UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

For the fiscal year ended December 31, 20172018

OR

Commission File Number: 001-37899

ALLIANCESCWorx Corp.

(f/k/a Alliance MMA, INC.Inc.)

(Exact Name of Registrant as Specified in Its Charter)

590 Madison Avenue, 21st Floor

New York, New York 10022

(212) 739-7825

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨Nox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨ Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNo¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes¨Nox

As of June 30, 2017,2018, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $9.9$4.9 million, based on the last reported trading price of the Common Stock on that date, as reported on the Nasdaq Capital Market.

The number of shares outstanding of the registrant’s common stock as of March 30, 201829, 2019 was 14,862,974.6,563,195.

SCWORX CORP.

(f/k/a ALLIANCE MMA, INC.)

ANNUAL

REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20172018

TABLE OF CONTENTS

Forward LookingCautionary Statement Regarding Forward-Looking Statements

Certain statements that we make from time to time, including statements contained in this Annual Report on Form 10-K constitute “forward-looking statements” within the meaning Private Securities Litigation Reform Act of 1995, and of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Annual Report on Form 10-K are forward-looking statements. These statements, among other things, relate to our business strategy, goals and expectations concerning our products,services, future operations, prospects, plans and objectives of management. The words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, and similar terms and phrases are used to identify forward-looking statements in this presentation.

We operate in a very competitive and rapidly changing environment. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Forward-looking statements in this Annual Report on Form 10-K include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.operating expenses.

Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward looking statements as set forth under the heading, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to our ability to:

Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. In light of inherent risks, uncertainties and assumptions, the future events and trends discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Except as required by law, we are under no duty to update or revise any of such forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this Annual Report on Form 10-K.

You should read this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

All references to “Alliance,” “Alliance MMA,” “we,” “us,” “our” or the “Company” mean Alliance MMA, Inc., a Delaware corporation n/k/a SCWorx Corp., and where appropriate, its wholly owned subsidiaries.

PART I 

Item 1. Business

Corporate Information

We were incorporated in Delaware on February 15, 2015 under the name “Alliance MMA, Inc.”

On February 1, 2019, the Company acquired SCWorx Corp. in a stock for stock exchange transaction and changed its name to SCWorx Corp. Effective February 4, 2019, the Company changed the trading symbol for its common stock listed on the Nasdaq Capital Market to “WORX.”

Our principal executive offices are located at 590 Madison Avenue, 21^st Floor, New York, New York, 10022. Our telephone number is (212) 739-7825.

In this Annual Report, the terms “Alliance,” “Alliance MMA,” the “Company,” “we,” “us” and “our” refer to Alliance MMA, Inc. (n/k/a SCWorx Corp.). Unless specified otherwise, the historical financial results in this Annual Report are those of the Company and its subsidiaries on a consolidated basis.

Our Business

Alliance MMA isbegan its operations as a sports media company that operatesoperating a regional mixed martial arts (“MMA”) promotion business under the Alliance MMA name as well as under the trade names of the regional promoters that we own and operate.acquired. The fighters who participateparticipated in our MMA promotions arewere provided the opportunity to develop and showcase their talents for advancement to the next level of professional MMA competition. We also ownOn May 25, 2018, the Company commenced cessation of all the professional MMA promotion operations and operatesupporting functions and began the plan of disposition. This action included the termination of all promotion and support employees. As of June 30, 2018, all the MMA promotions were either disposed or ceased operations. On September 13, 2018, the Company commenced cessation of the sports management operations and began a fighterplan of disposition. This action included the termination of all sports management employees. As of September 30, 2018, the sports management business SuckerPunch Entertainment,unit was disposed. As of December 31, 2018, the Company has disposed of all MMA promotion businesses and an MMAthe sports management business and has been focused on the closing of the SCWorx Corp. (“SCWorx”) acquisition and related financing transactions, and operating its ticketing platform, CageTix.business. The SCWorx acquisition closed on February 1, 2019 and the company completed a one-for-nineteen reverse stock split [bracketed amounts represent post-split adjusted shares or per share amounts]. As of the filing date of this 10-K Annual Report, the Company continues to operate its ticketing business, and is focused on its newly acquired SCWorx business.

Our Promotions

The following is a discussion of our former promotion business, all of which had been disposed of as of May 25, 2018, as previously described.

In 2017,2018, our regional promotions held over 66 events with a number of those events, beingsome of which were televised on cable and network stations and/or streamed live via the Internet.internet. In providing fighters the opportunity to demonstrate their talents and move toward more lucrative fights, we also stressstressed the importance of maintaining strong personal values such as integrity, respect and discipline, as we believe that these attributes to be as important to a fighter’s success as his or her physical talents and skills.

Our promotions generategenerated revenue through ticket and concession sales at live MMA events. In addition, we distributedistributed our original content on television, cable networks, pay-per-view broadcasts and streaming over the internet. We also receivereceived sponsorship fees for live and tape-delayed MMA events.

Our current promotions arewere as follows:

CFFC Promotions (“CFFC”) – based in Atlantic City, New Jersey, CFFC was founded in 2011 and promotespromoted professional MMA events primarily in New Jersey and Pennsylvania. CFFC has sent a number of fighters to the UFC, including Aljamain Sterling, Jimmie Rivera, Lyman Good and Paul Felder.

Hoosier Fight Club (“Hoosier Fight Club” or “HFC”) – based in the Chicago, Illinois metropolitan area, HFC was foundedpromoted professional MMA events in 2009. HFC promoted the first sanctioned event in Indiana in January 2010. HFC has sent several fighters to the UFC as well as to Invicta Fighting Championships, the premier all-female MMA promotion, including Neil Magny, Felice Herrig, Phillipe Nover, Josh Sampo and Barb Honchak.Indiana.

COmbat GAmes MMA (“COGA”) – based in Kirkland, Washington, COGA was founded in 2009 and promotespromoted professional MMA events primarily in Washington State. Among the fighters COGA has sent to the UFC, are bantamweight champion Demetrious Johnson, Ultimate Fighter winner Michael Chiesa, light heavy weight Trevor Smith and heavyweight Anthony Hamilton.

Shogun Fights (“Shogun”) – based in Baltimore, Maryland, Shogun was founded in 2008 and promotespromoted professional MMA events at the Royal Farms Arena in Baltimore. Shogun has sent a number of fighters to the UFC and Bellator, including Jim Hettes, Dustin Pague and Zach Davis.

V3 Fights (“V3”) – based in Memphis, Tennessee, V3 was founded in 2009 and has promoted professional MMA events primarily at event centers in Memphis, Tennessee, and elsewhere in Tennessee, Mississippi and Alabama.

Iron Tiger Fight Series (“IT Fight Series” or “ITFS”) – based in Bellefontaine, Ohio, IT Fight Series was founded in 1995 and promotespromoted professional MMA events in various locations throughout Ohio. Since its inception, IT Fight Series has sent or promoted a number of fighters to the UFC as well as to Bellator.

Fight Time Promotions (“Fight Time”) – based in Fort Lauderdale, Florida, Fight Time was founded in 2009 and promotespromoted professional MMA events throughout the South Florida Market. On January 18, 2017, Alliance MMA acquired the MMA promotion business of Fight Time Promotions, LLC for an aggregate consideration of $371,468, of which $84,000 was paid in cash and $287,468 was paid with the issuance of 74,667 shares of the Alliance MMA’s common stock valued at $3.85 per share, the fair value of Alliance MMA common stock on January 18, 2017.

National Fighting Championships (“NFC”) – based in Atlanta, Georgia, NFC was founded in 2002 and promotespromoted professional MMA events throughout Atlanta, Georgia, South Carolina and North Carolina. On May 12, 2017, Alliance MMA acquired the MMA promotion business of Undisputed Productions, LLC, doing business as National Fighting Championships or NFC, for an aggregate consideration of $506,227, of which $140,000 was paid in cash and $366,227 was paid with the issuance of 273,304 shares of Alliance MMA common stock valued at $1.34 per share, the fair value of Alliance MMA common stock on May 12, 2017.

Fight Club Orange County (“FCOC” or “Fight Club OC”) – based in Orange County, California, Fight Club OC was founded in 1982 and promotespromoted professional MMA events throughout Southern California. On June 14, 2017, Alliance MMA acquired the MMA promotion business of The Englebrecht Company, Inc., doing business as Roy Englebrecht Promotions and Fight Club Orange County for an aggregate consideration of $1,018,710 of which $207,900 was paid in cash and $810,810 was paid with the issuance of 693,000 shares of the Company’s common stock valued at $1.17 per share, the fair value of Alliance MMA common stock on June 14, 2017.

Victory Fighting Championship (“Victory”) – based in Omaha, Nebraska, Victory was founded in 2002 and promotespromoted professional MMA events throughout Nebraska, Kansas, South Dakota and Iowa. On September 28, 2017, Alliance MMA acquired the mixed martial arts promotion business of Victory Fighting Championship, LLC, doing business as Victory Fighting Championship for an aggregate consideration of $822,938 of which $180,000 was paid in cash and $642,938 was paid with the issuance of 267,891 shares of the Company’s common stock valued at $2.40 per share, the fair value of Alliance MMA common stock on September 28, 2017.

As an adjunct to our promotions, we operate Go Fight Net, doing business as Alliance Sports Media (“GFL” or “ASM”), our video production unit which produces, distributes and licenses video content.

Video Production and Distribution

Go Fight Net, Inc. (“GFL”) – As an adjunct to the promotion business, Alliance provided video distribution and media archiving through Alliance Sports Media (“ASM”) formerly GFL and ceased operations on May 25, 2018.

Fighter

Sports Management

SuckerPunch Entertainment (“SuckerPunch”) – based in Northern Virginia, SuckerPunch manages over approximately 150 professional MMA fighters. Since 2007, SuckerPunch has managed several UFC titleholders including Joanna Jedrzejczyk, Jens Pulver, Carla Esparza and, most recently, Max Holloway. On January 4, 2017, Alliance MMA acquired the stock of Roundtable Creative, Inc., a Virginia corporation d/b/a SuckerPunch Entertainment, for an aggregate purchase price of $1,686,347, of which $357,500 was paid in cash and $1,146,927 was paid with the issuance of 307,487 shares of Alliance MMA common stock valued at $3.73 per share, the fair value of Alliance MMA common stock on January 4, 2017 and $181,920 was paid with the issuance of a warrant to acquire 93,583 shares of the Company’s common stock. 

On September 13, 2018, management and the board of directors extended the exit/disposal plan to the sports management business unit because it did not believe it could generate positive cash flows. On September 26, 2018 the Company entered an agreement to sell SuckerPunch Entertainment to the former owners. The effective date of the transaction was July 1, 2018. SuckerPunch – based in Northern Virginia, managed over approximately 150 professional MMA fighters. Since 2007, SuckerPunch has managed several UFC titleholders including Joanna Jedrzejczyk, Jens Pulver, Carla Esparza and, most recently, Max Holloway.

Ticketing Platform

CageTix (“CageTix”) – founded in 2009, CageTix focusses its ticket sales service on the MMA industry. In addition to providing ticket services for our events, CageTix presently services many of the industry’s top U.S. mixed martial arts events.

Initial Public Offering / Acquisitions

Alliance completedAs of the first tranchefiling date of its initial public offering on September 30, 2016, selling 1,813,225 shares of common stock with net proceeds of $7,732,280, contemporaneously closing the acquisitions of five MMA promotion businesses and certain other MMA assets. The Company completed the offering in October 2016 selling an additional 409,083 shares with net proceeds of $1,168,861 and acquiring additional assets. The offering was underwritten on a best-efforts basis by Network 1 Financial Securities, Inc.

Following the IPO and the initial acquisitions,this 10-K Annual Report, the Company continues to operate its ticketing business, but is focused primarily on its newly acquired four additional MMA promotion businesses, IT Fight Series, NFC, Fight Club OC and Victory, as well as SuckerPunch.SCWorx business.

The agreements by which Alliance acquires MMA businesses typically provide for additional consideration to be paid if a gross profit target is exceeded. In 2017, Shogun exceeded its target resulting in $304,000 of additional consideration to be paid in the form of Alliance MMA common stock.

Alliance’s common stock is currently listed on the Nasdaq Capital Market under the trading symbol “AMMA”.

Our Business Objectives and Strategies

Our business objectives include providing sports media contentThe Company’s current focus is on integrating and optimizing the acquisition of SCWorx Corp., which was completed February 1, 2019. The Company also continues to national broadcasters, internet streaming services and other content distributors and leveraging those arrangements to attract major brand sponsorships. We also plan to enhance the scope of our fighter management andoperate its ticketing platforms. To achieve these objectives, we intend to employ the following strategies:business.

Securing Premier Venues

We intend to continue migrating our promotional events from paid venue arrangements to venues that will compensate the promotions for hosting events, such as community sponsored civic auditoriums and casinos. We expect that the relocation of our events to higher quality venues will enable us more easily to obtain content distribution arrangements with national broadcasters and others.

Distribution and Licensing our Original Content

We produce high quality MMA programming at the events we promote, and monetize our content through distribution and licensing arrangements. A number of our promotions have established live and delayed television arrangements with national networks, including CBS Sports Network and Comcast Sports Net.

Obtaining National Sponsorships

In addition to local and regional sponsors for live events, we anticipate identifying, negotiating and establishing sponsorship and advertising arrangements with larger nationally-recognized brands. SuckerPunch actively pursues local, regional and national sponsorships for fighters under management, under which management commissions are earned.

Enhancing theThe CageTix Ticketing Platform

Currently, theThe majority of paid tickets for ourregional MMA events isare sold by the fighters appearing on the event fight card. Referred to as “fighter consigned” tickets, sales are generally made in face-to-face cash transactions. We continue to expand the utilization of CageTix to help control the ticketing sales chain across our promotions. We believe that greater use of CageTix by our promotions will allow us to increase the profitability of our live events, while capturing valuable demographic customer information that will facilitate subsequent sales and marketing efforts. The CageTix platform can provideprovides significant benefits to thethird party MMA promotions, including the security of credit/debit card sales processing; immediate revenue recognition; real time sales reporting; and sales audit and compliance tracking for tax and regulatory authorities.

Identifying and Signing Top ProspectsSCWorx Corp.’s Corporate History

We intendOn December 31, 2017, SCWorx, LLC acquired its wholly owned subsidiary, Primrose Solutions, LLC, (“Primrose”), a Delaware limited liability company focused on developing functionality within SCWorx Corp.’s software. The majority of shareholders of Primrose were shareholders of SCWorx Corp. and based upon SAB Topic 5G, the technology acquired has been accounted for at predecessor cost of $nil. In June 2018, SCWorx, LLC merged with and into SCWorx Acquisition Corp., a Delaware corporation, as a result of which it became a Delaware corporation. Prior to continue signing highly-regarded professional fighters,entering into the Share Exchange Agreement, SCWorx Acquisition Corp. changed its name to SCWorx Corp. and then changed its name to SCW FL Corp. to allow the Company to change its name to SCWorx Corp. at the closing of the acquisition.

Overview of SCWorx Acquisition and related Financing Transactions

SCWorx Corp. Acquisition

On August 20, 2018, Company entered into a Stock Exchange Agreement,as amended by Amendment No. 1 thereto (the “Share Exchange Agreement” or “SEA”)with SCWorx Corp., a software as a service (“SaaS”) company servicing the healthcare industry, under which we believe enhances our brand recognitionthe Company agreed to purchase from the SCWorx Corp. shareholders all the issued and outstanding capital stock of SCWorx Corp., in exchange for which the Company agreed to issue at the closing:

Consummation of the transactions contemplated by the SEA was subject to satisfaction of a variety of conditions, including approval by the Company and SCWorx Corp.’s shareholders and the valuenewly combined company meeting the listing qualifications for initial inclusion on the Nasdaq Capital Market.

SCWorx Corp. Financing Transaction

On June 28, 2018, the Company entered into a Securities Purchase Agreement, as amended December 18, 2018 (the “SPA”) with SCWorx Corp. (n/k/a SCW FL Corp.) a big data software as a service company servicing the healthcare industry (f/k/a SCWorx Acquisition Corp.) (“SCWorx”), under which it agreed to sell up to $1,250,000 in principal amount of our live MMA programming content. We believe thatconvertible notes and warrants to purchase up to 59,387post-split adjustedshares of Company common stock. $750,000 in principal amount was under the SPA convertible into shares of common stock at a post-split conversion price of $7.08 (reduced to $4.09 per share by providing fighters with a large number of events in which to participate, and by televising or streaming these events, we will be able to provide prospects with multi-fight opportunitiesamendment dated January 25, 2019) and the visibility they seek when affiliating withwarrants are exercisable for shares of Company common stock at a promotion.post-split exercise price of $7.08 per share. The remaining $500,000 in principal amount is under the SPA convertible into shares of common stock at a post-split conversion price of $3.80 and the warrants are exercisable for shares of Company common stock at a post-split exercise price of $5.70 per share.

CompetitionAs of December 31, 2018, pursuant to the SPA, SCWorx had purchased convertible notes of the Company in the aggregate amount of $1,035,000, convertible into 180,970 post-split shares, and warrants to purchase an aggregate 45,243 post-split shares of common stock. These notes bear interest at 10% per annum, mature one year from the date of issue and are subject to automatic conversion upon consummation of the Company’s acquisition of SCWorx. Since December 31, 2018, SCWorx purchased the remaining $215,000 in convertible notes bringing the aggregate amount purchased to $1,250,000. This note was amended in January 2019 to reduce the conversion price to $0.215 [$4.09] per share.

Series A Preferred Stock Financing

The Company has sold an aggregate of $6,150,000 in Series A Preferred Stock Units comprised in the aggregate of 615,000 shares of Preferred Stock (face value $10 per share), convertible into common stock at a rate of $3.80 per share (on a post-split adjusted basis) (subject to adjustment), and (ii) warrants to purchase up to 809,211 post-split adjusted shares of common stock, with an exercise price of $5.70 per share (subject to adjustment) (the “Preferred Stock Units”).The sale of the Series A Preferred Stock Units was deemed a below market issuance (on an as converted basis) of more than 20% of the Company’s issued and outstanding common shares. As such, the conversion of the Preferred Shares and exercise of the Warrants was subject to shareholder approval, as required by Nasdaq Rule 5635(d), which was obtained January 30, 2019.

In connection with the sale of the Series A Preferred Stock Units, the Company (i) received $5.5 million in cash proceeds and (ii) satisfied approximately $676,000 of indebtedness, for an aggregate of $6,150,000.

The cash amount raised from the sale of the Series A Preferred Stock Units was required to be kept in a reserve account pending the closing of the Company’s acquisition of SCWorx, which occurred February 1, 2019. These funds are now available to fund the business of the combined company.

On February 1, 2019, the Company consummated the acquisition of SCWorx as contemplated by the SEA andeffected a one-for-nineteen reverse stock split of its common stock and changed its name to SCWorx Corp. References to SCWorx herein refer to the company acquired by the Company. SCWorx is focused on streamlining the three core healthcare provider systems; Supply Chain, Financial and Clinical (“EMR”) enabling providers’ enterprise systems to work as one automated and seamless business management system.

Alliance’s common stock was listed on the Nasdaq Capital Market under the trading symbol “AMMA”. Upon the completion of the acquisition of SCWorx, the Company’s common stock began being listed on the Nasdaq Capital Market under the trading symbol “WORX” as of February 4, 2019.

Overview of the Company’sBusiness

As noted above, as of the filing date of this 10-K Annual Report, although the Company continues to operate its ticketing business, it is now focused on its newly acquired SCWorx business.

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

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 quickly and accurately improve the flow of information 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 huge 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 providers core systems and accurately migrating data from one application to another and removing disconnects between critical business systems.

SCWorx’s software solutions are delivered to clients within a fixed term period, where such software is hosted in SCWorx’s data center and accessed by the client through a secure connection in a software as a service (“SaaS”) delivery method.

SCWorx sells its solutions and services in the United States to hospitals and health systems through its distribution and reseller partnerships.

SCWorx’s Software Solutions/Services

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.

Clients and Strategic Partners

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 and the continued 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.

Our major clients include the following hospitals and health care providers: CAPTIS, Vanderbilt University Medical Center, Mercy Health, Providence Health & Services, University of Chicago Medical Center, and the University of Vermont Medical Center, among others.

Competition

SCWorx competes against a variety of vendors and smaller companies which provide solutions in the specific markets we address. Our principal competitors include:

Some of our actual and perceived competitors have advantages over us, such as longer operating histories, greater financial, technical, marketing or other resources, stronger brand and business user recognition, larger intellectual property portfolios, broader distribution and presence, and competitive pricing. In addition, our industry is evolving rapidly and is becoming increasingly competitive.

Barriers to entry to this market include technological and application sophistication, the ability to offer a proven product, creating and utilizing a well-established client base and distribution channels, brand recognition, the ability to provide agnostic interoperability and to operate on a variety of MMIS, EMR and financial platforms, the ability to integrate with pre-existing systems and capital for sustained development and marketing activities.

SCWorx believes that these obstacles taken together represent a moderate to high-level barrier to entry. The principal competitive factors in our industry include:markets are product features, functionality and support, product depth and breadth (number of items in the central data warehouse), flexibility, ease of deployment and use, total cost of ownership and time to value. We believe that we generally compete favorably on the basis of these factors. For example, besides our agnostic interoperability, additional key strengths include the SCWorx data warehouse, which exceeds 12 million items, SCWorx Big Data analytics and benchmarking.

Contracts, License and Service Fees

SCWorx enters into agreements with its clients that specify the scope of the solution to be installed and/or services to be provided by SCWorx, as well as the agreed-upon aggregate price, applicable duration and the timetable for the associated licenses and services.

