MDWerks, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 12 Index to Financial Statements As of December 31, 2021 and 2020 and for the Years Ended December 31, 2021 and 2020 Report of Independent Registered Public Accounting Firm (PCAOB ID 5854 ) F-2 Balance Sheet F-3 Statements of Operations F-4 Statement of Changes in Stockholders’ Equity (Deficit) F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of MDWerks, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of MDWerks, Inc. (the Company) as of December 31, 2021, 2020 and the related statements of income, comprehensive income, stockholders’ deficit, and cash flows for the years ended December 31, 2021, 2020 and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, 2020 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Matter The accompanying financial statement have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined that there are no critical matters. /s/ TAAD LLP We have served as the Company’s auditor since 2020. Diamond Bar, CA April 15, 2022 F- 2 MDWERKS, INC. Balance Sheet December 31, 2021 December 31, 2020 ASSETS Cash – – TOTAL ASSETS $ – $ – LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and accrued liabilities $ 1,139 $ 65,599 Advances Payable 19,659 – Convertible notes payable 210,000 210,000 TOTAL CURRENT LIABILITIES 230,798 275,599 TOTAL LIABILITIES 230,798 275,599 STOCKHOLDERS’ DEFICIT Preferred stock, (par value $ 0.001 , 10,000,000 shares authorized, of which 10,000,000 and 10,000,000 shares issued and outstanding as of December 31, 2021 and 2020 respectively) 10,000 10,000 Common stock (par value $ 0.001 , 200,000,000 shares authorized, of which 18,010,208 and 18,010,208 shares issued and outstanding as of December 31, 2021 and 2020, respectively) 18,010 18,010 Additional paid in capital 35,195 28,370 Accumulated deficit ( 294,003 ) ( 331,979 ) TOTAL STOCKHOLDERS’ DEFICIT ( 230,798 ) ( 275,599 ) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ – $ – The accompanying notes are an integral part of these financial statements. F- 3 MDWERKS, INC. Statements of Operations For the Year Ended December 31, 2021 For the Year Ended December 31, 2020 Operating Expenses General and administrative expenses $ 20,798 $ 13,728 Total operating expenses 20,798 13,728 Net (Loss) ( 20,798 ) ( 13,728 ) Other Income/Expenses Interest Expense ( 6,825 ) ( 6,825 ) Gain on Forgiveness of Debt 65,599 – Total Other Income 58,774 ( 6,825 ) Net Income (Loss) $ 37,976 $ ( 20,553 ) Basic and diluted income (loss) per share $ ( 0.00 ) $ ( 0.00 ) Weighted average number of shares outstanding Basic and diluted 18,010,208 18,010,208 The accompanying notes are an integral part of the financial statements F- 4 MDWERKS, INC. Statement of Changes in Stockholders’ Equity (Deficit) Preferred Stock Common Stock Additional Paid in Accumulated Total Shareholder’s Shares Amount Shares Amount Capital Deficit (Deficit) Balance, December 31, 2019 10,000,000 $ 10,000 18,010,208 $ 18,010 $ 21,545 $ ( 311,427 ) $ ( 261,872 ) Imputed Interest – – – – 6,825 – 6,825 Net (loss) – – – – – ( 20,553 ) ( 20,553 ) Balance, December 31, 2020 10,000,000 $ 10,000 18,010,208 $ 18,010 $ 28,370 $ ( 331,979 ) $ ( 275,599 ) Preferred Stock Common Stock Additional Paid in Accumulated Total Shareholder’s Shares Amount Shares Amount Capital Deficit (Deficit) Balance, December 31, 2020 10,000,000 $ 10,000 18,010,208 $ 18,010 $ 28,370 $ ( 331,979 ) $ ( 275,599 ) Imputed Interest – – – – 6,825 – 6,825 Net (loss) Income – – – – – 37,976 37,976 Balance, December 31, 2021 10,000,000 $ 10,000 18,010,208 $ 18,010 $ 35,195 $ ( 294,003 ) $ ( 230,798 ) The accompanying notes are an integral part of these financial statements. F- 5 MDWERKS, INC. Statements of Cash Flows For the Year Ended December 31, 2021 For the Year Ended December 31, 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 37,976 $ ( 20,553 ) Adjustments to reconcile net loss to net cash used in operating activities: Imputed interest 6,825 6,825 Changes in operating assets and liabilities: Accounts payable ( 64,460 ) 13,728 NET CASH (USED IN) OPERATING ACTIVITIES ( 19,659 ) – CASH FLOWS FROM FINANCING ACTIVITIES: Advances Payable 19,659 – NET CASH PROVIDED BY FINANCING ACTIVITIES 19,659 – NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS – – CASH AND CASH EQUIVALENTS: Beginning of period – – End of period $ – $ – Supplemental disclosure of cash flow information: Cash paid for income taxes $ – $ – Cash paid for interest $ – $ – The accompanying notes are an integral part of these financial statements F- 6 MDWERKS, Inc. Notes to Financial Statements For the Years Ended December 31, 2020 and 2021 NOTE 1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS MDWerks, Inc. (the “Company”), a Delaware corporation, is 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 is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. As of the date of this report, the Company had not yet commenced any operations. All activity through the date of this report relates to preserving cash, making settlements with creditors, attempting to raise capital, and continuing the Company’s public reporting. COVID-19 On March 11, 2020, the World Health Organization (“WHO”) declared the Covid-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease. Covid-19 and the U.S. response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the Covid-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation – The financial statements present the financial position, results of operations and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). All dollar amounts are rounded to the nearest thousand dollars. Cash and Cash Equivalents – The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at December 31, 2020 and December 31, 2021. Income Taxes – The Company complies with the accounting and reporting requirements of US GAAP in accounting for income taxes. The Company uses the asset and liability approach to financial reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. The Company also complies with US GAAP in accounting for uncertain tax positions. A tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2020 and December 31, 2021. However, the Company's conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized as of and for the years ended December 31, 2020 and December 31, 2021. F- 7 Net Loss Per Share – The Company complies with the accounting and reporting requirements of US GAAP in reporting its earnings per share. Net loss per share is computed based on the weighted average number of common shares outstanding. Basic (loss) per share excludes dilution and is computed by dividing (loss) available to common stockholders by the weighted average common shares outstanding for the year. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. In the fiscal years ended December 31, 2020 and December 31, 2021, there were no options, warrants or derivative securities outstanding. Therefore, basic and diluted loss per share were the same for the fiscal years ended December 31, 2020 and December 31, 2021. Fair Value of Financial Instruments – The fair value of the Company's assets and liabilities, which qualify as financial instruments under US GAAP, approximate the carrying amounts presented in the consolidated balance sheets. 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. 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. Our financial instruments include cash, inventories, prepayment and deposits, accounts payable, accrued liabilities, accrued interest payable, accrued compensation, convertible note payable, loans payable, derivative liabilities and billing in excess of costs and estimated earnings. The carrying values of the Company’s accounts payable, accrued liabilities, accrued interest payable, accrued compensation, convertible note payable, short-term loans payable, derivative liabilities and billing in excess of costs and estimated earnings approximate their fair value due to their short-term nature. Convertible notes payable – The Company accounts for convertible notes payable in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging, since the conversion feature is not indexed to the Company’s stock and can’t be classified in equity. The Company allocates the proceeds received from convertible notes payable between the liability component and conversion feature component. The conversion feature that is considered embedded derivative liabilities has been recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company has also recorded the resulting discount on debt related to the conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments. Going Concern – These financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. As reflected in the accompanying financial statements, the Company had income of $ 37,976 and a net loss of $ 20,553 , and an accumulated deficit of $ 294,003 and $ 331,979 for the years ended December 31, 2021 and 2020, respectively. Although management believes that it will be able to successfully execute a Business Combination, which includes third party financing and the raising of capital to meet the Company’s future liquidity needs, there can be no assurances in this regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern. F- 8 Recently Issued Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“ FASB ”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its financial position or results of operations upon adoption. In August 2018, the FASB issued ASU No. 2018-13, “ Fair Value Measurement (Topic 820). ” This standard modifies disclosure requirements related to fair value measurement and is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company adopted ASU No. 2018-13 effective on January 1, 2020 and it did not have a material impact on the Company’s financial statements. In December 2019, the FASB issued ASU No. 2019-12, “ Simplifying the Accounting for Income Taxes (Topic 740) ”. This standard simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact of adopting this standard on its financial statements. In August 2020, the FASB issued ASU 2020-06, “ Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) ” (“ ASU 2020-06 ”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements. NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As of December 31, 2021 and December 31, 2020, the Company had a credit of $ 1,139 towards accounts payable and accrued liabilities of $ 65,599 , respectively. These amounts were primarily due to accrued expenses of $65,599 as owed to the Company’s transfer agent and forgiven by the transfer agent in exchange for a one-time payment of $10,000 paid directly to the transfer agent from a representative of the Company’s former management team and which was also subsequently forgiven. NOTE 4 – NOTES PAYABLE On July 18, 2014, the Company sold and issued a convertible promissory note in the principal amount of $210,000 to an investor in exchange for $210,000 in cash (the “Note”). The Note has no maturity date and is due on demand by the holder at any time. The Note converts into shares of the Company’s common stock at a fixed conversion price of $0.0005 per share provided that the Holder shall not convert into any amount exceeding 9.99% of the then issued and outstanding shares of the Company. On July 28, 2020, the Note was subsequently sold and purchased by a non-related 3 rd party investor. The Company received multiple advances totaling $ 19,659 from a non-related 3 rd party during the period ending December 31, 2021 in order to cover legal, accounting and other various public company related operating expenses. NOTE 5 – CAPITAL STOCK The Company is authorized to issue 200,000,000 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. At December 31, 2020 and December 31, 2021, there were 18,010,208 and 18,010,208 shares issued and outstanding, respectively. F- 9 Preferred stock The Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value, with such designations, rights and preferences as may be determined from time to time by the Board of Directors, of which 10,000,000 shares are designated Series A Convertible Preferred. On June 15, 2014, the Company designated the Series A Convertible Preferred so that each share shall hold with it conversion rights of one hundred (100) shares of common stock for every share of Series A Preferred stock held, and that each share of Series A Preferred stock will also hold with it the same number of common share votes prior to conversion as it would if fully converted to be used in voting on any company matter requiring a vote of shareholders. At December 31, 2021 and December 31, 2020, there were 10,000,000 and 10,000,000 shares issued and outstanding, respectively. NOTE 6 – CONTINGENCY 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. F- 10 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There have been no changes in or disagreements with accountants regarding our accounting, financial disclosures or any other matter.