MDWerks, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements As of December 31, 2023 and 2022 and for the Years Ended December 31, 2023 and 2022 Report of Independent Registered Public Accounting Firm (PCAOB ID 2738 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statement of Changes in Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of MDwerks, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of MDwerks, Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023 and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company suffered a net loss from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audits of the consolidated financial statements that were communicated, or required to be communicated, to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Going Concern Due to the net loss for the year, the Company evaluated the need for a going concern. Auditing management’s evaluation of a going concern can be a significant judgement given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated. As discussed in Note 2, the Company suffered a net loss from operations and has an accumulated deficit for the year ended December 31, 2023. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern. /s/ M&K CPAS, PLLC We have served as the Company’s auditor since 2022 The Woodlands, TX June 28, 2024 PCAOB ID #2738 F- 2 MDwerks, Inc. Consolidated Balance Sheets December 31, 2023 December 31, 2022 Assets Current Assets Cash $ 115,111 $ 23,715 Note receivable 97,533 - Accounts receivable, net 106,734 - Inventory 201,207 - Prepaid expenses 28,632 - Total Current Assets 549,217 23,715 Fixed assets, net of accumulated depreciation of $ 10,787 and $ 0 , respectively 496,890 - Intangible assets, net of accumulated amortization of $ 4,339 and $ 0 , respectively 615,161 - Right-of-use asset 1,105,152 - Goodwill 466,648 - Total Assets $ 3,233,068 $ 23,715 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities Accounts payable and accrued expenses $ 668,748 $ 34,478 Advances payable - 104,204 Notes payable 96,404 - Deferred revenue 52,779 - Right-of-use liability, current portion 249,175 - Total Current Liabilities 1,067,106 138,682 Notes payable, net of current portion 92,830 - Right-of use liability, net of current portion 912,915 - Total Liabilities 2,072,851 138,682 Stockholders’ Equity (Deficit) Preferred stock, par value $ 0.001 ; 10,000,000 shares authorized, of which 8,957,500 were issued and outstanding 8,958 8,958 Common stock, par value $ 0.001 ; 300,000,000 shares authorized, of which 198,724,868 and 122,260,208 shares were issued and outstanding at December 31, 2023 and 2022, respectively 198,725 122,260 Additional paid in capital 1,691,922 201,531 Accumulated deficit ( 739,388 ) ( 447,716 ) Total Stockholders’ Equity (Deficit) 1,160,217 ( 114,967 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 3,233,068 $ 23,715 The accompanying notes are an integral part of these consolidated financial statements. F- 3 MDwerks, Inc. Consolidated Statements of Operations 2023 2022 For the Years Ended December 31, 2023 2022 Revenues $ 104,066 $ - Cost of revenues 28,551 - Gross profit 75,515 - Operating expenses: Selling, general and administrative expenses 470,917 153,713 Salaries and wages 42,071 - Depreciation expense 15,126 - Total operating expenses 528,114 153,713 Operating loss ( 452,599 ) ( 153,713 ) Other income (expense): Gain on sale of assets 168,855 - Other income 2,533 - Interest expense, net ( 10,461 ) - Total other income (expense) 160,927 - Net loss $ ( 291,672 ) $ ( 153,713 ) Net loss per common share – basic $ ( 0.00 ) $ ( 0.01 ) Net loss per common share – diluted $ ( 0.00 ) $ ( 0.01 ) Weighted average common shares outstanding Basic 129,422,897 24,565,003 Diluted 129,422,897 24,565,003 The accompanying notes are an integral part of these consolidated financial statements. F- 4 MDwerks, Inc. Consolidated Statement of Changes in Stockholders’ Equity (Deficit) Shares Amount Shares Amount Capital Deficit (Deficit) Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance December 31, 2021 10,000,000 $ 10,000 18,010,208 $ 18,010 $ 35,195 $ ( 294,003 ) $ ( 230,798 ) Conversion of preferred stock-related party ( 1,042,500 ) ( 1,042 ) 104,250,000 104,250 ( 103,208 ) - - Contributed capital - - - - 30,100 - 30,100 Forgiveness of debt-related party - - - - 239,444 - 239,444 Net loss - - - - - ( 153,713 ) ( 153,713 ) Balance December 31, 2022 8,957,500 $ 8,958 122,260,208 $ 122,260 $ 201,531 $ ( 447,716 ) $ ( 114,967 ) Balance December 31, 2022 8,957,500 $ 8,958 122,260,208 $ 122,260 $ 201,531 $ ( 447,716 ) $ ( 114,967 ) Balance 8,957,500 $ 8,958 122,260,208 $ 122,260 $ 201,531 $ ( 447,716 ) $ ( 114,967 ) Common Shares sold for cash - - 8,964,660 8,965 667,384 - 676,349 Common Shares issued for acquisitions - - 67,500,000 67,500 817,500 - 885,000 Imputed interest - - - - 5,507 - 5,507 Net loss - - - - - ( 291,672 ) ( 291,672 ) Balance December 31, 2023 8,957,500 $ 8,958 198,724,868 $ 198,725 $ 1,691,922 $ ( 739,388 ) $ 1,160,217 Balance 8,957,500 $ 8,958 198,724,868 $ 198,725 $ 1,691,922 $ ( 739,388 ) $ 