Despite

For clients purchasing software to be installed locally or provided on a SaaS model, these are multi-element arrangements that include a term license granting the competition we face, we believeright to access the applicable software functionality (whether installed locally at the client site or the right to use the Company’s solutions as a part of SaaS services), terms regarding maintenance and support services, terms for any third-party components such as infrastructure and software, and professional services for implementation, integration, process engineering, optimization and training, as well as fees and payment terms for each of the foregoing. If the client purchases solutions on a long-term license model, the client may be billed the license fee up front or on a monthly or quarterly basis. Maintenance and support are provided on a term basis for separate fees, with an initial term of typically three to five years. The license, maintenance and support fee is charged annually in advance, commencing either upon contract execution or deployment of the solution in live production. If the client purchases solutions on a term-based model, the client is billed periodically a combined access fee for a specified term, typically three to five years in length.

SCWorx also generally provides software and SaaS clients professional services for implementation, integration, process engineering, and optimization and training. These services and the associated fees are separate from the license, maintenance and access fees. Professional services are provided on either a fixed-fee or hourly arrangements billable to clients based on agreed-to payment milestones (fixed fee) or monthly payment structure on hours incurred (hourly). These services can either be included at the time the related SaaS solution is licensed as part of the initial purchase agreement or added on afterward as an addendum to the existing agreement for services required after the initial implementation.

For one-time data normalization services clients, these normalization services are provided either through a stand-alone services agreement or services addendum to an existing master agreement with the client. These normalization services are available as either a one-time service or recurring monthly, quarterly or annual review structure. These services are typically provided on a per item basis. Payment typically occurs upon completion of the applicable normalization project. The commencement of revenue recognition varies depending on the size and complexity of the system and/or services involved, the implementation or performance schedule requested by the client and usage by clients of SaaS for software-based components. SCWorx’s agreements are generally non-cancelable but provide that our approachthe client may terminate its agreement upon a material breach by SCWorx and/or or may delay certain aspects of combining multiplethe installation or associated payments in such events. SCWorx does allow for termination for convenience in certain situations. SCWorx also includes trial or evaluation periods for certain clients, especially for new or modified solutions. Therefore, it is difficult for SCWorx to accurately predict the revenue it expects to achieve in any particular period, and a termination or installation delay of one or more phases of an agreement, or the failure of SCWorx to procure additional agreements, could have a material adverse effect on SCWorx’s business, financial condition, and results of operations. Historically, SCWorx has not experienced a material amount of contract cancellations; however, SCWorx sometimes experiences delays during contract implementation and SCWorx accounts for them accordingly.

Third Party License Fees

SCWorx incorporates software licensed from various third-party vendors into its proprietary software. Stand-alone third-party software is also required to operate certain of SCWorx’s proprietary software and/or SaaS services. SCWorx licenses these software products and pays the required license fees when such software is delivered to clients.

CageTix Ticketing Platform

Currently, the majority of paid tickets for regional MMA events is sold by the fighters appearing on the event fight card. Referred to as “fighter consigned” tickets, sales are generally made in face-to-face cash transactions. Our CageTix event ticketing platform allows regional promoters to control the ticketing sales chain. The CageTix platform can provide significant benefits to regional promotions, including the security of credit/debit card sales processing, immediate revenue recognition, and real time sales reporting.

Property

The Company does not own any real property. The principal executive offices are located at an office complex in New York, New York, consisting of shared office space that we are leasing. The lease had an original one-year term that commenced on December 1, 2015, which was renewed until November 30, 2018 and now is under one umbrella organization enables us to leverage their collective resourcesa month-to-month lease agreement. The lease allows for the limited use of private offices, conference rooms, mail handling, videoconferencing, and relationships to address competition more effectively thancertain other business services.

In conjunction with the acquisition of SCWorx Corp on February 1, 2019, the Company assumed a single regional promotion on its own. In addition, our multi-regional presence enables us to offer sponsors and media outlets a broad geographic footprintlease for office space in which to market products, services and content.

Greenwich, Connecticut. The lease expires in March 2020.

Government Regulation

The Company believes that governmental regulation is not material to its ticketing business or SCWorx’s business operations.Our MMA events arewere regulated at the state level by the athletic commission in each state where our promotions are conducted. The commissions are concerned primarily with the introduction and enforcement of safety rules and oversee MMA in much the same way as they do boxing.for boxing events.

Intellectual Property

We protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We control access to our proprietary technology by entering into confidentiality agreements, invention assignment agreements and work for hire agreements with our employees and contractors, and confidentiality agreements with third parties. We further control the use of our proprietary technology and intellectual property through provisions in our websites’ terms of use.

We maintain a catalog of copyrighted works, including copyrights to television programming and photographs. We also own a number of domain names including, alliancemma.com, the domain names of each of our promotions, CageTix.com and Suckerpunchent.com.

Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in the United States or other countries in which we seek protection of our marks or our copyrighted works. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights may harm our business or our ability to compete.

Seasonality

We don’t believe that SCWorx’s revenues are impacted by seasonality.

We haveOur MMA business has historically experienced a negative seasonal impact on revenues during the months of June, July and August when attendance is lower at scheduled events than during the balance of the year. As a result, we generally schedulescheduled fewer events during this period, which is likely to resultresulted in less revenue during these periods compared to other periods during the year.

Employees

As of December 31, 2017,2018, we had 342 employees.As of the closing of the acquisition on February 1, 2019, the Company had 4 employees, of whom 2 are in management and finance and 2 are in operations. We mainly utilize independent contractors for maintenance of our database and customer software installation.

Facilities

The Company does not own any real property. The principal executive offices are located at an office complex in New York, New York, consisting of shared office space that we are leasing. The lease had an original one-year term that commenced on December 1, 2015, which was renewed until November 30, 2018.2018 and now is under a month-to-month lease agreement. The lease allows for the limited use of private offices, conference rooms, mail handling, videoconferencing, and certain other business services.

In November 2016, the Company entered a sublease agreement for office and video production space in Cherry Hill, New Jersey. The lease expires on June 30, 2019. In June 2018, the Company abandoned the Cherry Hill space and in January 2019 negotiated a settlement to exit the sublease. 

With the acquisition of Fight Club OC, the Company assumed a lease for office space in Orange County, California. The lease expiresexpired in September 2018.2018 and was included in the sale of Fight Club OC.

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.

In April and May 2017, respectively, two purported securities class action complaints—complaints-Shapiro v. Alliance MMA, Inc., No. 1:17-cv-2583 (D.N.J.), andShulman v. Alliance MMA, Inc., No. 1:17-cv-3282 (S.D.N.Y.)—were-were filed against the Company and certain of its officers in the United States District Court for the District of New Jersey and the United States District Court for the Southern District of New York, respectively. The complaints alleged that the defendants violated certain provisions of the federal securities laws and purported to seek damages in an amount to be alleged on behalf of a class of shareholders who purchased the Company’s common stock pursuant or traceable to the Company’s initial public offering. In July 2017, the plaintiffs in the New York action voluntarily dismissed their claim and, on March 8, 2018, the parties reached a settlement to the New Jersey action in which the insurance carrier for our directors and officers liability insurance policy has agreed to cover Alliance’s financial obligations including legal fees, under the settlement arrangement, less a deductible of $250,000.

