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Item 7. Management’s Discussion and Analysis

2025-03-25 compared with 2024-06-28 · 129 added, 62 removed, 135 unchanged (59% of the section changed)

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(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 (a

“Business Combination”) that would benefit from the Company’s public reporting status.

During the fiscal year

ended December 31, 2023, the Company completed two acquisitions as discussed in detail below.

The Company is a forward-thinking company that is leading the charge in the world of sustainable technology.

leading provider of energy wave technologies, MDwerks is dedicated to creating innovative solutions that help businesses reduce their

energy costs while also increasing speed to market.

Our expertise in radio wave technologies and microwave technologies has led to multiple

breakthroughs with applications both industrial and commercial.

asset acquisition, stock purchase, reorganization or other similar business combination with one or more unrelated businesses (a “Business

Combination”) that would benefit from the Company’s public reporting status.

During the fiscal year ended December 31, 2023,

the Company completed two acquisitions as discussed in detail below.

are a technology company pioneering the development of innovate 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.

wholly-owned subsidiary, Two Trees Beverage Company, utilizes our Spirits Rapid Aging System, validating the use of our 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

Precision engineered to match traditional aging flavors and aromas, it has been used to produce over 50 SKUs and many award-winning

Specialties, Inc.

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rate of 8% per annum commencing as of August 25, 2023, and matures on August 25, 2029.

The Company recognized a gain of $168,855 on the disposition of assets.

The Company recognized a gain of $168,855 on the

disposition of assets.

During the year ended December 31, 2024, the Company recognized a loss on impairment of the Note of $97,533.

May 2024, the Company entered into two bill of sale agreements to sell two vehicles to Keith Mort, the former owner of RFS.

assumed the loans associated with the two vehicles with a net book value of $130,492 and an aggregate principal balance of $72,592 at

the time of sale, and the Company recognized a loss on disposal of $57,900 during the year ended December 31, 2024.

of Operations

Year Ended December 31, 2024 compared to Year Ended December 31, 2023

Company’s results of operations for the year ended December 31, 2023 include the results of Two Trees since the acquisition

date of December 8, 2023, and include the results of RFS from the acquisition date of December 27, 2023.

Company’s results of operations for the year ended December 31, 2024 include the results of Two Trees since the acquisition date

of December 8, 2023, and include the results of RFS from the acquisition date of December 27, 2023.

For the Years ended December 31,

Two Trees Distilling

RF Specialties

Cost of Revenue

Two Trees Distilling

RF Specialties

Gross profit (loss)

Two Trees Distilling

RF Specialties

Revenue for the year ended December 31, 2024 was $2,364,093 compared to $104,066 for the year ended December 31, 2023.

The revenue is primarily

attributable to liquor sales during the period resulting from the acquisition of Two Trees.

We did not earn any revenues for the year

ended December 31, 2022.

$1,324,823 in 2024 is attributable to liquor sales from the acquisition of Two Trees, compared to $104,066 in 2023, and $1,039,270 of

revenue in 2024 attributable to product and service income from the acquisition of RF Specialties, compared to $0 in 2023.

The RF Specialties

business benefited in 2023 from contracts related to the design of industrial drying modules using the Company’s patented radio

frequency technology for use in lumber mills.

In February 2025, the Company executed contracts with two customers related to the lease

of an aggregate of three Spirits Rapid Aging System that are expected to begin producing revenue to the Company in the second half of

The Company expects to drive significant growth in revenue and gross profit in its Two Trees Distilling business from this new

revenue stream going forward.

Cost of sales for the year ended December 31, 2024 was $1,490,064 compared to $81,656 for the year ended December 31, 2023.

cost of sales is primarily attributable to liquor sales during the period resulting from the acquisition of Two Trees.

We did not incur

any cost of sales for the year ended December 31, 2022.

The Company reported operating expenses of $528,114 consisting primarily of legal, accounting, payroll, and general

business related expenses for the year ended December 31, 2023 compared to $153,713 for the year ended December 31, 2022.

$374,401 increase in operating expenses was primarily attributable to increased legal and payroll expenses and accounting fees

related to our public company reporting obligations as well as our activities related to the acquisitions that occurred in

Other Income .

Total other income was $160,927 for the year ended December 31, 2023 compared to $0 for the year ended December

The $160,927 increase was attributable to a gain on the sale of assets discussed above.

Cost of sales for the Company’s Two Trees Distilling operations was $917,458 in 2024 compared to $80,133 in 2023.

is due to a full year of operations in 2024 compared to the acquisition in December 2023.

The Company’s RF Specialties business

incurred costs of sales of $572,606 in 2024, including labor costs of $470,045 related to the product and service income from the acquisition

of RF Specialties, compared to $1,523 in 2023.

The Company reported operating expenses of $2,376,693 consisting primarily of legal, accounting, payroll, and general business

related expenses for the year ended December 31, 2024 compared to $475,009 for the year ended December 31, 2023.

The $1,843,784 increase

in operating expenses was primarily attributable to a full year of operations with both businesses.