1,160,217 The accompanying notes are an integral part of these consolidated financial statements. F- 5 MDwerks, Inc. Consolidated Statements of Cash Flows December 31, 2023 December 31, 2022 Year Ended December 31, 2023 December 31, 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 291,672 ) $ ( 153,713 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 15,126 - Gain on sale of assets ( 168,855 ) - Imputed interest 5,507 - Allowance for credit losses 20,420 - Interest income ( 2,533 ) - Changes in operating assets and liabilities: Accounts receivable ( 11,494 ) - Prepaid expense 1,429 - Inventory 1,277 - Right-of-use asset 9,881 - Accounts payable ( 82,061 ) 33,339 Deferred revenue ( 7,288 ) - Right-of-use liability ( 9,527 ) - NET CASH USED IN OPERATING ACTIVITIES ( 519,790 ) ( 120,374 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangible assets ( 19,500 ) - Proceeds from sale of property and equipment 100,000 - Net assets acquired from acquisitions 46,541 - Purchase of property and equipment ( 88,000 ) - NET CASH PROVIDED BY INVESTING ACTIVITIES 39,041 - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from advances payable - 113,989 Contributed capital - 30,100 Repayment of advances payable ( 104,204 ) - Proceeds from subscription agreements 676,349 - NET CASH PROVIDED BY FINANCING ACTIVITIES 572,145 144,089 NET CHANGE IN CASH 91,396 23,715 CASH - BEGINNING OF YEAR 23,715 - CASH - END OF PERIOD $ 115,111 $ 23,715 Supplemental disclosures of cash flow information: Cash paid for interest $ - $ - Cash paid for taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities Forgiveness of debt as capital contribution $ - $ 239,444 Note receivable issued for asset sale $ 95,000 $ - Common stock issued for acquisitions $ 885,000 $ - Conversion of preferred stock $ - $ 104,250 The accompanying notes are an integral part of these consolidated financial statements. F- 6 MDwerks, Inc. Notes to Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE BUSINESS MDwerks, Inc. (the “Company”), a Delaware corporation, was focused on effecting a “reverse merger,” capital exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more unrelated businesses (the “Business Combination”) that would benefit from the Company’s public reporting status. On February 13, 2023, the Company entered into a Merger Agreement (the “Merger Agreement”), by and between the Company, MD-TT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”) and Two Trees Beverage Co. (“Two Trees”). Two Trees produces a variety of aged alcoholic beverages using an innovative rapid-aging system. This scalable technology results in all-natural, high-quality products, efficiently produced, with a reduced environmental impact. Our products are nearly indistinguishable from those that are traditionally aged. Two Trees created a proprietary process that mirrors and accelerates the natural aging process that occurs when alcohol is aged in wooden barrels over time. The true art of our craft spirits lives within the balance between the grain selection, local water, and the full-bodied flavors from our toasted wood chip varieties. Our wood chips are selected to pair with specific grains and toasted to just the right char, bringing rich flavor profiles to life with a hint of smoke. In consideration of the Merger Agreement, at the effective time of the Merger, each of the holders of Two Trees stock, subject to certain exceptions set forth in the Merger Agreement, shall have the right to convert all of the shares of Two Trees stock into a total of 60,000,000 shares of Company common stock, which shall be apportioned between the Two Trees stockholders, pro rata, based on the number of shares of Two Trees stock held by each of the Two Trees stockholders as of the closing of the Merger (the “Merger Consideration”). Immediately following the Exchange, Two Trees became a wholly owned subsidiary of the Company. The Merger closed on December 8, 2023. RF Specialties, LLC (“RFS”) is an innovative company pushing the boundaries of sustainable Radio Frequency applications. For over 12 years RF Specialties has addressed companies’ most pressing challenges by implementing automated Radio Frequency Technology in a sustainable way reducing energy costs and increasing speed to market when compared to traditional methods. By bringing Radio Frequency applications to market RFS has successfully elevated a wide range of industries including structural engineering, food & beverage, and manufacturing. As discussed below, on January 25, 2023, the “Company entered into an Exchange Agreement (the “Exchange Agreement”), dated as of January 19, 2023, by and between the Company, RFS and Keith A. Mort as the sole member of RFS (the “Member”). Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from Mr. Mort, and Mr. Mort agreed to sell to the Company, 100 % of the equity interests and membership interests of RFS, in exchange for the issuance by the Company to Mr. Mort of 7,500,000 shares of the Company’s common stock (the “Exchange”). Whereby, immediately following the closing of the Exchange, RFS became a wholly owned subsidiary of the Company. The Exchange closed on December 27, 2023. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The financial statements present the financial position, results of operations and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Two Trees Beverage Company, Prost Beverage Co, Radio Aged Beer LLC, RF Kettle Company LLC, Two Trees, Drilling, RAS LLC, (collectively referred to as “Two Trees”) and RF Specialties, LLC. All intercompany accounts, transactions and balances have been eliminated in consolidation. F- 7 Cash and Cash Equivalents - The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. The Company had $ 115,111 cash equivalents at December 31, 2023 and $ 23,715 cash at December 31, 2022. Income Taxes - The Company complies with the accounting and reporting requirements of US GAAP in accounting for income taxes. The Company uses the asset and liability approach to financial reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. The Company also complies with US GAAP in accounting for uncertain tax positions. A tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2023 and December 31, 2022. However, the Company’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations, and interpretations thereof. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized as of and for the years ended December 31, 2023 and December 31, 2022. Loss Per Share -Earnings per share is computed based on the weighted average number of common shares outstanding. Basic (loss) per share excludes dilution and is computed by dividing (loss) available to common stockholders by the weighted average common shares outstanding for the year. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. In the fiscal years ended December 31, 2023 and December 31, 2022, there were no options, warrants or derivative securities outstanding. Use of Estimates and Assumptions - The preparation of financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. Prepaid Expenses and Other Assets - Prepaid expenses primarily consist of prepaid purchases, insurance, income tax refund receivable, and various other expenses. These amounts are recognized as an expense in the period the related service or benefit is received. Accounts Receivable and the Allowances for Credit losses - Accounts receivable are recorded in the period when the right to receive payment or other consideration becomes unconditional. Accounts receivable are recorded at the invoiced amount and do not earn interest. The Company maintains an allowance for credit losses based upon the best estimate of probable credit losses in existing accounts receivable. The Company determines the allowance based upon individual accounts when information indicates the customers may have an inability to meet their financial obligations, as well as historical collection and write-off experience. The Company had an accounts receivable balance of $ 106,734 net of $ 54,967 allowance for doubtful accounts as of December 31, 2023. The Company had bad debt expense of $ 20,420 and $ 0 as of December 31, 2023 and 2022, respectively. The company had an accounts receivable balance of $ 0 as of December 31, 2022. As of and for the year ended December 31, 2023, the Company had three customers that accounted for 25 %, 17 %, and 10 % of total accounts receivable. Fair value of financial instruments - The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. F- 8 Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable. The carrying values of the Company’s accounts payable and accrued liabilities, advances payable, and convertible notes payable, approximate their fair value due to their short-term nature. Convertible notes payable - The Company accounts for convertible notes payable in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging, since the conversion feature is not indexed to the Company’s stock and can’t be classified in equity. The Company allocates the proceeds received from convertible notes payable between the liability component and conversion feature component. The conversion feature that is considered embedded derivative liabilities has been recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company has also recorded the resulting discount on debt related to the conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments. Going Concern - These financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. As reflected in the accompanying financial statements, the Company had loss of $ 291,672 and an accumulated deficit of $ 739,388 as of and for the year ended December 31, 2023. Although management believes that it will be able to successfully execute a business combination, which includes third party financing and the raising of capital to meet the Company’s future liquidity needs, there can be no assurances in this regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Revenue Recognition - Net sales from Two Trees include liquor and related products, less excise taxes and customer programs and incentives. Sales from RF Specialties, LLC will include product and services related to sustainable Radio Frequency applications to a wide range of industries including structural engineering, food & beverage, and manufacturing. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission, the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. For service revenue within the Company’s radio frequency applications, the Company recognizes revenue as the services are provided to the customer. The Company’s contracts typically have a single performance obligation, and do not contain a significant financing component. The Company recognizes deferred revenue for performance obligations not yet satisfied, primarily related to liquor sales not yet shipped. As of December 31, 2024, the Company had $ 52,779 in unsatisfied performance obligations that it expects to satisfy over the next 12 months. During the year ended December 31, 2023, the Company’s revenue consisted solely of liquor sales. For the year ended December 31, 2023, the Company had one customer who accounted for 26 % of total revenue. F- 9 Inventory - Inventories primarily consist of bulk and bottled liquor and raw materials and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (“FIFO”) method. A portion of the Company’s finished goods inventory is held in warehouses located in several states that maintain control over the alcohol beverage distribution process until it is sold into the retail distribution channel within those states. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. Intangible Assets - Intangible assets, consisting of trade names, developed technology, and customer relationships, are accounted for in accordance with ASC 350 Intangibles - Goodwill and Other. Intangible assets that have finite lives are amortized using the straight-line method over their estimated useful lives of three to fifteen years. Goodwill - Goodwill represents the excess of acquisition cost over the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it can conclude the assessment. If the Company concludes otherwise, the Company is required to perform a quantitative analysis to determine the amount of impairment. A quantitative analysis is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value to determine the amount of impairment, if any. The Company has determined that it has one reporting unit. During the years ended December 31, 2023, and 2022, no impairment expense was recognized. Impairment of Long-Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair market value of the assets. During the years ended December 31, 2023, and 2022, no impairment expense was recognized. Leases - Management determines if an arrangement is a lease at the inception of the agreement. Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liability on the accompanying consolidated balance sheet. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the rate implicit in the lease agreement, when available, or a discount rate based on the information available at the commencement date in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. F- 10 Property and Equipment - Property and equipment are recorded at cost. Depreciation of property and equipment is calculated on a straight-line basis over the estimated useful lives of the assets. Furniture and fixture assets are depreciated over seven years, vehicles are depreciated over five years, and computer and equipment are depreciated over three years. Expenditures for renewals and betterments that extend the useful lives of or improve existing property or equipment are capitalized. Expenditures for maintenance and repairs are expensed as incurred. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows: SCHEDULE OF PROPERTY AND EQUIPMENT Category Estimated Useful Lives Machinery and equipment 3 - 7 years Vehicles 5 years Furniture & Fixtures 5 years Computers 3 years Leasehold improvements are depreciated over the shorter period of their estimated useful life or term of the lease. Research and Development Expenses - The Company records research and development expenses in the period in which they are incurred as a component of product development expenses. Stock-Based Compensation - The Company measures stock-based compensation at the estimated fair value on the grant date and recognizes the amortization of stock-based compensation expense on a straight-line basis over the requisite service period, or when it is probable criteria will be achieved for performance-based awards. Fair value is determined based on assumptions related to the fair value of the Company common stock, stock volatility and risk-free rate of return. The Company has elected to recognize forfeitures when realized. Excise Taxes - The Company is responsible for compliance with the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcoholic beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $ 595 and $ 143 for the years ended December 31, 2023, and 2022, respectively. Recently Issued Accounting Pronouncements - From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“ FASB ”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its financial position or results of operations upon adoption. NOTE 3 - INVENTORY Inventories primarily consist of bulk and bottled liquor and raw materials and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (“FIFO”) method. A portion of the Company’s finished goods inventory is held in warehouses located in several states that maintain control over the alcohol beverage distribution process until it is sold in to the retail distribution channel within those states. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. Inventories consisted of the following as of December 31: SCHEDULE OF INVENTORY 2023 2022 Raw materials and packaging $ 78,352 $ - Finished goods 122,855 - Total inventories $ 201,207 $ - F- 11 NOTE 4 – FIXED ASSETS, NET Fixed assets, net consisted of the following as of December 31: SCHEDULE OF FIXED ASSETS, NET 2023 2022 Machinery and equipment $ 220,984 $ - Furniture and office equipment 133,890 - Vehicles 142,306 - Buildings 10,497 - Total Property and equipment 507,677 - Less accumulated depreciation ( 10,787 ) - Total property and equipment, net $ 496,890 $ - On August 25, 2023, the Company entered an asset purchase agreement with an unrelated company, Dream Workz Automotive LLC, a Colorado limited liability company (“Dream Workz”). Pursuant to this agreement, the Company sold certain tangible manufacturing assets of ours to Dream Workz for a purchase price of $ 195,000 (the “Purchase Price”). The Purchase Price was paid in a combination of cash in the amount of $ 100,000 and a promissory note in the amount of $ 95,000 (the “Note”). The Note is unsecured and bears interest at the rate of 8 % per annum commencing as of August 25, 2023. The Note matures on August 25, 2029 . Depreciation expense totaled $ 10,787 and $ 0 for the years ended December 31, 2023, and 2022, respectively. NOTE 5 – I NTANGIBLE ASSETS, NET Intangible assets, net consisted of the following as of December 31: SCHEDULE OF INTANGIBLE ASSETS, LESS ACCUMULATED AMORTIZATION 2023 2022 Trade names and license, 10 year estimated useful life $ 359,500 $ - Developed technology, 15 year estimated useful life 140,000 - Customer relationships, 10 year estimated useful life 120,000 - Total intangible assets 619,500 - Less accumulated amortization ( 4,339 ) - Total intangible assets, net $ 615,161 $ - Total amortization expense for the years ended December 31, 2023 and 2022 was $ 4,339 and $ 0 , respectively. The Company expects to recognize amortization expense of $ 56,432 annually in each of the next five years . NOTE 6 – NOTE RECEIVABLE During the year ended December 31, 2023, the Company sold certain fixed assets for $ 195,000 . At the time of the sale $ 100,000 cash proceeds were received and the Company received a note receivable for $ 95,000 . The net book value of the asset at the time of sale was $ 26,145 . A gain of $ 168,855 was recorded in the year ended December 31, 2023, for the sale of equipment. The note is payable in full at maturity on August 25, 2029 , and accrues interest at the rate of 8 % per year. The note receivable balance as of December 31, 2023, was $ 97,533 including interest of $ 2,533 . F- 12 NOTE 7 - ACQUISITIONS Two Trees The Company completed the Merger on the Merger Closing Date pursuant to the Merger Agreement. Pursuant to the terms of the Merger Agreement, on the Merger Closing Date of the Merger, the Company issued 60,000,000 shares of its common stock, $ 0.001 par value per share, (the “Company Common Stock”) which was apportioned among the Two Trees stockholders, pro rata, based on the number of shares of Two Trees common stock, par value $ 0.0001 per share (the “Two Trees Common Stock”) held by each of the Two Trees stockholders as of the closing of the Merger (the “Merger Consideration”). Upon completion of the Merger, all 12,045,277 shares of Two Trees common stock were cancelled in exchange for the right of the Two Trees stockholders to receive the Merger Consideration. Each share of common stock of Merger Sub issued and outstanding immediately prior to the effective time of the Merger was converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, $ 0.001 par value per share, of Two Trees as the surviving corporation. Purchase Price Allocation The purchase price for Two Trees has been allocated to the assets acquired and liabilities assumed for purposes of this pro forma financial information based on their estimated relative fair values. The merger with Two Trees is being accounted for as a business combination under Financial Accounting Standards Board Accounting Standards Codification (ASC) 805. The following information summarizes the purchase consideration and allocation of the fair values assigned to the assets at the purchase date: Purchase Price: SUMMARIZES THE PURCHASE CONSIDERATION AND ALLOCATION OF THE FAIR VALUES 60,000,000 common share @ $ 0.011 per share $ 660,000 Total purchase consideration $ 660,000 Purchase Price Allocation Cash $ 3,900 Accounts receivable 63,797 Inventory 202,484 Prepaid expenses 1,430 Fixtures and equipment 171,870 Right of use asset 317,582 Trade names 320,000 Developed technologies 130,000 Customer relationships 120,000 Goodwill 371,930 Accounts payable ( 332,890 ) Accrued expenses ( 307,687 ) Deferred revenue ( 60,067 ) Right of use liability ( 320,765 ) Notes payable ( 21,584 ) Total $ 660,000 The fair value of the common stock issued for the Merger was based on the closing price of the Company’s common stock on the closing date of December 8, 2023. F- 13 The Company’s consolidated statement of operations includes revenue of $ 104,066 and net income of $ 12,620 related to the Two Trees business since the transaction closed on December 8, 2023. RF Specialties On December 27, 2023, the Company completed the acquisition of RFS and the Exchange and issued to Mr. Mort 7,500,000 shares of the Company’s common stock, $ 0.001 par value per share (the “Common Stock”). Immediately following the completion of the Exchange, RFS became a wholly owned subsidiary of the Company Purchase Price Allocation The following table presents the estimated allocation of the purchase price of the assets acquired and liabilities assumed for the acquisition by the Company of RFS via the exchange: SUMMARIZES THE PURCHASE CONSIDERATION AND ALLOCATION OF THE FAIR VALUES Purchase Price: 7,500,000 common share @ $ 0.03 per share based on closing price of the Company’s common stock at December 27, 2023 $ 225,000 Total purchase consideration $ 225,000 Purchase Price Allocation Cash $ 42,641 Accounts receivable 51,863 Fixtures and equipment 273,952 Other assets 28,632 Right of use assets 797,451 Trade names 20,000 Developed technologies 10,000 Goodwill 94,718 Accounts payable ( 62,716 ) Accrued expenses ( 13,039 ) Notes payable – current ( 48,504 ) Right of use liability - current ( 126,161 ) Right of use liability – net of current ( 724,691 ) Long term loans payable ( 119,146 ) Total $ 225,000 The fair value of the common stock issued for the Merger was based on the closing price of the Company’s common stock on the closing date of December 27, 2023. The Company’s consolidated statement of operations includes revenue of $ 0 and net loss of $ 8,112 related to RFS since the transaction closed on December 27, 2023. Unaudited Pro Forma Financial Information The following table sets forth the pro-forma consolidated results of operations for the years ended December 31, 2023 and 2022 as if the Exchange agreement with RF Specialties and the Merger agreement with Two Trees occurred on January 1, 2022. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisitions had taken place on the dates noted above, or of results that may occur in the future. F- 14 SCHEDULE OF UNAUDITED PROFORMA FINANCIAL INFORMATION 2023 2022 Year ended December 31, 2023 2022 Revenue $ 2,283,567 $ 3,154,850 Operating loss ( 1,253,970 ) ( 2,440,691 ) Net loss ( 1,093,089 ) ( 2,447,140 ) Net loss per common share $ ( 0.01 ) $ ( 0.03 ) Weighted Average common shares outstanding 193,059,884 92,065,003 Asset purchase agreements Prior to its acquisition by the Company on December 27, 2023, RFS entered into two asset purchase agreements to acquire certain tools and equipment. The Company received assets under one agreement in December 2023, totaling $ 97,363 . The assets are included in property and equipment on the Company’s consolidated balance sheet. The Company assumed the liability of $ 88,674 as part of the Exchange agreement with RF Specialties. The agreement requires monthly payments through October 2026. As of December 31, 2023, the Company owed $ 88,674 . The Company did not receive the assets under the second purchase agreement until 2024, and as such did not recognize any asset or liability until it took control of the assets in January 2024. The Company agreed to pay a total of $ 441,891 on a monthly basis through March 2030. NOTE 8 - ADVANCES PAYABLE The Company received advances aggregating $ 29,444 from a non-related parties during the first half of 2022 in order to cover legal, accounting and other various public company related operating expenses. This amount was forgiven during the year ended December 31, 2022, along with the outstanding note payable of $ 210,000 . This transaction was recognized as an in substance related party transaction. The forgiveness of debt was recognized as capital contribution during July 2022 in the accompanying financial statements. The Company received advances aggregating $ 104,204 from two non-related parties during the year ended December 31, 2022 to cover legal, accounting, and other various public company related operating expenses. The advances are unsecured, non-interest bearing and are due on demand. During the year ended December 31, 2023, the Company repaid $ 104,204 in cash of the advances. The balance as of December 31, 2023 and 2022 is $ 0 and $ 104,204 , respectively. NOTE 9 - NOTES PAYABLE During July 2022, the holders of the Company’s shares of Preferred Stock sold their shares pursuant to a Stock Purchase Agreement (“SPA”), executed with (i) Tradition Reserve I LLC, a New York limited liability company (“Buyer”); and (ii) Ronin Equity Partners, Inc., a Texas corporation (“Seller”). The SPA, provides, among