In October 2017, a shareholder derivative claim based on the same facts that were alleged in the class action complaints was filed against the directors of the Company in the District Court for the District New Jersey; however, a complaint was not served on the defendants and, on February 2, 2018 the claim was dismissed by the District Court.

In June 2018, the landlord of our Cherry Hill, New Jersey office filed suit against the Company for non-payment of rent. Currently the Company is in negotiations to settle the remaining payments due under the lease. The Company recorded $167,000 of expense related to the lease within discontinued operations - general and administrative for the cost of the remaining payments under the lease agreement. This amount is accrued for at December 31, 2018 within the current liabilities - discontinued operations balance. In January 2019, the Company entered into a settlement agreement with respect to this litigation, and paid the landlord $75,000 and issued warrants to purchase 20,250 shares of common stock at an exercise price of $3.42 per share.

In June 2018, the Company’s former President, Robert Haydak, filed suit against the Company. The Company and Mr. Haydak resolved the suit effective July 2018 with the Company agreeing on a cash settlement of $50,000, and delivery of certain MMA promotion fixed assets. The Company has accrued the settlement as of December 31, 2018 which is included within net loss from discontinued operations, net of tax, and current liabilities - discontinued operations balance. In February 2019, the Company paid Mr. Haydak the $50,000 called for by the settlement agreement and obtained a release of all claims thereunder.

On December 19, 2018, the Company’s former Chief Executive Officer (“CEO”), Robert L. Mazzeo, who resigned on May 25, 2018, served a complaint against the Company in the United States District Court for the Sothern District of NY. Mazzeo alleges that he (i) was fraudulently induced to become the CEO of the Company and (ii) entered into an employment contract with the Company and that the Company breached said alleged contract. Mazzeo seeks damages in “excess of $500,000.” The Company believes that the lawsuit is frivolous and violative of Rule 11 of the Federal Rules of Civil Procedure. The Company filed an answer to the complaint on February 5, 2019, and, in addition to mounting a vigorous defense, the company has filed a counterclaim against Mazzeo alleging breach of fiduciary duty.

Available Information

Our primary website address is www.alliancemma.com.www.scworx.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are filed with the U.S. Securities and Exchange Commission (SEC). We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements, and other information with the SEC. Such reports and other information filed by us with the SEC are available free of charge on our website at ir.alliancemma.comwww.scworx.com when such reports become available on the SEC’s website. The public may read and copy any materials filed by Alliance MMASCWorx Corp. with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549 on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of the websites referred to above are not incorporated into this filing. Further, our references to the URLs for these websites are intended to be inactive textual references only.

Item 1A. Risk Factors

Certain factors could have a material adverse effect on our business, financial condition, results of operations and prospects. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties of which we are unaware, or that we currently believe are not material, may also become important factors that adversely affect our business, financial condition, results of operations and prospects. If any of the following risks occurs, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.

We may not be able to maintain sufficient capital to continue as a going concern.

For the year ended December 31, 2017,2018, our revenue was approximately $4.2 million$150,000 and we had a net loss of approximately $14.6 million. For the year ended December 31, 2017, our revenues were approximately $221,000, and we had a net loss of approximately $12.0 million. For the year ended December 31, 2016, our revenues were approximately $600,000, and we had a net loss of approximately $4.2 million. At December 31, 2017,2018, we had an accumulated deficit of approximately $16.5$31.3 million. OurAt December 31, 2018, our ability to continue as a going concern iswas dependent upon completing the acquisition of SCWorx.

As a result of the recently consummated convertible note and Preferred Stock financings, as of December 19, 2018, the Company had approximately $5.4 million of restricted cash, which under the operative documents was required to be held in reserve pending the closing of the Acquisition. In addition, as of December 31, 2018, SCWorx was required to provide additional advances of $215,000 under the SPA, as amended. These advances were made in January of 2019.

With the completion of the SCWorx acquisition and related financings, the Company currently has approximately $3.0 million in cash on obtaining adequate capital to fundhand. Although the Company has historically generated operating losses until we become profitable. We cannot provide any assurancesand negative operating cash flows, with the completion of the SCWorx acquisition, the Company expects that wethe combined company will be ablegenerate operating profits and positive operating cash flows.

The Company believes that these positive operating cash flows, coupled with the cash on hand, are such that, as of the date of this report, the Company has sufficient cash to obtain sufficient capital to fund losses and, if we are unable to obtain adequate capital, we would be forced to cease operations.support the business for at least the one-year period following the date of this report.

A failure by us to establish and maintain effective internal control over financial reporting could have a material adverse effect on our business and operating results.

Maintaining effective internal control over financial reporting is necessary for us to produce accurate and complete financial reports and to help prevent financial fraud. In addition, such control is required in order to maintain the listing of our common stock on the Nasdaq Capital Market. While we have undertaken remedial steps to improve our financial reporting process, including the implementation of a firm-wide accounting information system that collects, stores and processes financial and accounting data on a consolidated basis for use in meeting our reporting obligations, there are no assurances that our internal control over financial reporting has been effective at any time since then. For the year ended December 31, 2017,2018, the Company did not have effective controls over financial reporting. Our management has identified material weakness in our internal controls related to deficiency in the design of internal controls and segregation of duties.

If we are unable to maintain adequate internal controls or fail to correct material weaknesses in such controls noted by our management or our independent registered public accounting firm, our business and operating results could be adversely affected, we could again fail to meet our obligations to report our operating results accurately and completely and our continued listing on the Nasdaq Capital Market could be jeopardized.

Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results.

As a public company and particularly after we cease to be an “emerging growth company,” we incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and the Nasdaq StockCapital Market impose various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal, accounting, and financial compliance costs and have made and will continue to make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or as executive officers.

Our business represents a new business model for the MMA industry.

Our business model focuses on creating a developmental organization by combining a number of regional MMA promotions under one umbrella organization. Our business model is unique to the MMA industry and may not prove to be successful. We have a limited operating history upon which you can evaluate our business. The MMA industry is also rapidly growing and evolving and may develop in a way that is detrimental to our business model. You must consider the challenges, risks and difficulties frequently encountered by early-stage companies using new and unproven business models in new and rapidly evolving markets. Some of these challenges relate to our ability to:

Our business strategy may not successfully address these and the other challenges, risks and uncertainties that we face, which could adversely affect our overall success and delay or prevent us from achieving profitability.

If we do not manage our growth effectively, our revenue, business and operating results may be harmed.

Our expansion strategy includes the acquisitionpossible acquisitions of regional MMA promotion companies and organic growth. These acquisitionsother SaaS companies. We may not be indicative of our abilityable to identify, secure and manage future acquisitions successfully. The acquisition of our current promotions orSCWorx and any future businesses may require a greater than anticipated investment of operational and financial resources as we seek to institute uniform standards and controls across promotions.acquired businesses. Acquisitions may also result in the diversion of management and resources, increases in administrative costs, including those relating to the assimilation of new employees, and costs associated with any financings undertaken in connection with such acquisitions. We cannot assure you that any acquisition we undertake, including those we have already made, will be successful. Future growth will also place additional demands on our management, sales, and marketing resources, and may require us to hire and train additional employees. We will need to expand and upgrade our systems and infrastructure to accommodate our growth, and we may not have the resources to do so in the time frames required. The failure to manage our growth effectively will materially and adversely affect our business, financial condition and results of operations.

We may be unable to implement our strategy of acquiring additional companies and such acquisitions may subject us to additional unknown risks.

We anticipate makingmay make future acquisitions of regional MMA promotionsSaaS companies in markets that we do not serve now. We may not be able to reach agreements with such promotionscompanies on favorable terms or at all. In completing the acquisition of promotions,acquisitions, we rely upon the representations and warranties and indemnities made by the sellers with respect to each acquisition as well as our own due diligence investigation. We cannot assure you that such representations and warranties will be true and correct or that our due diligence will uncover all materially adverse facts relating to the operations and financial condition of the acquired companies or their businesses. To the extent that we are required to pay for undisclosed obligations of an acquired company, or if material misrepresentations exist, we may not realize the expected economic benefit from such acquisition and our ability to seek legal recourse from the seller may be limited.

The value of our goodwill and other intangible assets may declinedeclined in the future as it has in 2017.2018.

As of December 31, 2017,2018, there was no goodwill or other intangible assets. In 2018, we had $6.0 million of goodwill and $2.9 million of other netrecorded intangible assets netimpairment charges of amortization and impairment. In 2017, we recorded a goodwill impairment charge within the promotion segment of $2.4 million.approximately $231,000. The impairment was identified as part of management’s review of impairment indicators during the fourthsecond quarter. Accordingly, it was determined the recoverable value of the promotion segment was less than the carrying value and therefore, an impairment loss was recorded. Additionally, the Company recorded a $893,000 impairment expense related to the write down of certain video library, venue contracts and tradename intangible assets. We havehad recorded goodwill in connection with the acquisitions we have made, and wemade. We expect to continue to record goodwill for future acquisitions. Our other net intangible assets includehad included venue relationships, ticketing software, trademarks and brands, fighter contracts, promoter relationships and sponsor relationships, at cost less accumulated amortization and impairment, and we amortizeamortized such assets using a method reflecting the period(s) in which the economic benefit of the asset is utilized, which we estimateestimated to be three to ten years. For intangible assets subject to amortization, impairment will be recognized if the carrying amount is deemed to be not recoverable and the carrying amount exceeds the fair value of the intangible asset.

We evaluate goodwill at least annually, and will do so more frequently if events or circumstances indicate that impairment may have occurred. Many of the assumptions and estimates that we make in order to estimate the fair value of our intangible assets directly impact the results of impairment testing, including an estimate of future expected revenues, earnings and cash flows, and the discount rates applied to expected cash flows. We are able to influence the outcome and ultimate results based on the assumptions and estimates we choose for testing. To avoid undue influence, we have set criteria that are followed in making assumptions and estimates. The determination of whether goodwill or acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of our reporting unit. Changes in our strategy or market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets.

For the year ended December 31, 2017, we recorded impairment charges of $2.4 million to goodwill and $893,000 to intangible assets. Declines in our stock price and market capitalization, significant declines in our expected future cash flows, adverse regulatory actions, or the failure of the MMA industry to sustain growth and meet projected targets, among other reasons, may require the Company to realize additional impairment charges in the future. Such impairment charges could have a material adverse effect on our results of operations.

Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.

Future acquisitions are likely to result in issuances of equity securities, which maywill be dilutive to the equity interests of existing stockholders, and may involve the incurrence of debt, which will require us to maintain cash flows sufficient to make payments of principal and interest, the assumption of known and unknown liabilities, and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition and results of operations.

We may be perceived as a competitive threat to For example, the UFC and other premier MMA promotions, which may use their significantly greater resources to impede our business and growth strategy.

Since we promote live events, televise and distribute MMA media and related content, solicit sponsorship revenues and seek to secure professional MMA fighters to multi-fight contracts, we may be perceived as a competitor by the UFC or other premier MMA promotions. Should the UFC or another premier national MMA promotion view us as a competitive threat, they could use their significantly greater resources to frustrate our business and growth strategy and materially and adversely affect our business.

We may be prohibited from promoting and conducting our live events if we do not comply with applicable regulations.

In various states in the United States and in some foreign jurisdictions, athletic commissions and other applicable regulatory agencies will require us to obtain licenses for promoters, medical clearances and/or other permits or licenses for athletes and/or permits so we can promote and conduct our live events. If we fail to comply with the regulationsacquisition of a particular jurisdiction, we may be prohibited from promoting and conducting live events in that jurisdiction. The inability to promote live events over an extended period of time orSCWorx resulted in a numberchange of jurisdictions could leadcontrol of the Company involving the issuance of approximately 5.3 million post-split adjusted shares of common stock and 190,000 shares of Series A Preferred Stock, convertible into 500,000 post-split adjusted shares of common stock (subject to a decline inadjustment), and the revenue streams generated from our live events, in which case our operating results would be adversely affected.issuance of warrants to purchase an additional 250,000 post-split adjusted shares of common stock, at an exercise price of $5.70 per share.

We may become involved in litigation which could harm the value of our business.

Because of the nature of our business and the exit from lines of business, there is a risk of litigation from event attendees, sponsors and others.litigation. Any litigation could cause us to incur substantial expenses whether or not we prevail, which would add to our costs and affect the capital available for our operations.

We could incur substantial liability in the event of accidents or injuries occurring during our events.

We intend to hold numerous live MMA events each year. Each live event exposes our employees who are involved in the production of those events to the risk of travel and match-related accidents, the costs of which may not be fully covered by insurance. The physical nature of our events will expose our professional MMA fighters to the risk of serious injury or death. Although our fighters, as independent contractors, are responsible for maintaining their own health, disability and life insurance, For example, we insure medical costs for injuries that a fighter may suffer at our events. Any liability we incur as a result of the death of or a serious injury sustained by one of our fighters while fighting in a match at our events, to the extent not coveredwere recently sued by our insurance, could adversely affect our business, financial condition and operating results.

Our live events will entail other risks inherent in public live events, including air and land travel interruption or accidents, the spread of illness, injuries resulting from building problems, equipment malfunction, terrorism or other violence, local labor strikes and other “force majeure” type events. These circumstances could result in personal injuries or deaths, canceled events and other disruptions to our business for which we do not carry business interruption insurance, or result in liability to third parties for which we may not have insurance. The occurrence of any of these circumstances could adversely affect our business, financial condition and results of operations.

A future decline in the popularity of mixed martial arts could adversely affect our business.

Our operations are affected by consumer tastes and sports and entertainment trends, which are unpredictable and subject to change, and may be affected by changes in the social and political climate. We believe that MMA is growing in popularity in the United States and around the world, but a change in our fans’ tastes or a material change in the perceptions of the MMA industry, whether due to social or political issues or otherwise, could adversely affect our operating results and have a material adverse effect on our business.

We may not be able to attract and retain key professional MMA fighters.

Our business is dependent upon identifying, recruiting and retaining highly regarded professional MMA fighters for our promotions. Fans and sponsors are attracted to events featuring top fighters, and the value placed on a promotion’s television and other media rights is dependent to a great extent on the quality of the promotion’s fighter roster. We may not be able to attract and retain key professional MMA fighters due to competition with other regional promoters for the same fighters. Failing to put on events featuring top professional fighters could adversely affect our operating results and have a material adverse effect on our business.

We may not be able to attract national promotional and advertising sponsorships or maintain such arrangements.

