory of $475,000 and depreciation expense of $73,000.



Investing Activities


The Company did not have any investing activities during the six months ended June 30, 2022 and 2021.



Financing Activities


The Company did not have any financing activities during the six months ended June 30, 2022.



                                       25




Cash provided by financing activities was $139,595 for the six months ended June 30, 2021. This consisted of proceeds from a loan payable.

Off-Balance Sheet Arrangements

As of June 30, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 4,63 M - -
Net income 2021 -3,81 M - -
Net Debt 2021 0,49 M - -
P/E ratio 2021 -3,55x
Yield 2021 -
Capitalization 9,15 M 9,15 M -
EV / Sales 2020 2,61x
EV / Sales 2021 3,24x
Nbr of Employees 10
Free-Float 79,9%
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Managers and Directors
Timothy A. Hannibal President, CEO, COO & Director
Christopher J. Kohler Chief Financial Officer
Alton Fernando Irby Chairman
Steven Wallitt Independent Director
John C. Ferrara Independent Director
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