MDWerks, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE EXCHANGE ACT OF 1934 For the transition period from __________ to __________ MDwerks, Inc. (Exact name of registrant as specified in its charter) Commission File Number: 000-56299 Delaware 33-1095411 (State or other jurisdiction or incorporation or organization) (I.R.S. Employer Identification No.) 411 Walnut Street , Suite 20125 Green Cove , FL 32043 (Address of Principal Executive Offices) (Zip Code) (252) 501-0019 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A 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. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to 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 such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an 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. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ 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 Exchange Act). Yes ☐ No ☒ As of August 18, 2026, the Company has 240,802,096 shares of common stock issued and outstanding. Table of Contents PART I—FINANCIAL INFORMATION Item 1. Financial Statements Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 4 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 Item 4. Controls and Procedures 11 PART II—OTHER INFORMATION 12 Item 1. Legal Proceedings 12 Item 1A. Risk Factors 12 Item 2. Unregistered Sales of Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Mine Safety Disclosure 12 Item 5. Other Information 12 Item 6. Exhibits 13 SIGNATURES 14 EXHIBIT 31.1 EXHIBIT 31.2 EXHIBIT 32.1 2 Forward-Looking Statements Various statements contained in this report constitute “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are based on current expectations and are indicated by words or phrases such as “believe,” “expect,” “may,” “should,” “seek,” “plan,” “intend” or “anticipate” or the negative thereof or comparable terminology, or by discussion of strategy. Forward-looking statements represent as of the date of this report our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. Such forward-looking statements are based largely on our current expectations and are inherently subject to risks and uncertainties. Our actual results could differ materially from those that are anticipated or projected as a result of certain risks and uncertainties, including, but not limited to, a number of factors, such as: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles and the other risks and uncertainties that are set forth in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the Securities and Exchange Commission (“SEC”) pursuant to the SEC’s rules, we have no duty to update these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information contained in this report will in fact transpire. As used in this Quarterly Report on Form 10-Q, unless the context requires or is otherwise indicated, the terms “we,” “us,” “our,” the “Company,” “our company” and similar expressions means MDwerks, Inc. 3 Index to Financial Statements As of June 30, 2026 and for the Three and Six Months Ended June 30, 2026 and 2025 Consolidated Balance Sheets (Unaudited) F-2 Consolidated Statements of Operations (Unaudited) F-3 Consolidated Statement of Changes in Stockholders’ Equity (Deficit) (Unaudited) F-4 Consolidated Statements of Cash Flows (Unaudited) F-5 Notes to Consolidated Financial Statements (Unaudited) F-6 F- 1 MDwerks, Inc. Consolidated Balance Sheets (Unaudited) June 30, 2026 December 31, 2025 Assets Current Assets Cash $ 13,258 $ 211,948 Accounts receivable, net 96,578 43,489 Inventory 585,007 820,956 Prepaid expenses 141,478 90,659 Total Current Assets 836,321 1,167,052 Fixed assets, net 1,179,841 1,268,555 Intangible assets, net 474,181 502,382 Right-of-use asset 917,944 628,125 Goodwill 466,648 466,648 Other non-current assets 16,010 16,010 Total Assets $ 3,890,945 $ 4,048,772 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities Accounts payable and accrued expenses $ 1,603,509 $ 1,560,425 Accounts payable – related party - - Accounts payable - - Notes payable 219,768 162,110 Notes payable – related party 176,500 117,500 Notes payable 176,500 117,500 Convertible Notes payable – related party 145,000 - Deferred revenue 530,585 457,178 Right-of-use liability, current portion 243,050 124,856 Total Current Liabilities 2,918,412 2,422,069 Notes payable, net of current portion - 38,126 Notes payable – related party, net of current portion - 50,000 Notes payable , net of current portion - 50,000 Right-of use liability, net of current portion 705,057 536,253 Total Liabilities 3,623,469 3,046,448 Stockholders’ Equity (Deficit) Preferred stock, par value $ 0.001 ; 10,000,000 shares authorized, of which 0 were issued and outstanding - - Common stock, par value $ 0.001 ; 300,000,000 shares authorized, of which 239,849,681 and 234,105,560 shares were issued and outstanding at June 30, 2026 and December 31, 2025, respectively 239,850 234,106 Additional paid in capital 7,548,025 6,911,713 Subscription payable 15,000 15,000 Accumulated deficit ( 7,535,399 ) ( 6,158,495 ) Total Stockholders’ Equity (Deficit) 267,476 1,002,324 Total Liabilities and Stockholders’ Equity (Deficit) $ 3,890,945 $ 4,048,772 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 2 MDwerks, Inc. Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Revenues 524,090 420,609 958,177 934,539 Cost of revenues 451,674 701,906 1,022,024 1,083,304 Gross profit(loss) 72,416 ( 281,297 ) ( 63,847 ) ( 148,765 ) Operating expenses: Selling, general and administrative expenses 323,777 589,362 811,671 1,173,267 Salaries and wages 164,928 375,265 310,982 469,074 Depreciation and amortization 93,313 78,588 160,914 151,195 Total operating expenses 582,018 1,043,215 1,283,567 1,793,536 Operating loss ( 509,602 ) ( 1,324,512 ) ( 1,347,414 ) ( 1,942,301 ) Other income (expense): Other income - - - 200 Interest expense, net ( 20,270 ) ( 12,380 ) ( 29,490 ) ( 24,145 ) Total other expense ( 20,270 ) ( 12,380 ) ( 29,490 ) ( 23,945 ) Net loss ( 529,872 ) ( 1,336,892 ) ( 1,376,904 ) ( 1,966,246 ) Net loss per common share - basic ( 0.00 ) ( 0.01 ) ( 0.01 ) ( 0.01 ) Net loss per common share - diluted ( 0.00 ) ( 0.01 ) ( 0.01 ) ( 0.01 ) Weighted average common shares outstanding: Basic 237,579,115 220,395,322 236,523,911 215,540,647 Diluted 237,579,115 220,395,322 236,523,911 215,540,647 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 3 MDwerks, Inc. Consolidated Statement of Changes in Stockholders’ Equity (Deficit) (Unaudited) Shares Amount Shares Amount Capital Payable Deficit Total Preferred Stock Common Stock Additional Paid-in Subscription Accumulated Shares Amount Shares Amount Capital Payable Deficit Total Balance December 31, 2024 - $ - 204,744,872 $ 204,745 $ 2,511,788 $ 15,000 $ ( 2,360,505 ) $ 371,028 Common shares sold for cash - - 9,493,332 9,493 1,414,507 160,000 - 1,584,000 Common shares issued for inventory - - 5,000,000 5,000 845,000 - - 850,000 Stock based compensation - - 692,858 693 51,379 14,250 - 66,322 Net loss - - - - - - ( 629,354 ) ( 629,354 ) Balance March 31, 2025 - - 219,931,062 $ 219,931 $ 4,822,674 $ 189,250 $ ( 2,989,859 ) $ 2,241,996 Common shares sold for cash - - 1,166,667 1,167 173,833 ( 110,000 ) - 65,000 Stock based compensation - - 184,766 185 53,839 ( 14,250 ) - 39,774 Net loss - - - - - - ( 1,336,892 ) ( 1,336,892 ) Balance June 30, 2025 - $ - 221,282,495 $ 221,283 $ 5,050,346 $ 65,000 $ ( 4,326,751 ) $ 1,009,878 Balance December 31, 2025 - $ - 234,105,560 $ 234,106 $ 6,911,713 $ 15,000 $ ( 6,158,495 ) $ 1,002,324 Balance - $ - 234,105,560 $ 234,106 $ 6,911,713 $ 15,000 $ ( 6,158,495 ) $ 1,002,324 Common shares sold for cash - - 1,333,333 1,333 198,667 250,000 - 450,000 Stock based compensation - - 271,150 271 44,620 - - 44,891 Net loss - - - - - - ( 847,032 ) ( 847,032 ) Balance March 31, 2026 - $ - 235,710,043 $ 235,710 $ 7,155,000 $ 265,000 $ ( 7,005,527 ) $ 650,183 Balance - $ - 235,710,043 $ 235,710 $ 7,155,000 $ 265,000 $ ( 7,005,527 ) $ 650,183 Common shares sold for cash - - 2,500,000 2,500 247,500 ( 250,000 ) - - Common shares issued for inventory - - 1,500,000 1,500 105,300 - - 106,800 Stock based compensation - - 139,638 140 40,225 - - 40,365 Net loss - - - - - - ( 529,872 ) ( 529,872 ) Balance June 30, 2026 - $ - 239,849,681 $ 239,850 $ 7,548,025 $ 15,000 $ ( 7,535,399 ) $ 267,476 Balance - $ - 239,849,681 $ 239,850 $ 7,548,025 $ 15,000 $ ( 7,535,399 ) $ 267,476 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 4 MDwerks, Inc. Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 1,376,904 ) $ ( 1,966,246 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 160,914 151,195 Stock-based compensation 85,256 106,096 Inventory impairment 99,588 - Allowance for credit losses ( 1,155 ) 27,317 Changes in operating assets and liabilities: Accounts receivable ( 51,934 ) 17,208 Prepaid expense 97,154 73,805 Inventory 243,161 ( 85,351 ) Right-of-use asset 161,047 123,288 Accounts payable 67,418 711,556 Accounts payable – related party - ( 46,812 ) Deferred revenue 73,407 196,913 Right-of-use liability ( 163,868 ) ( 140,121 ) NET CASH USED IN OPERATING ACTIVITIES ( 605,916 ) ( 831,152 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ( 38,333 ) ( 707,454 ) NET CASH USED IN INVESTING ACTIVITIES ( 38,333 ) ( 707,454 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from convertible notes payable, related parties 115,000 - Proceeds from related party notes payable 9,000 150,000 Repayment of related party notes payable - ( 105,500 ) Repayment of notes payable ( 128,441 ) ( 152,723 ) Proceeds from subscription agreements 450,000 1,649,000 NET CASH PROVIDED BY FINANCING ACTIVITIES 445,559 1,540,777 NET CHANGE IN CASH ( 198,690 ) 2,171 CASH - BEGINNING OF YEAR 211,948 11,159 CASH - END OF PERIOD $ 13,258 $ 13,330 Supplemental disclosures of cash flow information: Cash paid for interest $ 4,482 $ 276 Cash paid for taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities Right of use asset, operating lease $ 450,866 $ - Property and equipment additions in accounts payable $ 5,667 $ 64,350 Common stock issued for inventory $ 106,800 $ 850,000 Insurance premium financed with a note payable $ 147,973 $ 171,050 The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 5 MDwerks, Inc. Notes to Unaudited Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 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. The Company has two lines of business as outlined below from acquisitions completed in 2023. Two Trees Beverage Co. (“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. 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 and 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. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission (“SEC”) on March 25, 2026. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been omitted from this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the SEC. Results for the interim periods in this report are not necessarily indicative of future financial results and have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly our interim financial statements as of June 30, 2026, and for the three and six months ended June 30, 2026 and 2025. These adjustments are of a normal recurring nature and consistent with the adjustments recorded to prepare the annual audited consolidated financial statements as of December 31, 2025. The accompanying unaudited 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. 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. F- 6 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 $ 96,578 net of $ 8,969 allowance for doubtful accounts as of June 30, 2026. The Company had an accounts receivable balance of $ 43,489 net of $ 10,627 allowance for doubtful accounts as of December 31, 2025. The Company had credit losses (recoveries) of $ ( 1,155 ) and $ 27,317 during the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, the Company had one customer that accounted for 71 % of total accounts receivable. As of December 31, 2025, the Company had four customers that accounted for 35 %, 23 %, 14 %, and 14 % of total accounts receivable. 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. 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. 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. 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 $ 1,376,904 for the six months ended June 30, 2026 and an accumulated deficit of $ 7,535,399 as of June 30, 2026. Although management believes that it will be able to successfully execute its business plans, which includes third party financing and raising 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. F- 7 The Company recognizes deferred revenue for performance obligations not yet satisfied, primarily related to deposits on its radio frequency aging machine contracts and liquor sales not yet shipped. As of June 30, 2026 and December 31, 2025, the Company had $ 530,585 and $ 457,158 , respectively, in unsatisfied performance obligations that it expects to satisfy over the next 12 months. During the three and six months ended June 30, 2026 and 2025, the Company’s revenue consisted of liquor sales from the Two Trees and installation services and the completion of manufactured machinery systems in the RF Specialties business. For the three and six months ended June 30, 2026, the Company had one customer who accounted for 27 % and 16 % of total revenue, respectively. For the three and six months ended June 30, 2025, the Company had one customer who accounted for 28 % and 29 % of total revenue, respectively. 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 3 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 three and six months ended June 30, 2026, and 2025, 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 three and six months ended June 30, 2026, and 2025, 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. F- 8 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. 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 5 five years, vehicles are depreciated over 5 five years, and computer and equipment are depreciated over 3 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 $ 5,266 and $ 13,648 for the three and six months ended June 30, 2026. Excise taxes totaled $ 5,407 and $ 12,639 for the three and six months ended June 30, 2025. Segment Reporting - In November 2023, the Financial Accounting Standard Board (“ FASB ”) issued ASU 2023-07, Improvements to Reportable Segment Disclosures , which amends the existing segment reporting guidance (ASC Topic 280) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount for other segment items by reportable segment and a description of its composition, the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Reclassifications – Certain prior period amounts have been reclassified to conform to current period presentation. Recently Issued Accounting Pronouncements - From time to time, new accounting pronouncements are issued by the 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. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE) , requiring additional disclosure of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments in this update are effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of our pending adoption of this standard on our consolidated financial statements. F- 9 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 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. Inventories consisted of the following: SCHEDULE OF INVENTORY June 30, 2026 December 31, 2025 Raw materials $ 664,914 $ 832,285 Finished goods and packaging materials 129,928 124,295 Inventory allowance ( 209,835 ) ( 135,624 ) Total inventories $ 585,007 $ 820,956 During the six months ended June 30, 2026, the Company recognized an impairment of $ 99,588 related to barrel inventory with a market price below the Company’s carrying value. During the three months ended June 30, 2026, the Company entered into an agreement to acquire barrel inventory from a vendor in exchange for 1,500,000 shares of common stock with a fair value of $ 106,800 based on the closing price of the Company’s common stock at the agreement date. The Company received $ 71,675 of the inventory as of June 30, 2026 and received the remaining $ 35,125 in July 2026. NOTE 4 – FIXED ASSETS, NET Fixed assets, net consisted of the following: SCHEDULE OF FIXED ASSETS, NET June 30, 2026 December 31, 2025 Machinery and equipment $ 1,233,929 $ 647,369 Furniture and office equipment 264,584 262,890 Buildings 10,497 10,497 Construction in progress 299,216 843,471 Total Property and equipment 1,808,226 1,764,227 Less accumulated depreciation ( 628,385 ) ( 495,672 ) Total property and equipment, net $ 1,179,841 $ 1,268,555 Two Trees entered into two contracts with two spirit companies for the deployment and license of our proprietary Spirits Rapid Aging System (“SRAS”). The first contract is for the building and deployment of SRAS at the customer’s facilities within the next three months, with the potential for additional SRAS deployments in the next 12 months. The second contract is for the building and deployment of SRAS at the customer’s facilities within the next six to nine months, with the potential for additional SRAS deployments in the next 12 months. Under both agreements, RFS will assemble the SRAS units and provide ongoing machine servicing and maintenance, thereby is entitled to receive recurring monthly license payments from the customers for use of the SRAS units. The Company is constructing the machines which expect to be deployed by the end of fiscal year ended December 31, 2026. Depreciation expense totaled $ 79,213 and $ 132,713 for the three and six months ended June 30, 2026, respectively, and $ 64,487 and $ 122,993 for the three and six months ended June 30, 2025, respectively. F- 10 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 RFS. The agreement requires monthly payments through October 2026. On January 31, 2024, the Company received assets under the second purchase agreement totaling $ 444,891 . The assets are included in property and equipment on the Company’s consolidated balance sheet. The Company assumed the liability of $ 444,891 as part of the Exchange Agreement with RFS. The Exchange Agreement requires monthly payments through March 2027. NOTE 5 – INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: SCHEDULE OF INTANGIBLE ASSETS, LESS ACCUMULATED AMORTIZATION June 30, 2026 December 31, 2025 Trade names and license, 10 year estimated useful life $ 359,500 $ 359,500 Developed technology, 15 year estimated useful life 140,000 140,000 Customer relationships, 10 year estimated useful life 120,000 120,000 Total intangible assets 619,500 619,500 Less accumulated amortization ( 145,319 ) ( 117,118 ) Total intangible assets, net $ 474,181 $ 502,382 Total amortization expense was $ 14,101 and $ 28,201 for the three and six months ended June 30, 2026, respectively, and $ 14,101 and $ 28,202 for the three and six months ended June 30, 2025, respectively. The Company expects to recognize amortization expense of $ 56,402 annually in each of the next five years. On February 5, 2024, the Company, through its wholly owned subsidiary, Two Trees Beverages, entered into a new 15-year license agreement with Shine Time, LLC, 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 agreed to pay a royalty of 9 % on branded products covered by the license agreement, or 4.5 % of any sublicensed revenue under the agreement. During