Our business strategy involves developing national sponsorship arrangements, or expanding existing regional sponsorship arrangements, in support of our network of live MMA events. We will compete with larger more established sports and entertainment organizations and media outlets for sponsorship and advertising revenue. While many of our promotions maintain existing local and regional sponsorship arrangements with large advertisers who advertise on a national basis in our target markets and demographic, they currently have no national sponsorships. Should we be able to secure national promotional and advertising arrangements, there is no assurance that we will be able to maintain these arrangements. Many factors, including the popularity and perception of MMA and the perceived quality of our promotions, will significantly affect our ability to secure and maintain important advertising and promotional arrangements. If we are unable to generate sponsorship and promotional revenue and increase that revenue over time, our operating results and business will be adversely affected.former CEO.

Economic uncertainty impacts our business and financial results and a renewed recession could materially affect us in the future.

Any significant decrease in consumer confidence, or periodsPeriods of economic slowdown or recession could lead to a curtailing of discretionary spending,reduction in demand for our software and services, which in turn could reduce our revenues and results of operations and adversely affect our financial position. Our business will be dependent upon consumerbusiness discretionary spending and therefore is affected by consumerbusiness confidence as well as the future performance of the United States and global economies. As a result, our results of operations are susceptible to economic slowdowns and recessions. Increases in job losses, home foreclosures, investment losses in the financial markets, personal bankruptcies, credit card debt and home mortgage and other borrowing costs, declines in housing values and reduced access to credit, among other factors, may result in lower levels of ticket sales, sponsorship and distribution revenue.

We depend on the services of key executives, and the loss of these executives could materially harm our business and our strategic direction if we were unable to replace them with executives of equal experience and capabilities.

Our future success significantly depends on the continued service and performance of our key management personnel.personnel, especially our new CEO and SCWorx founder, Marc Schessel. We cannot prevent members of senior management from terminating their employment with us even if we have an employment agreement with them. Losing the services of members of senior management could materially harm our business until a suitable replacement is found, and such replacement may not have equal experience and capabilities. We have not purchased life insurance covering any members of our senior management.

The markets in which we operate are highly competitive, rapidly changing and increasingly fragmented, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence.

We face competition from in addition to other MMA promotions, professional and college sports, as well as from other forms of live and televised entertainment and other leisure activities that are offered in a rapidly changing and increasingly fragmented marketplace.SaaS companies. Many of the companies with which we will compete have greater financial and technical resources than are available to us. Our failure to compete effectively could result in a significant loss of viewers, venues, distribution channels or athletes and fewer advertising dollars spent on our form of sporting events, any ofcustomers, which could adversely affect our operating results.

Our expansion into new markets may present increased risks due to our unfamiliarity with the area, different rules and regulations and challenging operating environments.

Some of our future acquisitions may be located in geographic areas where we have little or no experience in promoting events. Those markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause future promotions to be less successful than our existing promotions. Acquisitions in new markets may not generate the same level of revenues and may have higher operating expense ratios than our existing promotions.

Some of our future acquisitions may occur outside the United States. Beyond the risks posed by new markets generally, the operating conditions in overseas markets may vary significantly from those we currently experience, including in relation to consumer preferences, regulatory environment, currency risk, the presence and cooperation of suitable local partners and availability of vendors or commercial and physical infrastructure, among others. There is no guarantee that we will be successful in integrating these acquisitions into our operations, achieving market acceptance, operating these acquisitions profitably, and maintaining compliance with the rapidly changing business and regulatory requirements of new markets. Our inability to do so could have a material adverse effect on our business, financial condition and results of operations.

Our failure to obtain and maintain key agreements and arrangements with television and other media outlets could adversely affect our ability to distribute our original MMA programming.

Our business strategy is dependent upon monetizing the media content we create at our live MMA events through live television and cable broadcasts and the distribution of live and historical video content through a variety of media outlets such as Internet pay-per-view and video on demand. We also anticipate that our growth will be dependent on securing international distribution arrangements for our content. There is significant competition for television and other distribution arrangements from within the MMA industry and from other sports and entertainment companies who offer these media outlets programming alternatives to our MMA content. Our failure to obtain and maintain key agreements and arrangements with television and other media outlets could adversely affect our ability to distribute our original MMA programming, which could have a material adverse effect on our business, financial condition and results of operations.

Our limited operating history makes forecasting our revenues and expenses difficult.

Revenues and operating results are difficult to forecast accurately because of our limited operating history as a combined business, which commenced in October 2016,February of 2019, and because suchSCWorx’s results generally depend on our ability to secure national sponsorships and advertising arrangements for our regional promotions, and enter into television and media distribution arrangements, all ofterm service/license agreements, which are subject to varying degrees of uncertainty. As a result, we may be unable to adjust our spending appropriately to compensate for any unexpected revenue shortfall, which may result in substantial losses and a lower market price for our common stock.

We may need additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on reasonable terms when required, or at all.

In order for us to grow and execute our business plan successfully, we willmay require additional financing which may not be available on acceptable terms or at all. If such financing is available, it may be dilutive to the equity interests of existing stockholders. Failure to obtain financing will have a material adverse effect on our financial position. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed.

If we fail to meet the continued listing standards and corporate governance requirements for Nasdaq Capital Market companies, we may be subject to de-listing.

Our common stock is currently listed on the Nasdaq Capital Market. In order to maintain this listing, we are required to comply with various continued listing standards, including corporate governance requirements, set forth in the Nasdaq Listing Rules. These standards and requirements include, but are not limited to, maintaining a minimum bid price for our common stock, as well as having a majority of our Board members qualify as independent. If we fail to meet any one of these requirements for an extended period of time, we will be subject to possible de-listing.

In November 2017, we received a letter from Nasdaq’s Listing Qualifications Office informing us that, due to the resignation of one of the independent members of our Board of Directors, who also served as the chairman of our Audit Committee and a member of our Compensation Committee, we are not in compliance with the applicable Nasdaq rule governing the composition of audit and compensation committees. The letter also stated that we are entitled to a “cure period” in which to correct the deficiency that extends until October 24, 2018 or, if earlier, our next annual meeting of stockholders. While we believe that we will regain compliance within the specified cure period, if we fail to do so for any reason, Nasdaq will notify us that our common stock is subject to de-listing.

On February 22, 2018, we received a letter notifying us that Alliance is not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share. Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the Company’s common stock for the 30 consecutive business days prior to the date of the letter, Alliance no longer meets the minimum bid price requirement.

The February letter does not impact our listing on the Nasdaq Capital Market at this time. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided 180 calendar days from the date of this letter, or until August 21, 2018, to regain compliance with Nasdaq Listing Rule 5550(a)(2). In the event the Company does not regain compliance by August 21, 2018, the Company may be eligible for an additional period of 180 days within which to regain compliance. To regain compliance, the Company’s common stock must have a closing bid price of at least $1.00 for a minimum of 10 consecutive business days.

Our common stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock and our ability to grow our business.

There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will either develop or be maintained. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market periodically in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or that our share price will appreciate over time. Because we intend to acquire additional regional MMA promotion businesses primarily using our common stock as purchase consideration, fluctuations in the price and trading volume of our common stock may make such acquisitions more difficult to consummate or may make them more dilutive to the equity interests of existing stockholders.

Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

In addition, the securities markets from time to time experience significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

The periodic availability of shares for sale upon the expiration of any statutory holding period or lockup agreements, could create a circumstance commonly referred to as an “overhang”, in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. We are required under the Series A Preferred Stock documents to register under the Securities Act of 1933 the shares of common stock underlying the preferred stock and related warrants. Once this registration statement goes effective, a substantial number of additional shares of common stock will likely become freely tradable which could adversely affect the trading price of our common stock.

We may be unable to establish, protect or enforce our intellectual property rights adequately.

Our success will depend in part on our ability to establish, protect and enforce our intellectual property and other proprietary rights. We maintain a catalog of copyrighted works, including copyrights covering television programming and photographs. Our inability to protect our portfolio of copyrighted material, tradenames, service marks and other intellectual property rights from infringement, piracy, counterfeiting or other unauthorized use could negatively affect our business. If we fail to establish, protect or enforce our intellectual property rights, we may lose an important advantage in the market in which we compete. Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages. Monitoring unauthorized uses of and enforcing our intellectual property rights can be difficult and costly. Legal intellectual property actions are inherently uncertain and may not be successful, and may require a substantial amount of resources and management attention.

We have entered into agreements that provide for the repurchase or revocability of certain of our intellectual property rights, including the Alliance brand name, under certain limited circumstances.

In connection with the acquisitions we have made since our initial public offering, we acquired or licensed a number of trademarks and copyrights, including the Alliance brand name. Some of these agreements provide for the revocation or possible repurchase of our ownership or license of this intellectual property under certain conditions, such as a voluntary or involuntary bankruptcy petition that is not stayed or dismissed within 60 days or the de-listing of our common stock from Nasdaq. While we believe the likelihood of these contingencies occurring to be remote, should any one or more of them occur, we may forfeit either our ownership of or our right to use valuable intellectual property assets, including the brand name that we are currently using to market ourselves.

Changes in laws, regulations and other requirements could adversely affect our business, results of operations or financial condition.

We are subject to the laws, regulations and other requirements of the jurisdictions in which we operate. Changes to these laws could have a material adverse impact on the revenue, profit or the operation of our business.

Disruptions in our information technology systems or security breaches of confidential customer information or personal employee information could have an adverse impact on our operations.

Our operations are dependent upon the integrity, security and consistent operation of various information technology systems and data centers, including our ticketing system, 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.

Our current insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.

We believe we maintain insurance coverage that is customary for businesses of our size and type; however, we may be unable to insure against certain types of losses or claims, or the cost of such insurance may be prohibitive. For example, although we carry insurance for breaches of our computer network security, there can be no assurance that such insurance will cover all potential losses or claims or that the dollar limits of such insurance will be sufficient to provide full coverage against all losses or claims. Uninsured losses or claims, if they occur, could have a material adverse effect on our financial condition, business and results of operations.

We may be required to pay for the defense of our clients, officers, or directors in accordance with certain indemnification provisions.

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 services. 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, as a result, no liability has been recorded in the Company’s 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; however, the Company has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable the Company to recover a portion of any such payments.

Item 1B. Unresolved Staff Comments

None. 

Item 2. Properties

The Company does not own any real property. The principal executive offices are located at an office complex in New York, New York, consisting of shared office space that we are leasing. The lease had an original one-year term that commenced on December 1, 2015, which was renewed until November 30, 2018.2018 and now is under a month-to-month lease agreement. The lease allows for the limited use of private offices, conference rooms, mail handling, videoconferencing, and certain other business services.

In November 2016, the Company entered a sublease agreement for office and video production space in Cherry Hill, New Jersey. The lease expires on June 30, 2019. We are currently attemptingIn June 2018, the Company abandoned the Cherry Hill space and in January 2019 negotiated a settlement to sublease this space to avoidexit the lease expense.sublease. The expected settlement costs were accrued as of December 31, 2018, and included in current liabilities - discontinued operations.

With the acquisition of Fight Club OC, the Company assumed a lease for office space in Orange County, California. The lease expiresexpired in September 2018.2018 and was included in the sale of Fight Club OC.

We believe that our facilities are adequate for our current needs.

Item 3. 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.

In April and May 2017, respectively, two purported securities class action complaints—complaints-Shapiro v. Alliance MMA, Inc., No. 1:17-cv-2583 (D.N.J.), andShulman v. Alliance MMA, Inc., No. 1:17-cv-3282 (S.D.N.Y.)—were-were filed against the Company and certain of its officers in the United States District Court for the District of New Jersey and the United States District Court for the Southern District of New York, respectively. The complaints alleged that the defendants violated certain provisions of the federal securities laws and purported to seek damages in an amount to be alleged on behalf of a class of shareholders who purchased the Company’s common stock pursuant or traceable to the Company’s initial public offering. In July 2017, the plaintiffs in the New York action voluntarily dismissed their claim and, on March 8, 2018, the parties reached a settlement to the New Jersey action in which the insurance carrier for our directors and officers liability insurance policy has agreed to cover Alliance’s financial obligations including legal fees, under the settlement arrangement, less a deductible of $250,000.

$250,000. The complaint was dismissed in October 2018.

In October 2017, a shareholder derivative claim based on the same facts that were alleged in the class action complaints was filed against the directors of the Company in the District Court for the District New Jersey; however, a complaint was not served on the defendants and, on February 2, 2018 the claim was dismissed by the District Court.

In June 2018, the landlord of our Cherry Hill, New Jersey office filed suit against the Company for non-payment of rent. The Company has been in negotiations to settle the remaining payments due under the lease. The Company recorded $167,000 of expense related to the lease within net loss from discontinued operations, net of tax, for the cost of the remaining payments under the lease agreement. This amount is accrued for at December 31, 2018 within the current liabilities - discontinued operations balance. The Company settled this litigation in January 2019 by paying $75,000 in cash and issuing warrants to purchase 20,250 common shares at an exercise price of $3.42 per share.

In June 2018, the Company’s former President, Robert Haydak, filed suit against the Company. The Company and Mr. Haydak resolved the suit effective July 2018 with the Company agreeing on a cash settlement of $50,000, and delivery of certain MMA promotion fixed assets. The Company has accrued the settlement as of December 31, 2018 which is included within net loss from discontinued operations, net of tax, and current liabilities - discontinued operations balance. In February 2019, the company paid Mr. Haydak $50,000 and obtained a further release of all claims under the settlement agreement effective July 2018.

On December 19, 2018, the Company’s former Chief Executive Officer (“CEO”), Robert L. Mazzeo, who resigned on May 25, 2018, served a complaint against the Company in the United States District Court for the Southern District of NY. Mazzeo alleges that he (i) was fraudulently induced to become the CEO of the Company and (ii) entered into an employment contract with the Company and that the Company breached said alleged contract. Mazzeo seeks damages in “excess of $500,000.” The Company believes that the lawsuit is frivolous and violative of Rule 11 of the Federal Rules of Civil Procedure. The Company filed an answer to the complaint on February 5, 2019, and,in addition to mounting a vigorous defense, the Company filed a counterclaim against Mazzeo alleging breach of fiduciary duty.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock has been listed on the NASDAQNasdaq Capital Market under the symbol “AMMA” since October 6, 2016. Our symbol was changed to “WORX” on February 4, 2019 in connection with the closing of the SCWorx acquisition. The following table sets forth for the indicated periods the high and low closing prices for ourAMMA’s pre-stock split adjusted common stock as reported on the NASDAQ Capital Market.