MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF SCWORX CORP.
SCWorx is a privately held 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 offers an advanced software solution for the management of health care providers’ foundational business applications. Together these software systems have been credited with the healthcare providers’ customers tending to realize reduced medical expenses, while healthcare providers have tended to experience expanded revenues and more successful and safer clinical outcomes. The SCWorx software solution ultimately transforms many aspects of the healthcare providers’ business through its delivery of highly accurate, real-time information that offers the executives of these healthcare providers the ability to optimize many areas of their day-to-day operations, negotiate better contracts with their vendors and payors and make better decisions with respect to strategic purchases.
Proposed Business Combination with AMMA
As described elsewhere in this Proxy Statement, on August 20, 2018, SCWorx and its stockholders entered into a Stock Exchange Agreement, as amended by Amendment No. 1 thereto (the “Share Exchange Agreement” or “SEA”), with the Company, under which the Company agreed to (i) purchase from the SCWorx shareholders all the issued and outstanding capital stock of SCWorx, in exchange for which the Company agreed to issue at the closing 100,000,000 shares of Company common stock (the quotient of $50,000,000 (the agreed value of SCWorx) divided by a fixed price of $0.50 per share for each share of AMMA common stock (the agreed value per AMMA share on the Closing Date)) and (ii) issue an SCWorx related party note holder approximately 190,000 Preferred Stock Units, comprised of 190,000 shares of Preferred Stock (face value of $10 per share) and warrants to purchase 4,750,000 shares of common stock, in satisfaction of approximately $1.9 million of SCWorx indebtedness to such note holder. Consummation of the transactions contemplated by the SEA is subject to satisfaction of a variety of conditions, including but not limited to approval by the Company and SCWorx’ shareholders and the combined company meeting the listing qualifications for initial inclusion on the Nasdaq Stock Market.
AMMA’s Preferred Stock Unit and Convertible Note Financing
On December 18, 2018, AMMA closed $5.5 million in aggregate proceeds from the sale of Preferred Stock Units comprised of 550,000 shares of convertible preferred stock and warrants to purchase 13,750,000 shares of common stock (the “Preferred Stock Units”). The face value of the Preferred stock will, upon stockholder approval of the Financing Proposal, be convertible into shares of common stock at a conversion price of $0.20 per share and the warrant exercise price is $0.30 per share (in each case, subject to adjustment).
In addition, AMMA issued Preferred Stock Units, comprised of approximately 65,000 shares of convertible preferred stock and warrants to purchase 1,625,000 shares of common stock to AMMA creditors in satisfaction of approximately $650,000 of indebtedness.
On December 18, 2018, the Securities Purchase Agreement with AMMA dated June 28, 2018 (“SPA”) was amended to increase the amount SCWorx could purchase by $250,000 to up to $1.25 million, of which 750,000 had previously been funded, leaving an additional $500,000 to be funded. The conversion/exercise price of the additional $500,000 convertible note is $0.20 per share. As of December 18, 2018, SCWorx has funded $275,000 of the additional $500,000 and received (i) a $275,000 convertible promissory note, convertible into common shares at a conversion price of $0.20 per share, and warrants to purchase 343,750 common shares at an exercise price of $0.30 per share. This brings the total amount funded by SCWorx to $1,025,000.
The cash amount raised from the sale of the Preferred Stock Units must under the operative documents be kept in a reserve account pending the closing of the Acquisition. Upon the closing of the Acquisition, these funds will be available to fund the business of the combined company.