the year ended December 31, 2024, the Company paid $ 79,688 to Shine Time, LLC pursuant to the license agreement. An additional $ 112,500 was due under the terms of the license agreement by April 1, 2024. As of the filing date of this Quarterly Report on Form 10-Q, the Company has not paid such amount. The Company also agreed to issue to Shine Time, LLC 300,000 shares of the Company’s common stock with a fair value of $ 15,000 . Such shares have not been issued as of the date of this report. As of June 30, 2026 and December 31, 2025, the royalty payable balance was $ 156,669 and $ 135,872 , respectively, included in accounts payable and accrued expenses on the consolidated balance sheets. F- 11 NOTE 6 - NOTES PAYABLE The Company has the following outstanding notes payable: SCHEDULE OF NOTES PAYABLE Loans Origination Date Interest Rate Balance as of June 30, 2026 Balance as of December 31, 2025 Asset purchase agreement notes December 1, 2023 and January 31, 2024 0.00 % $ 113,873 $ 178,652 Termination Agreement December 31, 2021 0.13 % 21,584 21,584 Insurance Note payable December 14, 2026 9.70 % 84,311 - Advances and Notes Payable – Related parties Various 10.00 %- 12.00 % 176,500 167,500 Convertible Notes Payable – Related parties April 15, 2026 20 % 145,000 - Total notes payable 541,268 367,736 Less current portion ( 541,268 ) ( 279,610 ) Total long term $ - $ 88,126 The following is a summary of the future minimum payments of loans payable: SCHEDULE OF FUTURE MINIMUM PAYMENTS OF LOANS PAYABLE 12 months ending: June 30, 2027 541,268 June 30, 2028 - June 30, 2029 - Total loans payable $ 541,268 Convertible Notes Payable, Related Parties On April 15, 2026, the Company entered into three convertible notes, two with members of the Board of Directors, and one with a family member of a Director, for an aggregate principal amount of $ 145,000 (the “Convertible Notes”). The Company received cash proceeds of $ 115,000 and settled $ 30,000 of accounts payable owed to a Director. The Convertible Notes bear interest at 20 % per annum, payable at maturity on October 15, 2026 and are convertible beginning on the three-month anniversary of issuance into common stock of the Company at a fixed price of $ 0.10 per share. Notes Payable During the year ended December 31, 2020, the Company entered into a termination agreement in which it agreed to pay the sum of $ 50,000 . 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 June 30, 2026, and December 31, 2025, is $ 21,584 . 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 the first asset purchase 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. On January 31, 2024, the Company received assets under the second asset purchase agreement totaling $ 444,891 . The assets are included in property and equipment on the Company’s consolidated balance sheet. The Company assumed the liability of $ 444,891 as part of the Exchange Agreement with RFS. The agreement requires monthly payments through March 2030. During the year ended December 31, 2025, the Company received a total of $ 150,000 in proceeds from shareholders. The advances are unsecured, due on demand and have stated interest of 10 % per annum. During the period ended June 30, 2026, the Company received a total of $ 9,000 in proceeds from shareholders. The advances are unsecured, due on demand and have stated interest of 10 % per annum. As of June 30, 2026 and December 31, 2025, the balance owed on the advances from shareholders was $ 176,500 and $ 167,500 , respectively. F- 12 In February 2026, the Company entered into an insurance policy financing arrangement. The total principal was $ 147,793 with an interest rate of 9.70 % and monthly payments of $ 12,437 due through December 2026. The Company made principal payments of $ 63,661 during the six months ended June 30, 2026. As of June 30, 2026, the remaining balance was $ 84,311 . Interest expense of $ 20,270 and $ 29,490 was recorded in the three and six months ended June 30, 2026, respectively on all notes payable and convertible notes payable. Interest expense of $ 12,380 and $ 24,145 was recorded in the three and six months ended June 30, 2025, respectively. Accrued interest as of June 30, 2026 and December 31, 2025 was $ 44,014 and $ 30,355 , respectively. NOTE 7 - CAPITAL STOCK 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 rights and preferences to the Series A Convertible Preferred stock. Each share of Series A Convertible Preferred stock may be converted into one hundred (100) shares of common stock. Additionally, each share of Series A Preferred stock holds the same number of common stock share votes into which it is convertible, prior to being converted, for the purposes of voting on any company matter requiring a vote of shareholders. On November 7, 2024, the Company agreed to purchased 8,957,000 shares of Series A Convertible Preferred stock, representing all of the issued and outstanding shares of Series A Convertible Preferred shares of the Company from, Tradition Reserve I LLC, a New York limited liability company, in exchange for $ 10 . At June 30, 2026 and December 31, 2025, there were 0 shares of Series A Convertible Preferred issued and outstanding. Common 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. On May 18, 2026, the Company issued a total of 1,500,000 restricted shares of Common Stock of the Company, with a fair value of $ 106,800 in exchange for inventory. The fair value was based on the closing price of the Company’s common stock at the agreement date. During the three months ended March 31, 2026, the Company sold 2,833,333 shares of common stock in exchange for cash proceeds of $ 450,000 . A total of 2,500,000 of these shares of common stock were issued during the three months ended June 30, 2026. The Company has also not yet issued 300,000 shares of common stock related to a prior royalty agreement which are included in subscriptions payable on the Company’s consolidated balance sheet at a value of $ 15,000 . During the three months ended March 31 , 2026, the Company issued a total of 271,150 shares of common stock to officers, directors and consultants for services under the agreements discussed in Note 8. The Company recorded stock-based compensation of $ 44,891 under the agreements, based on the common stock prices ranging from $ 0.13 to $ 0.15 on the respective grant dates. During the three months ended June 30, 2026, the Company issued a total of 139,638 shares of common stock to officers, directors and consultants for services under the agreements discussed in Note 8. The Company recorded stock-based compensation of $ 40,365 under the agreements, based on the common stock price of $ 0.13 on the respective grant dates. F- 13 During the three months ended March 31, 2025, the Company sold 10,559,999 shares of common stock in exchange for cash proceeds of $ 1,584,000 . A total of 333,333 shares of common stock were issued subsequent to June 30, 2025 related to $ 50,000 of cash proceeds, which are included in subscriptions payable on the Company’s consolidated balance sheet. During the three months ended June 30, 2025, the Company sold 433,333 shares of common stock in exchange for cash proceeds of $ 65,000 . The Company also issued 733,334 shares of common stock related to share sold for cash during the period ended March 31, 2025. During the three months ended March 31, 2025, the Company issued a total of 692,858 shares of common stock to officers, directors and consultants for services under the agreements discussed in Note 8. The Company recorded stock-based compensation of $ 66,322 under the agreements, based on the common stock prices ranging from $ 0.12 to $ 0.30 on the respective grant dates. During the three months ended June 30, 2025, the Company issued a total of 184,766 shares of common stock to officers, directors and consultants for services under the agreements discussed in Note 9. The Company recorded stock-based compensation of $ 39,774 under the agreements, based on the common stock prices ranging from $ 0.22 to $ 0.31 on the respective grant dates. At June 30, 2026 and December 31, 2025, there were 239,849,681 and 234,105,560 shares issued and outstanding, respectively. Warrants The following table represents warrant activity during the six months ended June 30, 2026: SCHEDULE OF WARRANT ACTIVITY Number of Options Weighted Average Exercise Price Outstanding at December 31, 2025 17,262,656 $ 1.50 Granted - - Forfeited, cancelled - - Outstanding at June 30, 2026 17,262,656 $ 1.50 Exercisable at June 30, 2026 17,262,656 $ 1.50 The warrants had a weighted average remaining life of 2.15 years and no intrinsic value as of June 30, 2026. Stock options The following is a summary of activity of outstanding stock options during the six months ended June 30, 2026: SCHEDULE OF ACTIVITY OF OUTSTANDING STOCK OPTIONS Weighted Average Number Exercise of Options Prices Balance, December 31, 2025 4,650,685 $ 0.36 Granted - - Forfeited - - Balance, June 30, 2026 4,650,685 $ 0.36 Exercisable, June 30, 2026 4,650,685 $ 0.36 The options had a weighted average remaining life of 7.44 years and no intrinsic value as of June 30, 2026. Stock Appreciation Rights On July 15, 2025, the Company awarded a total of 2,180,000 Stock Appreciation Rights (‘SARs”) to the Company’s common stock to the employees under the 2025 Plan at an exercise price of $ 0.22 per share, vesting immediately, with a 10 year exercise period. The Company has the sole discretion to settle the SARs in shares or cash. The Company will issue shares when exercised based on the difference between the fair value on the exercise date and the exercise price of $ 0.22 . The SARs are classified as equity instruments in accordance with ASC 718. F- 14 The following is a summary of activity of outstanding SARs during the six months ended June 30, 2026: SCHEDULE OF ACTIVITY OF OUTSTANDING STOCK OPTIONS Weighted Average Number of SARs Exercise Prices Balance, December 31, 2025 2,180,000 $ 0.22 Granted - - Cancelled ( 250,000 ) 0.22 Balance, June 30, 2026 1,930,000 $ 0.22 Exercisable, June 30, 2026 1,930,000 $ 0.22 NOTE 8 - COMMITMENTS AND 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. 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. Under the broker agreement, the Company incurred fees of $ 0 and $ 1,500 during the three and six months ended June 30, 2026 and 2025, respectively, and owed the broker $ 0 as of June 30, 2026. In August 2024, the Company entered into an affiliate agreement with an independent contractor, whereby the Company agreed to pay the contractor a commission of 5 % of gross revenue related to any SRAS system sales or sales from aging services performed by the Company through customers introduced by the contractor. The agreement has a term of 10 years, and provides the contractor with exclusivity rights to provide its services to the Company. During the year ended December 31, 2025, the Company incurred commissions of $ 11,150 and owed $ 11,150 as of June 30, 2026 and December 31, 2025, respectively. On November 6, 2024, the Company entered into an employment agreement with its CEO, Steve Laker. The agreement specifies an annual salary of $ 180,000 through December 31, 2025, $ 225,000 2026, $ 250,000 for 2027, $ 300,000 for 2028 and $ 350,000 for 2029. Mr. Laker is also eligible to receive a cash performance-based bonus for any quarter over the next two years where the Company’s gross revenue has increased by at least 25% compared to the previous year quarter. The bonus per quarter would be 25% of Mr. Laker’s then-current base salary. After two years, for any calendar year where gross revenue has increased at least 10%, 15% or 25%, Mr. Laker will be eligible to a bonus of 50%, 100% or 150%, respectively, of his then-current base salary, and is payable 50% in cash and 50% in Company stock vesting over the following 24 months. Upon execution of the agreement, the Company will issue 500,000 shares of common stock to Mr. Laker, with 25 % vesting on January 1, 2025 and the remainder monthly from January 1, 2026 through December 31, 2028. During the six months ended June 30, 2026 and 2025, the Company recognized expense of $ 6,125 and $ 0 for these awards and expects to recognize an additional $ 30,625 through the end of the vesting period. Additionally, Mr. Laker is eligible to receive an additional 3,000,000 shares of common stock based on performance benchmarks tied to certain revenue targets, with targets ranging from $ 5,000,000 to $ 50,000,000 . These performance awards had a grant date fair value of $ 294,000 . The Company recognized no expense during the six months ended June 30, 2026 and 2025 related to these awards as vesting was not deemed probable. The expense related to the performance awards will be recognized when vesting becomes probable. The agreement has an initial term of five years, and renewal automatically unless written notice is provided 90 days prior. The agreement can be terminated by the Company for cause with 90 days notice. In the event of termination of Mr. Laker without cause, Mr. Laker will receive one year of his then-current base salary, and all stock awards under the agreement will become fully vested. F- 15 On November 6, 2024, the Company entered into an employment agreement with its Executive Chairman James Cassidy. The agreement specifies an annual salary of $ 180,000 through December 31, 2025, $ 225,000 for 2026, $ 250,000 for 2027, $ 300,000 for 2028 and $ 350,000 for 2029. Mr. Cassidy is also eligible to receive a cash performance-based bonus for any quarter over the next two years where the Company’s gross revenue has increased by at least 25% compared to the previous year quarter. The bonus per quarter would be 25% of Mr. Cassidy’s then-current base salary. After two years, for any calendar year where gross revenue has increased at least 10%, 15%, or 25% Mr. Cassidy will be eligible to a bonus of 50%, 100% or 150%, respectively, of his then-current base salary, and is payable 50% in cash and 50% in Company stock vesting over the following 24 months. Upon execution of the agreement, the Company issued 500,000 shares of common stock to Mr. Cassidy, with 25 % vesting on January 1, 2025 and the remainder monthly from January 1, 2026 through December 31, 2028. During the six months ended June 30, 2026 and 2025, the Company recognized expense of $ 6,125 and $ 0 for these awards and expects to recognize an additional $ 30,625 through the end of the vesting period. Additionally, Mr. Cassidy is eligible to receive an additional 3,000,000 shares of common stock based on performance benchmarks tied to certain revenue targets, with targets ranging from $ 5,000,000 to $ 50,000,000 . These performance awards had a grant date fair value of $ 294,000 . The Company recognized no expense during the six months ended June 30, 2026 and 2025 related to these awards as vesting was not deemed probable. The expense related to the performance awards will be recognized when vesting becomes probable. The agreement has an initial term of five years, and renewal automatically unless written notice is provided 90 days prior. The agreement can be terminated by the Company for cause with 90 days notice. In the event of termination of Mr. Cassidy without cause, Mr. Cassidy will receive one year of his then-current base salary, and all stock awards under the agreement will become fully vested. On November 18, 2024, Mr. Timothy Brocopp and the Company entered into an Independent Director Agreement, with the following summarized terms: Mr. Brocopp shall serve as an independent director of the Company and be available to perform the duties consistent with such position pursuant to the Certificate of Incorporation and Bylaws of the Company. Mr. Brocopp’s employment commenced on Monday, November 16, 2024, and continues for a term of three (3) years. Compensation that Mr. Brocopp will receive during his term includes the sum of $ 5,000 , each calendar quarter, payable in the third month of each calendar quarter, and with such amount for any partial calendar quarter being appropriately prorated. The Company issued an initial 100,000 shares of common stock to Mr. Brocopp 100,000 shares of common stock upon execution of the agreement, subject to the terms and conditions of the Company’s applicable equity incentive plan and any related grant documentation, and will issue an additional $ 10,000 of shares each quarter based on a VWAP schedule using the previous 20 Trading days at quarter end. During the six months ended June 30, 2026, the Company issued 85,575 shares to Mr Brocopp for shares earned in 2025 and 46,546 shares of common stock with a fair value of $ 6,278 for the first quarter of 2026. Furthermore, the Company is to issue an additional 150,804 shares of common stock with a fair value of $ 9,802 based on the closing price of the Company’s common stock as of June 30, 2026. The Company issued these shares of common stock in August 2026. On December 3, 2024, Mr. Richard Blackstone and the Company entered into an Independent Director Agreement. Mr. Blackstone shall serve as an independent director of the Company and be available to perform the duties consistent with such position pursuant to the Certificate of Incorporation and Bylaws of the Company. Mr. Blackstone’s employment commenced on Tuesday, December 3, and continues for a term of three (3) years. Compensation that Mr. Blackstone will receive during his term includes the sum of $ 5,000 , each calendar quarter, payable in the third month of each calendar quarter, and with such amount for any partial calendar quarter being appropriately prorated. Upon employment, the Company shall issue to Mr. Blackstone 100,000 shares of common stock, par value $ 0.001 per share, of the Company (the “Common Stock”), subject to the terms and conditions of the Company’s applicable equity incentive plan and any related grant documentation, and will issue an additional $ 10,000 of shares each quarter based on a VWAP schedule using the previous 20 Trading days at quarter end. During the six months ended June 30, 2026, the Company issued 85,575 shares to Mr. Blackstone for shares earned in 2025 and 46,546 shares of common stock with a fair value of $ 6,288 for the first quarter of 2026. Furthermore, the Company is to issue an additional 150,804 shares of common stock with a fair value of $ 9,802 . The Company issued these shares of common stock in August 2026. F- 16 On March 10, 2025, the Company entered into an Executive Employment Agreement with David Stephens. Mr. Stephens shall serve as the Chief Financial Officer of the Company. Mr. Stephen’s employment commenced on March 1, 2025, and continues for a term of three (3) years. Compensation that Mr. Stephens will receive during his term includes (i) for the period of January 1, 2025 through December 31, 2025, a base salary of $ 120,000 , payable in equal monthly payments of $ 10,000 per month; (ii) for the period of January 1, 2026 through December 31, 2026, a base salary of $ 150,000 ; and (iii) for the period of January 1, 2027 through December 31, 2027, a base salary of $ 175,000 . In addition to the Base Salary, Mr. Stephens shall receive performance-based bonuses from January 1, 2025 on a quarterly basis for a period of two (2) years of the Term (the “Two Year Quarterly Bonuses”) as follows: for any calendar quarter(s) where the Company’s gross revenue has increased a minimum of twenty five percent (25%) from its prior year gross revenue for that corresponding calendar quarter, Mr. Stephens shall be entitled to a cash bonus equating to fifteen percent (15%) of his then-current Base Salary within thirty (30) days of the conclusion of any such calendar quarter(s). Upon conclusion of the two (2) years of the Term, Mr. Stephens shall thereafter receive performance-based bonuses on an annual basis (the “Subsequent Annual Bonuses”). For any calendar year(s) where the Company’s gross revenue has increased a minimum of ten percent (10%) from its prior year gross revenue for that corresponding calendar year, Mr. Stephens shall be entitled to a cash bonus equating to forty percent (40%) of his then-current Base Salary payable as follows: (1) fifty percent (50%) in cash within thirty (30) days of the conclusion of any such calendar year(s); and (2) fifty percent (50%) in Company stock vesting on a prorated consecutive twenty four (24) calendar month basis; For any calendar year(s) where the Company’s gross revenue has increased a minimum of fifteen percent (15%) from its prior year gross revenue for that corresponding calendar year(s), Mr. Stephens shall be entitled to a cash bonus equating to seventy-five percent (75%) of his then-current Base Salary payable as follows: (1) fifty percent (50%) in cash within thirty (30) days of the conclusion of any such calendar year(s); and (2) fifty percent (50%) in Company stock vesting on a prorated consecutive twenty four (24) calendar month basis.; For any calendar year(s) where the Company’s gross revenue has increased a minimum of twenty five percent (25%) from its prior year gross revenue for that corresponding calendar year(s), Mr. Stephens shall be entitled to a cash bonus equating to one hundred twenty five percent (125%) of his then-current Base Salary payable as follows: (1) fifty percent (50%) in cash within thirty (30) days of the conclusion of any such calendar year(s); and (2) fifty percent (50%) in Company stock vesting on a prorated consecutive twenty four (24) calendar month basis. Upon execution of the agreement, the Company issued 150,000 shares of common stock to Mr. Stephens with a fair value of $ 27,000 , with 50,000 shares vesting on execution of the agreement and the remainder monthly from January 1, 2026 through December 31, 2027. The Company recognized expense of $ 3,000 and $ 9,000 for these awards during the six months ended June 30, 2026 and 2025, respectively and expects to recognize an additional $ 15,000 through the end of the vesting period. Additionally, Mr. Stephens is eligible to receive an additional 562,500 shares of common stock based on performance benchmarks tied to certain revenue targets, with targets ranging from $ 5,000,000 to $ 50,000,000 . These performance awards had a grant date fair value of $ 101,250 . The Company recognized no expense during the six months ended June 30, 2026 related to these awards as vesting was not deemed probable. On March 14, 2025, the Company agreed to issue 200,000 shares of common stock to a consultant, of which 66,667 vest upon execution, and the remaining 133,333 monthly vesting from January 1, 2026 through December 31, 2027 . The shares were valued at $ 60,000 based on the common stock price at the date of grant. The Company recognized expense of $ 6,667 and $ 20,000 during the six months ended June 30, 2026 and 2025, respectively and expects to recognize an additional $ 33,333 through the end of the vesting period. Additionally, the consultant is eligible to receive an additional 750,000 shares of common stock based on performance benchmarks tied to certain revenue targets, with targets ranging from $ 5,000,000 to $ 50,000,000 . These performance awards had a grant date fair value of $ 225,000 . The Company recognized no expense during the six months ended June 30, 2026 and 2025 related to these awards as vesting was not deemed probable. On February 11, 2026, the Board of Directors appointed Roy Milner (“Mr. Milner”) to serve as an independent director of the Company, as defined under the applicable SEC rules and Nasdaq listing standards. On February 10, 2026, Mr. Milner and the Company entered into an Independent Director Agreement, with the following summarized terms: Mr. Milner shall serve as an independent director of the Company and be available to perform the duties consistent with such position pursuant to the Certificate of Incorporation and Bylaws of the Company. Mr. Milner’s employment commenced on February 10, 2026, and continues for a term of three (3) years. Compensation that Mr. Milner will receive during his term includes the sum of $ 5,000 , each calendar quarter, payable in the third month of each calendar quarter, and with such amount for any partial calendar quarter being appropriately prorated. Upon employment, the Company issued to Mr. Milner 100,000 shares of common stock with a fair value of $ 15,100 based on the closing price of the Company’s common stock at the date of the agreement, subject to the terms and conditions of the Company’s applicable equity incentive plan and any related grant documentation. The Company will also grant each calendar quarter of $ 10,000 in shares of Common Stock with shares divided by a VWAP schedule based on the 20 previous trading days. The Company issued 46,546 shares of common stock with a fair value of $ 6,278 based on the closing price of the Company’s common stock as of June 30, 2026 for shares earned in the first quarter of 2026, and will issue an additional 150,804 shares of common stock which had a fair value of $ 9,802 for the second quarter of 2026. The Company issued these shares of common stock in August 2026. F- 17 The Company shall reimburse Mr. Milner for all reasonable out-of-pocket expenses incurred in the ordinary course of the Director’s business, with out-of-pocket expenses of the Director in excess of $ 500 subject to preapproval in advance by the Company. Mr. Milner is bound by certain confidentiality covenants with the Company. And has made certain representations and warranties customary to directors. According to the terms of the Independent Director Agreement, Mr. Milner shall relinquish all ownership to the Company, of work product related to his position with the Company, including any intellectual and proprietary rights of work product resulting from his position as director. NOTE 9 - RELATED PARTY TRANSACTIONS During the three months ended March 31, 2025, the Company received a total of $ 150,000 in proceeds from shareholders and repaid $ 55,500 of principal and $ 276 of accrued interest. During the six months ended June 30, 2026, the Company received a total of $ 9,000 in proceeds from shareholders. The advances are unsecured, due on demand and have stated interests ranging from 10 % to 12 % per annum. As of June 30, 2026 and December 31, 2025, the balance owed on the advances from shareholders was $ 176,500 and $ 167,500 , respectively. See Note 6 above. On April 15, 2026, the Company entered into three convertible notes, two with members of the Board of Directors, and one with a family member of a Director, for an aggregate principal amount of $ 145,000 (the “Convertible Notes”). The Company received cash proceeds of $ 115,000 and settled $ 30,000 of accounts payable owed to a Director. The Convertible Notes bear interest at 20 % per annum, payable at maturity on October 15, 2026 and are convertible beginning on the three month anniversary of issuance into common stock of the Company at a fixed price of $ 0.10 per share. NOTE 10 – 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 9.11 % 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. During the three months ended June 30, 2026, the Company renewed a facility lease for its Two Trees business for an additional three years and recognized an initial right of use asset and liability of $ 405,866 . As of June 30, 2026, the amount of right-of-use assets and lease liabilities was $ 917,944 and $ 948,107 , respectively. As of December 31, 2025, the amount of right-of-use assets and lease liabilities was $ 628,125 and $ 661,109 , respectively. Aggregate lease expense for the three and six months ended June 30, 2026 was $ 80,681 and $ 159,153 , respectively. Aggregate lease expense for the three and six months ended June 30, 2025 was $ 86,404 and $ 166,129 , respectively. The following table provides the maturities of lease liabilities at June 30, 2026: SCHEDULE OF MATURITIES LEASE LIABILITIES Operating Lease Remaining Term in Years 2026 (6 months remaining) $ 156,036 2027 324,082 2028 333,630 2029 204,387 2030 92,799 thereafter - Total lease payments 1,110,934 Less: imputed interest ( 162,827 ) Present value of lease liability $ 948,107 3.48 F- 18 NOTE 11 – SEGMENT REPORTING The Company’s operations are managed and reported in two operating segments, each of which is a reportable segment for financial reporting purposes: (1) RF Specialties and (2) Two Trees Distilling. These segments are organized principally by product and service category. The Company’s reportable segments are determined based on (1) financial information reviewed by the CODM, (2) operational structure of the Company which is designed and managed to share resources across the entire suite of products offered by the business, and (3) the basis upon which the CODM makes resource allocation decisions. The CODM for both segments is the Director, President and Chief Executive Officer of the Company. The CODM utilizes the segment operating income (loss) to assess profitability and performance of actual results compared to forecasts. Significant segment expenses and assets information is as follows: SCHEDULE OF SEGMENT EXPENSES AND ASSETS INFORMATION 2026 2025 For the Three Months ended June 30, 2026 2025 Revenue