10-Q: SCWorx Q1 2026 Financial Results and Delisting Update

SCWorx reports Q1 2026 financial results while facing Nasdaq delisting following a failure to meet minimum bid price requirements.

Summary

• Revenue for Q1 2026 was $744,899, compared to $720,299 in Q1 2025.
• Net loss for the quarter was $173,767, an improvement from the $476,303 loss in the same period last year.
• Gross profit increased to $374,109 from $136,863 in Q1 2025, driven by lower cloud hosting and contractor costs.
• Operating expenses rose to $509,923, primarily due to increased salaries and wages.
• The company implemented a 1-for-15 reverse stock split effective April 10, 2026.
• Trading of common stock was suspended on April 14, 2026, following a Nasdaq delisting determination.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a distressed situation; while the company improved its net loss, the delisting from Nasdaq and the admission of ineffective internal controls present severe risks to shareholder value.

Positives

• Revenue increased by approximately 3.4% year-over-year.
• Net loss narrowed significantly by approximately 63.5% compared to Q1 2025.
• Gross profit margin improved due to successful cost-reduction initiatives in cloud hosting and contractor expenses.
• Interest expense decreased significantly to $37,953 from $142,306 in the prior year period due to the conversion of convertible notes.

Negatives

• The company has been delisted from the Nasdaq Capital Market.
• Management concluded that internal controls over financial reporting were not effective as of March 31, 2026, citing design deficiencies and lack of segregation of duties.
• The company continues to incur net losses.
• Cash balance decreased to $1,341,779 from $1,644,439 at year-end 2025.

Risks

• Potential inability to continue as a going concern if additional capital cannot be raised.
• Ongoing litigation proceedings that could negatively impact financial results.
• Dependence on third-party subcontractors for contract performance.
• Inability to regain compliance with listing standards or maintain public market access.
• Risks associated with evolving healthcare industry regulations and technology demands.

Future Outlook

Management expects operating expenses to remain relatively flat for the remainder of 2026, with the exception of marketing and advertising. The company continues to focus on its SaaS-based health information technology solutions while navigating the challenges of its delisting and the need for additional capital.

Management Comments

• Management acknowledges the need to resolve pending litigation and obtain additional financing to fund the business plan.
• Management notes that internal controls were ineffective and requires improvement in design and segregation of duties.

Industry Context

StockSavvy.ai notes that the healthcare IT sector is increasingly focused on data interoperability and cost-reduction tools. However, SCWorx's struggle with Nasdaq compliance and internal control deficiencies places it at a significant disadvantage compared to larger, more stable competitors in the health information technology space.

Comparison to Industry Standards

• The company's reliance on third-party cloud hosting (AWS/RackSpace) is standard for SaaS providers.
• The need for internal control remediation is a common hurdle for smaller reporting companies, though it remains a significant red flag for institutional investors.
• The company's revenue scale is significantly smaller than established healthcare data analytics firms.

Corporate Governance

Legal Proceedings

• The company is involved in various litigation proceedings and notes that it will accrue liabilities when losses are probable and estimable.

Related Party Transactions

• A payable of $149,838 is due to an officer for contract work performed prior to their appointment.

Stakeholder Impact

• Shareholders face increased risk due to the delisting of the company's common stock.
• Creditors may be impacted by the company's ongoing need for capital and its history of net losses.

Next Steps

• Pursue an appeal of the Nasdaq delisting determination to a hearings panel.
• Continue efforts to raise additional capital.
• Address deficiencies in internal controls over financial reporting.

Key Dates

Recommendation

The combination of a Nasdaq delisting, ineffective internal controls, and the ongoing need for capital dilution makes this a high-risk, unattractive investment for institutional or conservative investors.

Keywords

SCWorx, Healthcare IT, Data Normalization, SaaS, Nasdaq Delisting, Reverse Stock Split, Big Data Analytics