other things, that the Company’s obligations under its convertible notes and advances payable aggregating $ 239,444 are forgiven. This transaction was recognized as an in substance related party transaction. The forgiveness of debt was recognized as capital contribution during July 2022 in the accompanying financial statements. The Company has the following outstanding notes payable: SCHEDULE OF NOTES PAYABLE Loans Origination Date Interest Rate Balance as of December 31, 2023 Asset purchase agreement note December 1, 2023 0.00 % $ 88,674 Termination Agreement December 31, 2021 0.13 % 21,584 Loan Payable - Mercedes September 19, 2022 6.79 % 60,008 Loan Payable - Dodge June 18, 2022 0.00 % 18,968 Total $ 189,234 F- 15 The following is a summary of the future minimum payments of loans payable: SCHEDULE OF LOANS PAYABLE FUTURE MINIMUM PAYMENTS Year Ending December 31, 2024 $ 96,404 2025 58,037 2026 34,793 2027 and Thereafter - Total loans payable $ 189,234 During the year ended December 31, 2020, the Company entered into a termination agreement and agreed to pay the sum of $ 50,000 , pursuant to the agreement. During the year ended December 31, 2021, the Company issued a promissory note payable in the amount of $ 31,584 at the rate of 0.13 % per annum, with a maturity date on or before January 1, 2025 , for settlement of the $ 50,000 agreed upon in the termination agreement. The balance as of December 31, 2023, and December 31, 2022, is $ 21,584 and $ 31,584 , respectively. During the year ended December 31, 2023, the Company made a payment of $ 10,000 . Interest expense of $ 10,461 and $ 0 was recorded in the years ended December 31, 2023, and 2022, respectively, of which $ 5,507 was imputed interest on the termination agreement. Accrued interest as of December 31, 2023, and December 31, 2022, was zero . NOTE 10 - CAPITAL STOCK The Company is authorized to issue 300,000,000 shares of Common stock, $ 0.001 par value, with such designations, rights and preferences as may be determined from time to time by the Board of Directors. The increase in authorized shares from 200,000,000 to 300,000,000 was effective September 13, 2022. Preferred stock The Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value, with such designations, rights and preferences as may be determined from time to time by the Board of Directors, of which 10,000,000 shares are designated Series A Convertible Preferred. On June 15, 2014, the Company designated the Series A Convertible Preferred so that each share shall hold with it conversion rights of one hundred (100) shares of common stock for every share of Series A Preferred stock held, and that each share of Series A Preferred stock will also hold with it the same number of common share votes prior to conversion as it would if fully converted to be used in voting on any company matter requiring a vote of shareholders. At December 31, 2023 and 2022, there were 8,957,500 shares issued and outstanding. Holders of the Preferred Stock converted 1,042,500 shares of Preferred Stock into 104,250,000 shares of the Company’s common stock during December 2022. Common stock At December 31, 2023 and 2022, there were 198,724,868 and 122,260,208 shares issued and outstanding, respectively. F- 16 During the year ended December 31, 2023, the Company issued a total of 8,964,660 shares of common stock to accredited investors for total cash proceeds of $ 676,349 . A total of 53,336 shares of common stock were not issued as of the date of this report. During July 2022, the holders of the Company’s shares of Preferred Stock sold their shares pursuant to a Stock Purchase Agreement (“SPA”), executed with (i) Tradition Reserve I LLC, a New York limited liability company (“Buyer”); and (ii) Ronin Equity Partners, Inc., a Texas corporation (“Seller”). The SPA, provides, among other things, that the Company’s obligations under its convertible notes and advances payable aggregating $ 239,444 are forgiven. This transaction was recognized as an in substance related party transaction. The forgiveness of debt was recognized as capital contribution during July 2022 in the accompanying financial statements. In December 2022 Tradition Reserve 1 LLC contributed $ 30,100 as contributed capital to MDwerks Inc. These funds represent the holdback amount of the purchase price between Tradition Reserve 1 LLC and Ronin Equity Partners Inc. During the year ended December 31, 2023, the Company issued a total of 67,500,000 shares of common stock, with a fair value of $ 885,000 , for the acquisitions of Two Trees and RF Specialties, LLC. See Note 5. NOTE 11 - CONTINGENCIES In the ordinary course of business, the Company may become a party to lawsuits involving various matters. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company believes the ultimate resolution of any such current proceeding will not have a material adverse effect on our continued financial position, results of operations or cash flows. NOTE 12 - RELATED PARTY TRANSACTIONS During July 2022, the holders of the Company’s shares of Preferred Stock sold their shares pursuant to a Stock Purchase Agreement (“SPA”), executed with (i) Tradition Reserve I LLC, a New York limited liability company (“Buyer”); and (ii) Ronin Equity Partners, Inc., a Texas corporation (“Seller”). The SPA, provides, among other things, that the Company’s obligations under its convertible notes and advances payable aggregating $ 239,444 are forgiven. This transaction was recognized as an in substance related party transaction. The forgiveness of debt was recognized as capital contribution during July 2022 in the accompanying financial statements. In December 2022 Tradition Reserve 1 LLC contributed $ 30,100 as contributed capital to MDwerks Inc. These funds represent the holdback amount of the purchase price between Tradition Reserve 1 LLC and Ronin Equity Partners Inc. Holders of the Preferred Stock, the largest Company’s shareholder, converted 1,042,500 shares of Preferred Stock into 104,250,000 shares of the Company’s common stock during December 2022. NOTE 13 – LEASES The Company maintains an operating lease for its office space and operating facility. The lease has a remaining term of 80 months. The Company determines if an arrangement is a lease at inception. As the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate based on information available at commencement to determine the present value of the lease payments. The Company used a weighted average incremental borrowing rate of 8.4% Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term . As of December 31, 2023, the amount of right-of-use assets and lease liabilities were $ 1,105,152 and $ 1,162,090 , respectively. As of December 31, 2022, the amount of right-of-use assets and lease liabilities were $ 0 . Aggregate lease expense for the years ended December 31, 2023, and 2022 was $ 5,546 and $ 0 , respectively. F- 17 The following table provides the maturities of lease liabilities at December 31, 2023: SCHEDULE OF MATURITIES LEASE LIABILITIES Remaining Term in Operating Lease Years 2024 370,439 2025 307,994 2026 184,952 2027 160,200 2028 160,200 thereafter 226,950 Total lease payments 1,410,735 Less: imputed interest ( 248,645 ) Present value of lease liability 1,162,090 3.33 NOTE 14 – INCOME TAXES For the period from inception through December 31, 2023, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2023, and 2022, the Company had approximately $ 739,388 and $ 447,716 of federal net operating losses. Under the Tax Cuts and Jobs Act of 2017, the net operating loss carry forwards can be carried forward indefinitely, however the deductions are limited to 80 % of taxable income. The effective income tax rate for the years ended December 31, 2023 and 2022 consisted of the following: SCHEDULE OF EFFECTIVE INCOME TAX RATE December 31, December 31, 2023 2022 Federal statutory income tax rate 21 % 21 % Change in valuation allowance ( 21 )% ( 21 )% Net effective income tax rate - - The components of the Company’s deferred tax asset are as follows: SCHEDULE OF DEFERRED TAX ASSET 2023 2022 December 31, 2023 2022 Deferred tax assets: Net deferred tax assets before valuation allowance $ 155,271 $ 94,020 Less: Valuation allowance ( 155,271 ) ( 94,020 ) Net deferred tax assets $ - $ - Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2023 and 2022, respectively. In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions. NOTE 15 - SUBSEQUENT EVENTS On February 5, 2024, the Company issued a press release announcing that the Company’s wholly owned subsidiary, Two Trees Beverages, has entered a new, fifteen (15) year license agreement Shine Time, LLC, product licensing territories for Tim Smith Spirits ® expanding its territories beyond the United States to include all members of the European Union, the United Kingdom, Norway, Switzerland, Iceland, Serbia, Turkey and Ukraine. The Company will pay a royalty of 9 % on branded products covered by the license agreement, or 4.5 % of any sublicensed revenue under the agreement. The Company paid $ 79,688 , owes an additional $ 112,500 under the license agreement that was due by April 1, 2024 but has not yet been paid and will issue 300,000 shares of common stock. Subsequent to December 31, 2023, the Company issued 2,600,000 shares of common stock and received cash proceeds of $ 390,000 . On April 22, 2024, the Company entered into a broker agreement with a third party. Under the agreement, the Company will pay a monthly fee of $ 1,500 , and a commission of 12 % of any revenue from customers introduced by the broker, less any promotional expenses incurred by the Company. The agreement is cancellable by either party with 60 days notice, and in the event of termination, the commissions shall continue for a period of one year from the termination date. On January 1, 2024, the Company entered into a short-term loan agreement with an existing shareholder for $ 25,000 in cash proceeds. The loan included interest of 10 % and was repaid in full in March 2024. F- 18 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no reportable events pursuant to Item 304(b) of Regulation S-K in connection with a change in our accountants.