Two Trees Distilling $ 253,568 $ 249,566 RF Specialties 270,522 171,043 Total $ 524,090 $ 420,609 Revenue $ 524,090 $ 420,609 Cost of Sales Two Trees Distilling $ 310,612 $ 220,638 RF Specialties 141,062 481,268 Total $ 451,674 $ 701,906 Cost of Sales $ 451,674 $ 701,906 Gross profit Two Trees Distilling $ ( 57,044 ) $ 28,928 RF Specialties 129,460 ( 310,225 ) Total $ 72,416 $ ( 281,297 ) Gross profit $ 72,416 $ ( 281,297 ) General & Administrative Expense Two Trees Distilling $ 121,211 $ 219,229 RF Specialties 45,888 73,245 Corporate 156,678 296,888 Total $ 323,777 $ 589,362 General & Administrative Expense $ 323,777 $ 589,362 Salary and Wages Two Trees Distilling $ 2,109 $ - RF Specialties - - Corporate 162,819 375,265 Total $ 164,928 $ 375,265 Salary and Wages $ 164,928 $ 375,265 Depreciation and Amortization Expense Two Trees Distilling $ 58,506 $ 28,998 RF Specialties 31,450 46,455 Corporate 3,357 3,135 Total $ 93,313 $ 78,588 Depreciation and Amortization Expense $ 93,313 $ 78,588 Net loss from operations Two Trees Distilling $ ( 238,870 ) $ ( 219,299 ) RF Specialties 52,122 ( 429,925 ) Corporate ( 322,854 ) ( 675,288 ) Total $ ( 509,602 ) $ ( 1,324,512 ) Net loss from operations $ ( 509,602 ) $ ( 1,324,512 ) F- 19 2026 2025 For the Six Months ended June 30, 2026 2025 Revenue Two Trees Distilling $ 567,307 $ 502,403 RF Specialties 390,870 432,136 Total $ 958,177 $ 934,539 Revenue $ 958,177 $ 934,539 Cost of Sales Two Trees Distilling $ 681,663 $ 389,353 RF Specialties 340,361 693,951 Total $ 1,022,024 $ 1,083,304 Cost of Sales $ 1,022,024 $ 1,083,304 Gross profit Two Trees Distilling $ ( 114,356 ) $ 113,050 RF Specialties 50,509 ( 261,815 ) Total $ ( 63,847 ) $ ( 148,765 ) Gross profit $ ( 63,847 ) $ ( 148,765 ) General & Administrative Expense Two Trees Distilling $ 257,103 $ 364,567 RF Specialties 89,548 146,915 Corporate 465,020 661,785 Total $ 811,670 $ 1,173,267 General & Administrative Expense $ 811,670 $ 1,173,267 Salary and Wages Two Trees Distilling $ 2,109 $ 16,148 RF Specialties - - Corporate 308,873 452,926 Total $ 310,982 $ 469,074 Salary and Wages $ 310,982 $ 469,074 Depreciation and Amortization Expense Two Trees Distilling $ 89,076 $ 53,615 RF Specialties 65,239 91,340 Corporate 6,599 6,240 Total $ 160,914 $ 151,195 Depreciation and Amortization Expense $ 160,914 $ 151,195 Net loss from operations Two Trees Distilling $ ( 462,644 ) $ ( 321,280 ) RF Specialties ( 104,278 ) ( 500,070 ) Corporate ( 780,492 ) ( 1,120,951 ) Total $ ( 1,347,414 ) $ ( 1,942,301 ) Net loss from operations $ ( 1,347,414 ) $ ( 1,942,301 ) Capital expenditures Two Trees Distilling $ 22,202 $ 56,909 RF Specialties 20,104 714,373 Corporate 1,694 - Total $ 42,306 $ 771,282 Capital expenditures $ 42,306 $ 771,282 Assets As of June 30, 2026 As of December 31, 2025 Two Trees Distilling $ 2,474,455 $ 1,958,962 RF Specialties 1,275,725 1,946,177 Corporate 140,765 143,633 Total $ 3,890,945 $ 4,048,772 Assets $ 3,890,945 $ 4,048,772 F- 20 NOTE 12 - SUBSEQUENT EVENTS The Company has evaluated events occurring after the balance sheet date through the date these financial statements were issued. Based on management’s assessment, no significant events were identified for the six-month period ended June 30, 2026 other than those described below: On August 14, 2026, the Company issued 150,804 shares of common stock to each of its three directors pursuant to the terms of their director agreements. On July 1, 2026, the Company entered into a convertible note, with an existing stockholder for a principal amount of $ 75,000 (the “July Convertible Note”) in exchange for cash. The July Convertible Note bears interest at 20 % per annum, payable at the maturity date of July 1, 2027 and are convertible beginning on the six-month anniversary of issuance into common stock of the Company at a fixed price of $ 0.07 per share. On July 9, 2026, the Company, by written consent of the Board of Directors of the Company expanded its board of directors from five (5) directors to six (6) directors and appointed Jeffrey Scott Hopmayer (“Mr. Hopmayer”) to serve as an independent director of the Company, as defined under the applicable SEC rules and Nasdaq listing standards. On June 26, 2026, Mr. Hopmayer and the Company entered into an Independent Director Agreement, with the following summarized terms: Mr. Hopmayer shall serve as an independent director of the Company and be available to perform the duties consistent with such position pursuant to the Certificate of Incorporation and Bylaws of the Company. Mr. Hopmayer’s employment commenced on Monday, June 26, 2026, and continues for a term of three years . Compensation that Mr. Hopmayer will receive during his term includes the sum of $ 5,000 , each calendar quarter, payable in the third month of each calendar quarter, and with such amount for any partial calendar quarter being appropriately prorated. Upon employment, the Company shall issue to Mr. Hopmayer 500,000 shares of common stock which were issued August 14, 2026, subject to the terms and conditions of the Company’s applicable equity incentive plan and any related grant documentation. As a bonus at the end of each quarter, the Company shall issue a number of shares of common stock equal $ 30,000 shares divided by a VWAP schedule. The Company shall reimburse Mr. Hopmayer for all reasonable out-of-pocket expenses incurred in the ordinary course of the Director’s business, with out-of-pocket expenses of the Director in excess of $ 500.00 subject to preapproval in advance by the Company. F- 21 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted. Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” or “MDwerks,” refer to MDwerks, Inc. Overview MDwerks, Inc. (the “Company,” “MDwerks,” “we,” “us,” or “our”), a Delaware corporation, is a technology company pioneering the development of innovative energy wave solutions for industrial and other commercial enterprises. Our expertise in radio wave technologies and microwave technologies has led to multiple breakthroughs with applications both industrial and commercial. Our patented energy wave technology introduces a revolutionary approach to industrial processes by specific molecular targeting, which can be applied at precise and multiple locations in a system in ways that conventional single point heat sources cannot, resulting in improved efficiency, higher quality, and reduced processing time. In December 2023, we completed the acquisition of RF Specialties, LLC (“RFS”) and Two Trees Beverage Co. and its subsidiaries (“Two Trees”). RFS, is engaged in the business of developing sustainable radio frequency (“RF”) applications, and for over 14 years, has addressed a variety of challenges faced by companies by implementing automated radio frequency technology. One of these applications is a method for the rapid aging of distilled spirits using RF energy. This proprietary Spirits Rapid Aging System (“SRAS”) reduces energy and production costs and increases the speed to market for distilled beverages when compared to traditional methods. Our wholly-owned subsidiary, Two Trees Beverage Company, utilizes the SRAS, validating the use of this patented energy wave technology within the premium craft spirits industry. Our proprietary and patented molecular targeting system swiftly and sustainably transforms distillate to maturity, delivering traditional flavors in a fraction of the time with greatly reduced environmental impact and cost. Precision engineered to match traditional aging flavors and aromas, it has been used to produce over 50 SKUs and many award-winning products. Overview of the Business of RF Specialties RFS is engaged in the business of developing sustainable radio frequency (RF) applications, and for over 14 years, has addressed the challenges faced by companies by implementing automated radio frequency technology. RFS has developed a system and method for the rapid aging of distilled spirits with RF energy that reduces energy and production costs thus increasing the speed to market for distilled beverages when compared to traditional technologies. Our patented energy wave technology introduces a revolutionary approach to industrial processes by specific molecular targeting, which can be applied at precise and multiple locations in a system in ways that conventional single point heat sources cannot, resulting in improved efficiency, higher quality, and reduced processing time. We have completed deployment of our first Molecular Sawdust Drying System (“MSDS”) at a large lumber mill, which utilizes a proprietary molecular energy wave technology to adjust the moisture content of sawdust for production of wood pellets, an alternative green energy source. The system offers scalable, flexible solutions for any tonnage of sawdust, catering to diverse pellet manufacturing needs. It utilizes patented technology to adjust moisture content as required, optimizing it to precise specifications. The system features precision automation for controlling temperature and drying parameters, ensuring consistent high-quality output. This adaptable system enhances safety and productivity, achieving uniform results with minimal downtime. The Company is also targeting applications of this process in engineered wood products, adhesives, wood forest products and food and beverages. 4 Overview of the Business of Two Trees Our Two Trees spirits business produces a variety of aged alcoholic beverages using our innovative rapid-aging system. This scalable technology results in all-natural, high-quality products, quickly and efficiently produced, with a reduced environmental impact. Our products are nearly indistinguishable from those that are traditionally aged. Deep in Appalachian Mountain country, we 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 distillate selection, local water, and the full-bodied flavors from our wood chip varieties that are toasted to just the right char, bringing rich barrel flavor profiles to life. Whiskey-as-a-Service Among our accomplishments to start the year, we successfully launched our “Whiskey-as-a-Service” (“WaaS”) business model, offering use of the SRAS through a flexible technology license structure to enable customers to access this transformative technology with minimal upfront investment, while securing long-term, predictable revenue streams for the Company. We also offer on-site aging of bulk spirits. We have signed new contracts with two companies for the construction and deployment of our proprietary SRAS and see excellent potential for multiple additional SRAS deployments by both customers within the next twelve months as well as by other third parties. The first of these units is anticipated to be installed on site at one of the largest distilleries in the U.S. in the foruth quarter of 2026, with the second unit deployed approximately three months thereafter. The second contract is with a leading U.S. wholesaler and broker of bulk spirits for one SRAS unit at their facility, which is estimated to be installed in the third quarter of 2026. Under both contracts, RFS will manufacture and assemble the SRAS units and provide ongoing machine servicing and maintenance in addition to the recurring monthly license payments from the customers for use of the SRAS units. These contracts validate the economic and sustainability benefits of our SRAS units and provide us with attractive recurring revenue streams through licensing agreements and ancillary fees for ongoing machine servicing and maintenance. Building on the momentum of our first two WaaS contracts, we signed a separate new agreement with an international spirits investment fund (the “Fund”) providing the Fund with limited exclusivity for the deployment of our SRAS units in three countries outside of the United States. To retain exclusivity, the Fund is required to deploy at least one SRAS unit annually in each of the three countries. Recent Developments Non-Binding Letter of Intent for Joint Venture On August 3, 2026, RF Specialties, signed a non-binding Letter of Intent with Rex Lumber Company (“Rex Lumber”) to form a proposed joint venture focused on the development, deployment, and commercialization of radio frequency-based solutions for the lumber and broader wood-products industry. The proposed joint venture would focus on utilizing our extensive IP portfolio and trade secrets for radio frequency technology applications including molecular sawdust drying, molecular wood-chip drying, board straightening, extraction systems for compounds such as turpentine and furfural, and future product development for the lumber industry. The proposed joint venture is expected to pursue revenue opportunities from system sales, deployments, royalties, services, and broader commercial adoption across the lumber market. 5 Under the LOI, RF Specialties is expected to hold a 51% ownership interest in the joint venture and Rex Lumber is expected to hold a 49% ownership interest, with governance and other key terms to be finalized in definitive agreements. RF Specialties is expected to contribute relevant radio frequency intellectual property, an exclusive license for lumber and wood-product applications, engineering and technical leadership, procurement and manufacturing oversight, and facility support from its Mills River, North Carolina location. Rex Lumber is expected to contribute sales leadership, distribution and market deployment capabilities, strategic commercial support, and a substantial multi-million-dollar initial capital investment to support design, manufacturing, engineering expansion, technician hiring, and commercialization efforts. The LOI also provides that Rex Lumber may designate an individual to serve on the Board of Directors of the Company to represent RF-REX Co and the Company’s lumber industry strategy, subject to applicable corporate approvals and governing documents. The LOI is non-binding and is intended solely as a framework for the negotiation of definitive agreements. Any final transaction will remain subject to the execution of such agreements, applicable approvals, and customary closing conditions. Upgraded Capacity In 2025, we began aging tanker loads of distillate at our facility for one of our SRAS customers to fill immediate demand for aged spirits. In early 2026, we completed installation of a higher capacity SRAS at our Two Trees facility in order to increase existing production across our aging services and brand production. 6 Results of Operations Three and Six Months Ended June 30, 2026 Compared to 2025 Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Revenue Two Trees Distilling 253,568 249,566 567,307 502,403 RF Specialties 270,522 171,043 390,870 432,136 Total 524,090 420,609 958,177 934,539 Cost of Sales Two Trees Distilling 310,612 220,638 681,663 389,353 RF Specialties 141,062 481,268 340,361 693,951 Total 451,674 701,906 1,022,024 1,083,304 Gross profit (loss) Two Trees Distilling (57,044 ) 28,928 (114,356 ) 113,050 RF Specialties 129,460 (310,225 ) 50,509 (261,815 ) Total 72,416 (281,297 ) (63,847 ) (148,765 ) Revenue. Three Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025 Revenue for the three months ended June 30, 2026 was $524,090 compared to $420,609 for the three months ended June 30, 2025. Revenue of $253,568 for three months ending June 30, 2026 is attributable to the Two Trees business, compared to $249,566 in 2025, and $270,522 of revenue for three months ending June 30, 2026 attributable to product and service income from RFS, compared to $171,043 in 2025. The increase in sales of RF Specialties of approximately $99,479 related to additional contracted work on the Company’s recently completed Molecular Sawdust Drying (“MSD”) system. The $4,002 increase revenue in the Two Trees business was primarily attributable to increased bulk alcohol sales in the current period offset by lower Two Trees brand sales. Six Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025 Revenue for the six months ended June 30, 2026 was $958,177 compared to $934,539 for the six months ended June 30, 2025. Revenue of $567,307 for six months ending June 30, 2026 is attributable to the Two Trees business, compared to $502,403 in 2025, and $390,870 of revenue for six months ending June 30, 2026 attributable to product and service income from RFS, compared to $432,136 in 2025. The $64,904 increase revenue in the Two Trees business was primarily attributable to increased bulk alcohol sales in the current period partially offset by lower Two Trees brand sales. The $41,266 decrease in sales of RF Specialties related to lower revenue recognition related to the MSDS milestone recognition and lower labor revenue from service calls to customers, partially offset by increase installation service revenue on the MSDS. Cost of Sales. Three Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025 Cost of sales for the three months ended June 30, 2026 was $451,674 compared to $701,906 for three months ended June 30, 2025. Cost of sales for the Company’s Two Trees Distilling operations was $310,612 in 2026 compared to $220,638 in 2025, with the increase driven primarily by an impairment loss of $99,588 associated with the Company’s barrel inventory. The Company’s RF Specialties business incurred costs of sales of $141,062 in 2026 compared to $481,268 in 2025. The decrease was due to the quarter ended June 30, 2025 including more significant related costs associated with the manufacturing of MSD project, which was installed at the customer site in the current period. Our gross profit for the three months ended June 30, 2026 improved by $353,713 compared to the three months ended June 30, 2025, primarily as a result of an increase of $439,685 in our RFS business due to the change in revenue mix towards service and installation revenue on the MSDS project, and the higher level of costs associated with the project in 2025 during the manufacturing phase. This improvement offset lower gross profit in our Two Trees business from inventory impairment charges in the current period. 7 Six Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025 Cost of sales for the six months ended June 30, 2026 was $1,022,024 compared to $1,083,304 for the six months ended June 30, 2025. Cost of sales for the Company’s Two Trees Distilling operations was $681,663 in 2026 compared to $389,353 in 2025, with the increase driven primarily by an impairment loss of $99,588 associated with the Company’s barrel inventory, higher bulk sales volume and increased input and freight costs. The Company’s RF Specialties business incurred costs of sales of $340,361 in 2026 compared to $693,951 in 2025. The decrease was due to the prior comparable period including more significant related costs associated with the manufacturing of MSDS project, which was installed at the customer site in the current period. Our gross profit for the six months ended June 30, 2026 improved by $84,918 compared to the six months ended June 30, 2025, primarily as a result of an increase of $312,324 from our RFS business due to the change in revenue mix towards service and installation revenue on the MSDS project, and the higher level of costs associated with the project in 2025 during the manufacturing phase. This improvement offset lower gross profit in our Two Trees business from inventory impairment charges in the current period, higher input costs and lower sales volumes. Operating Expenses . Three Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025 We reported operating expenses of $582,018 and $1,043,215 for the three months ended June 30, 2026 and 2025, respectively. Selling, general and administrative expenses were $323,776 and $589,362 for three months ended June 30, 2026 and 2025, respectively. The decrease of $265,586 was driven by a decrease of approximately $129,000 in professional fees, reduced travel expenses of approximately $36,000, decreased insurance costs of $38,000, lower reserves for credit loss of $28,000 and lower advertising costs of $15,000, primarily as a result of our initiatives to streamline costs and increase operational efficiencies. Salaries and wages were $164,928 and $375,265 for the three months ended June 30, 2026 and 2025, respectively. The decline compared to the prior period was due to lower costs associated with officer employment contracts. Depreciation and amortization expense was $93,314 and $78,588 for the three months ended June 30, 2026 and 2025, respectively, with the increase being driven by higher depreciation from the Company’s new in house SRAS deployed in the current period. Six Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025 We reported operating expenses of $1,283,567 and $1,793,536 for the six months ended June 30, 2026 and 2025, respectively. Selling, general and administrative expenses were $811,670 and $1,173,267 for the six months ended June 30, 2026 and 2025, respectively. The decrease of $361,597 was driven by a decrease of approximately $168,000 in professional fees, reduced travel expenses of approximately $46,000, decreased insurance costs of $46,000 and lower advertising costs of $13,000 as a result of our initiatives to streamline costs and increase operational efficiencies. Salaries and wages were and $310,982 and $469,074 for the six months ended June 30, 2026 and 2025, respectively. The decline compared to the prior period was due to lower costs associated with officer employment contracts Depreciation and amortization expense was $160,915 and $151,195 for the six months ended June 30, 2026 and 2025, respectively. The increase was driven by higher depreciation from the Company’s new in house SRAS deployed in the current period Total Other Expenses . Total other expense was $20,270 and $29,490 for the three and six months ended June 30, 2026, respectively, compared to $12,380 and $23,945 for the three and six months ended June 30, 2025, respectively. Interest expense was $20,270 and $29,490 for the 2026 periods, compared to $12,380 and $24,145 for the 2025 periods; other income for the six months ended June 30, 2025 was $200. Liquidity and Capital Resources As of June 30, 2026, and December 31, 2025, we had $13,258 and $211,948 of cash, respectively. We anticipate that our current cash and cash generated from financing activities will be insufficient to satisfy our liquidity requirements for the next 12 months. As of June 30, 2026, we have incurred losses since inception of $7,535,399. At June 30, 2026, we had a working capital deficit of $2,082,091. We believe that if we do not raise additional capital over the next 12 months, we may be required to suspend or cease the implementation of our business plans. We require additional funding to meet our ongoing obligations and to fund anticipated operating losses. Management has expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on raising capital to fund our initial business plan and ultimately to attain profitable operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. We expect to incur marketing, professional, and administrative expenses as well expenses associated with maintaining our filings with the Commission. During the six months ended June 30, 2026, we raised $450,000 in cash proceeds from the sale of common stock, and $115,000 from proceeds of convertible notes payable with related parties. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund our business by way of equity or debt financing and advances from related parties. Any inability to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations. 8 Cash Flows Cash Used in Operating Activities Net cash used in operating activities for the six months ended June 30, 2026 and 2025 was $605,916 and $831,152, respectively. The decrease in cash used by operating activities was driven by lower costs associated with our RFS business related to the MSD contract, and cost-reduction efforts in our Two Trees business. Cash Used in Investing Activities Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was $38,333 and $707,454, respectively, with the decline driven by completion of the Company’s in-house SRAS system resulting in lower capital expenditures. Cash Provided by Financing Activities Net cash provided by financing activities for the six months ended June 30, 2026 and 2025 was $445,559 and $1,540,777, respectively. The 2026 amount primarily reflected $450,000 of proceeds from subscription agreements, $115,000 of proceeds from related-party convertible notes payable, partially offset by repayments of notes payable. The 2025 amount primarily reflected $1,649,000 of proceeds from subscription agreements, partially offset by repayments of notes payable and related-party notes payable. Off-Balance Sheet Arrangements There are no off-balance sheet arrangements currently contemplated by management or in place that are reasonably likely to have a current or future effect on the business, financial condition, changes in financial condition, revenue or expenses, result of operations, liquidity, capital expenditures and/or capital resources. Recent Accounting Standards In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE), requiring additional disclosure of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments in this update are effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of this standard on our consolidated financial statements. We have implemented all new accounting standards that are in effect and that may impact our financial statements and do not believe that there are any other new accounting standards that have been issued that might have a material impact on its financial position or results of operations. Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our management believes the accounting policies below are critical in the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, or complex judgments. 9 Revenue Recognition Net sales from Two Trees include liquor and related products, less excise taxes and customer programs and incentives. Sales from RFS include product and services related to sustainable Radio Frequency applications to a wide range of industries including structural engineering, food & beverage, and manufacturing. We recognize revenue by applying the following steps in accordance with 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. We recognize 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, we recognize 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 our radio frequency applications, we recognize revenue as the services are provided to the customer over the length of the contract. Our contracts typically have a single performance obligation, and do not contain a significant financing component. 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, we have 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, we conclude 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 we conclude otherwise, we are 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. We have determined that we have two reporting units. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 10 Item 4. Controls and Procedures. Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2026. Based upon such evaluation, the principal executive officer and principal financial officer have concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. 11 PART II-OTHER INFORMATION Item 1. Legal Proceedings. None. Item 1A. Risk Factors. We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. Item 2. Unregistered Sales of Securities and Use of Proceeds. The following information represents securities sold by us that has not been previously included in a Quarterly Report on Form 10-Q or a Current Report of Form 8-K which were not registered under the Securities Act. Included are new issues, securities issued in exchange for property, services or other securities, securities issued upon conversion from our other share classes and new securities resulting from the modification of outstanding securities. We issued all of the securities listed below pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act (the “Securities Act”), or Regulation D or Regulation S promulgated thereunder. There were no sales of common stock during the three months ended June 30, 2026. Item 3. Defaults Upon Senior Securities. None Item 4. Mine Safety Disclosure. None Item 5. Other Information. (a) None. (b) There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since we last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K. (c) During the quarter ended June 30, 2026, no director or officer adopted or terminated a contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and/or a non-Rule 10b5-1 trading arrangement. 12 Item 6. Exhibits Exhibit No. Descriptio n 31.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act 31.2* Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act 32.1** Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 32.2** Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MDwerks, Inc. Date: August 19, 2026 /s/ Steven C. Laker Steven C. Laker Chief Executive Officer and Chief Financial Officer (Principal Executive Officer) Date: August 19, 2026 /s/ David Stephens David Stephens Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 14