Selling, general and administrative

expenses was $1,853,335, and included legal, accounting and audit fees related to our public company reporting obligations and increased

activity from two operating business lines, including stock-based compensation of $71,938.

Operating expenses included salary and wages

expense of $175,827 and $0 for the years ended December 31, 2024 and 2023, respectively.

Operating expenses included depreciation and

amortization expense of $289,631 and $15,126 for the years ended December 31, 2024 and 2023, and a loss of $57,900 on disposal of assets

to a related party.

Other Income/Expense .

Total other expense was $118,453 for the year ended December 31, 2024 compared to the total other income of

$160,927 for the year ended December 31, 2023.

The $221,480 change was primarily attributable to a loss of $97,533 loss on impairment

of note receivable compare to $0 in 2023, and a gain of $168,855 on the sale of assets in 2023.

and Capital Resources

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of December 31, 2024 and 2023, our cash balance was $11,159 and $115,111, 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.

To date, the Company has incurred operating losses since inception of $739,388.

At December 31, 2023, the Company

had working capital deficit of $517,889.

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.

To date, the Company

has incurred operating losses since inception of $2,360,505.

At December 31, 2024, the Company had a working capital deficit of $1,244,697.

Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses.

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liabilities that might result from this uncertainty.

expect to incur marketing, professional, and administrative expenses as well expenses associated with maintaining our filings with the

expect to incur marketing, professional, and administrative expenses as well as expenses associated with maintaining our filings with

the Commission.

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.

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.

intends to continue to fund its 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.

The Company intends to continue to fund its 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.

Used in Operating Activities.

Net cash used in operating activities for the years ended December 31, 2023 and 2022, were $519,790

Net cash used in operating activities for the years ended December 31, 2024 and 2023, was $781,970

and $519,790.

The increase was attributable to an increase in net loss partially offset by an increase in accounts payable.

The increase was attributable to an increase in net loss from the increase in operations in 2024.

Used in Investing Activities.

Net cash provided by investing activities for the years ended December 31, 2023 and 2022, were $39,041

The increase was attributable to an increase in net assets purchased from the Company’s acquisitions, cash proceeds from the sale of certain equipment of $100,000 offset by purchase of intangible assets and purchase of property and equipment of $88,000.

Net cash used in investing activities for the years ended December 31, 2024 and net cash provided

by investing activities for the year ended December 31, 2023, was $6,990 and $39,041, respectively.

The decrease was attributable to

a decrease in purchase of intangible assets of $19,500 and property and equipment of $88,000 in 2023 to purchases of property and equipment

of $6,990 in 2024.

The Company had cash proceeds from the sale of certain equipment of $100,000 and $46,541 net assets acquired from

acquisitions in 2023.

Provided by Financing Activities.

Net cash provided by financing activities for the years ended December 31, 2023 and 2022, were

Net cash provided by financing activities for the years ended December 31, 2024 and 2023, was

$685,008 and $572,145.

The increase was attributable to $676,349 in proceeds from the sale of common stock, offset by repayments of

advances payable.

Net cash provided by financing activities for the year ended December 31, 2024 consisted of $745,000 in proceeds

from the sale of common stock, $155,500 in proceeds from related party notes payable, offset by repayments of notes payable to related

parties and third parties of $32,500 and $182,982, respectively, and redemption of preferred stock of $10.

Net cash provided by financing

activities for the year ended December 31, 2023 consisted of $676,349 in proceeds from the sale of common stock, offset by $104,204 repayments

of advances payable.

Balance Sheet Arrangements

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Accounting Standards

November 2023, the 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.

The amendments in this update were effective for fiscal years beginning after December 15, 2023, and interim periods

within fiscal years beginning after December 15, 2024.

Company adopted this standard on a retrospective basis within our annual report for the year ended December 31, 2024, which resulted

in additional disclosures in our segment financial information footnote, primarily related to significant segment expenses that are regularly

provided to the CODM and included within our reported measure of segment profit or loss.

Refer to note 14 for these additional disclosures.

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 its consolidated financial statements.

Company has implemented all new accounting standards that are in effect and that may impact its financial statements and does not believe

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Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment

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

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.

For consignment sales, 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.

Company recognizes deferred revenue for performance obligations not yet satisfied, primarily related to liquor sales not yet shipped.

As of December 31, 2024, the Company had $52,779 in unsatisfied performance obligations that it expects to satisfy over the next 12 months.

the year ended December 31, 2023, the Company’s revenue consisted solely of liquor sales.

As of December 31, 2024, the Company had $226,066 in unsatisfied performance obligations that it expects to satisfy over the next 12

months, of which $25,366 related to shipment of liquor products and $200,700 related to the Company’s RF Specialties business

- Goodwill represents the excess of acquisition cost over the fair value of the net tangible and intangible assets acquired.

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by comparing the estimated fair value of a reporting unit with its respective carrying value to determine the amount of impairment, if

The Company has determined that it has one reporting unit.

The Company has determined that it has two reporting units.

During the years ended December 31, 2024, and 2023, no impairment expense

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis