MDwerks (MDWK) posts Q1 2026 loss, flags going concern risk and tight cash
MDwerks, Inc. reported a net loss of $847,032 for the three months ended March 31, 2026, on revenue of $434,087, down from $513,930 a year earlier. Two Trees Distilling revenue rose to $313,739, while RF Specialties revenue fell to $120,348, producing a negative gross profit of $136,263.
Total assets were $4,171,503 and total liabilities were $3,521,320, leaving stockholders’ equity of $650,183. Cash declined to $95,754, and the company had a working capital deficit of $1,782,901 and an accumulated deficit of $7,005,527, leading management to state substantial doubt about its ability to continue as a going concern.
MDwerks continued investing in its Spirits Rapid Aging System and signed SRAS-related contracts and licensing arrangements intended to create recurring “Whiskey-as-a-Service” revenue. Subsequent to quarter-end it issued $145,000 of 20% convertible notes due October 15, 2026, convertible at $0.10 per share.
Positive
- None.
Negative
- Substantial going concern doubt: Q1 2026 net loss of $847,032, accumulated deficit of $7,005,527, negative working capital of $1,782,901, and management’s explicit statement that these conditions raise substantial doubt about MDwerks’ ability to continue as a going concern.
- Weak liquidity and costly funding: Cash of only $95,754 at March 31, 2026, reliance on $450,000 equity raises in the quarter, and subsequent issuance of $145,000 20% convertible notes due October 15, 2026, underscore financing risk and potential shareholder dilution.
Insights
MDwerks shows shrinking cash, wider losses, and explicit going concern doubt.
MDwerks generated Q1 2026 revenue of $434,087 but booked a net loss of $847,032, with negative gross profit as both Two Trees and RF Specialties segments lost money. Cash fell to $95,754 and working capital was a negative $1,782,901.
Management highlighted an accumulated deficit of $7,005,527 as of March 31, 2026 and stated that these conditions raise substantial doubt about the company’s ability to continue as a going concern. To bridge liquidity, it relied on equity sales and, after quarter-end, $145,000 of 20% convertible notes maturing October 15, 2026.
The strategic push around the Spirits Rapid Aging System and “Whiskey-as-a-Service” model, including SRAS deployment contracts and an exclusivity deal with an international fund, may create future recurring revenue, but execution and funding risks remain elevated given current losses and leverage. Subsequent filings will show whether SRAS deployments translate into higher-margin revenue.
Key Figures
Key Terms
going concern financial
Spirits Rapid Aging System financial
Stock Appreciation Rights financial
right-of-use asset financial
ASC Topic 606 financial
convertible notes financial
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from __________ to __________
(Exact name of registrant as specified in its charter)
Commission
File Number:
| (State or other jurisdiction or incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(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 | ||
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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.
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).
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 ☐
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. ☐
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by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As
of May 14, 2026, the Company has
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 | 8 |
| Item 4. | Controls and Procedures | 8 |
| PART II—OTHER INFORMATION | 9 | |
| Item 1. | Legal Proceedings | 9 |
| Item 1A. | Risk Factors | 9 |
| Item 2. | Unregistered Sales of Securities and Use of Proceeds | 9 |
| Item 3. | Defaults Upon Senior Securities | 9 |
| Item 4. | Mine Safety Disclosure | 9 |
| Item 5. | Other Information | 9 |
| Item 6. | Exhibits | 10 |
| SIGNATURES | 11 | |
| 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 March 31, 2026
and for the Three Months Ended March 31, 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)
| March 31, 2026 | December 31, 2025 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use asset | ||||||||
| Goodwill | ||||||||
| Other non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable – related party | - | - | ||||||
| Accounts payable | - | - | ||||||
| Notes payable | ||||||||
| Notes payable – related party | ||||||||
| Notes payable | ||||||||
| Deferred revenue | ||||||||
| Right-of-use liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Notes payable – related party, net of current portion | - | |||||||
| Notes payable, net of current portion | - | |||||||
| Right-of use liability, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, par value $ | - | - | ||||||
| Common stock, par value $ | ||||||||
| Additional paid in capital | ||||||||
| Subscription payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ||||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
MDwerks, Inc.
Consolidated Statements of Operations
(Unaudited)
| 2026 | 2025 | |||||||
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ( | ) | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | ||||||||
| Salaries and wages | ||||||||
| Depreciation expense | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Gain (loss) on sale of assets | - | - | ||||||
| Other income | - | |||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | |||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share – basic | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share – diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
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 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Common shares sold for cash | - | - | - | |||||||||||||||||||||||||||||
| Common shares issued for inventory | - | - | - | - | ||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance March 31, 2025 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Balance December 31, 2025 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Common shares sold for cash | - | - | - | |||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | ||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance March 31, 2026 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
MDwerks, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| March 31, 2026 | March 31, 2025 | |||||||
| Three Months Ended | ||||||||
| March 31, 2026 | March 31, 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Inventory impairment | - | |||||||
| Allowance for credit losses | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expense | ||||||||
| Inventory | ( | ) | ||||||
| Right-of-use asset | ||||||||
| Accounts payable | ||||||||
| Accounts payable – related | - | ( | ) | |||||
| Accounts payable | - | ( | ) | |||||
| Deferred revenue | ||||||||
| Right-of-use liability | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related party notes payable | - | |||||||
| Repayment of related party notes payable | - | ( | ) | |||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Proceeds from subscription agreements | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET CHANGE IN CASH | ( | ) | ||||||
| CASH - BEGINNING OF YEAR | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Right of use asset, operating lease | $ | $ | - | |||||
| Common stock issued for inventory | $ | - | $ | |||||
| Insurance premium financed with a note payable | $ | $ | ||||||
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 Three Months Ended March 31, 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.
| F-6 |
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 March 31, 2026, and for the three months ended March 31, 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.
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 $
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 $
| F-7 |
Revenue Recognition - Net sales from Two Trees include liquor and related products, less excise taxes and customer programs and incentives. Sales from RF Specialties, LLC will include product and services related to sustainable Radio Frequency applications to a wide range of industries including structural engineering, food & beverage, and manufacturing. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission, the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. For service revenue within the Company’s radio frequency applications, the Company recognizes revenue as the services are provided to the customer. The Company’s contracts typically have a single performance obligation, and do not contain a significant financing component.
The
Company recognizes deferred revenue for performance obligations not yet satisfied, primarily related to liquor sales not yet shipped.
As of March 31, 2026 and December 31, 2025, the Company had $
During the three months ended March 31, 2026, the Company’s revenue consisted of liquor sales from the Two Trees and RF Specialties and labor costs related to the product and service income resulting from the RF Specialties and Two Trees Distilling.
For
the three months ended March 31, 2026, the Company had one customer who accounted for
For
the three months ended March 31, 2025, the Company had one customer who accounted for
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
| F-8 |
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 months ended March 31, 2026, and 2025,
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 months ended March 31, 2026, and 2025,
Leases - Management determines if an arrangement is a lease at the inception of the agreement. Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liability on the accompanying consolidated balance sheet. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the rate implicit in the lease agreement, when available, or a discount rate based on the information available at the commencement date in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
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
SCHEDULE OF PROPERTY AND EQUIPMENT
| Category | Estimated Useful Lives | |
| Machinery and equipment | ||
| Vehicles | ||
| Furniture & Fixtures | ||
| Computers |
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 $
| F-9 |
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.
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
| March 31, 2026 | December 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods and packaging | ||||||||
| Inventory allowance | ( | ) | ( | ) | ||||
| Total inventories | $ | $ | ||||||
During
the three months ended March 31, 2026, the Company recognized an impairment of $
| F-10 |
NOTE 4 – FIXED ASSETS, NET
Fixed assets, net consisted of the following:
SCHEDULE OF FIXED ASSETS, NET
| March 31, 2026 | December 31, 2025 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Furniture and office equipment | ||||||||
| Buildings | ||||||||
| Construction in progress | ||||||||
| Total Property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
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 $
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 $
On
January 31, 2024, the Company received assets under the second purchase agreement totaling $
NOTE 5 – INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS, LESS ACCUMULATED AMORTIZATION
| March 31, 2026 | December 31, 2025 | |||||||
| Trade names and license, | $ | $ | ||||||
| Developed technology, | ||||||||
| Customer relationships, | ||||||||
| Total intangible assets | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
Total
amortization expense for the three months ended March 31, 2026 and 2025 was $
| F-11 |
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
NOTE 6 - NOTES PAYABLE
The Company has the following outstanding notes payable:
SCHEDULE OF NOTES PAYABLE
| Loans | Origination Date | Interest Rate | Balance as of March 31, 2026 | Balance as of December 31, 2025 | ||||||||||
| Asset purchase agreement notes |
% | $ | $ | |||||||||||
| Termination Agreement |
% | |||||||||||||
| Insurance Note payable | % | - | ||||||||||||
| Advances and Notes Payable – Related parties | % | |||||||||||||
| Total notes payable | ||||||||||||||
| Less current portion | ( | ) | ( | ) | ||||||||||
| Total long term | $ | - | $ | |||||||||||
The following is a summary of the future minimum payments of loans payable:
SCHEDULE OF FUTURE MINIMUM PAYMENTS OF LOANS PAYABLE
| 12 months ending: | ||||
| March 31, 2027 | ||||
| March 31, 2028 | - | |||
| March 31, 2029 | - | |||
| Total loans payable | $ | |||
During
the year ended December 31, 2020, the Company entered into a termination agreement in which it agreed to pay the sum of $
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 $
On
January 31, 2024, the Company received assets under the second asset purchase agreement totaling $
During
the year ended December 31, 2025, the Company received a total of $
| F-12 |
In
February 2026, the Company entered into an insurance policy financing arrangement. The total principal was $
Interest
expense of $
NOTE 7 - CAPITAL STOCK
Preferred stock
The
Company is authorized to issue
On
June 15, 2014,
On
November 7, 2024, the Company agreed to purchased
Common stock
The
Company is authorized to issue
During
the three months ended March 31, 2026, the Company sold
During
the three months ended March 31, 2026, the Company issued a total of
During
the three months ended March 31, 2025, the Company sold
During
the three months ended March 31, 2025, the Company issued a total of
At
March 31, 2026 and December 31, 2025, there were
| F-13 |
Warrants
The following table represents warrant activity during the three months ended March 31, 2026:
SCHEDULE OF WARRANT ACTIVITY
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2025 | $ | |||||||
| Granted | - | - | ||||||
| Forfeited, cancelled | - | - | ||||||
| Outstanding at March 31, 2026 | $ | |||||||
| Exercisable at March 31, 2026 | $ | |||||||
The
warrants had a weighted average remaining life of
Stock options
The following is a summary of activity of outstanding stock options during the three months ended March 31, 2026:
SCHEDULE OF ACTIVITY OF OUTSTANDING STOCK OPTIONS
| Weighted | ||||||||
| Average | ||||||||
| Number | Exercise | |||||||
| of Options | Prices | |||||||
| Balance, December 31, 2025 | $ | |||||||
| Granted | - | - | ||||||
| Cancelled | - | - | ||||||
| Balance, March 31, 2026 | $ | |||||||
| Exercisable, March 31, 2026 | $ | |||||||
The
options had a weighted average remaining life of
Stock Appreciation Rights
On
July 15, 2025, the Company awarded a total of
The following is a summary of activity of outstanding SARs during the three months ended March 31,2026:
SCHEDULE OF ACTIVITY OF OUTSTANDING STOCK OPTIONS
| Weighted Average | ||||||||
| Number of SARs | Exercise Prices | |||||||
| Balance, December 31, 2025 | $ | |||||||
| Granted | ||||||||
| Cancelled | ( | ) | ||||||
| Balance, March 31,2026 | $ | |||||||
| Exercisable, March 31,2026 | $ | |||||||
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 $
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
| F-14 |
On
November 6, 2024, the Company entered into an employment agreement with its CEO, Steve Laker. The agreement specifies an annual salary
of $
On
November 6, 2024, the Company entered into an employment agreement with its Executive Chairman James Cassidy. The agreement specifies
an annual salary of $
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.
| F-15 |
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.
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 $
Upon
execution of the agreement, the Company issued
On
March 14, 2025, the Company agreed to issue
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:
| F-16 |
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.
Compensation
that
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 $
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 $
NOTE 10 – LEASES
The
Company maintains an operating lease for its office space and operating facility. The lease has a remaining term of
As
of March 31, 2026, the amount of right-of-use assets and lease liabilities were $
The following table provides the maturities of lease liabilities at March 31, 2026:
SCHEDULE OF MATURITIES LEASE LIABILITIES
| Operating Lease | Remaining Term in Years |
|||||||||
| 2026 | (9 months remaining) | $ | ||||||||
| 2027 | ||||||||||
| 2028 | ||||||||||
| 2029 | ||||||||||
| 2030 | ||||||||||
| thereafter | - | |||||||||
| Total lease payments | ||||||||||
| Less: imputed interest | ( |
) | ||||||||
| Present value of lease liability | $ |
|||||||||
NOTE 11 – SEGMENT REPORTING
The
Company’s operations are managed and reported in
| F-17 |
Significant segment expenses and assets information is as follows:
SCHEDULE OF SEGMENT EXPENSES AND ASSETS INFORMATION
| 2026 | 2025 | |||||||
For the Three Months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | ||||||||
| Two Trees Distilling | $ | $ | ||||||
| RF Specialties | ||||||||
| Total | $ | $ | ||||||
| Revenue | $ | $ | ||||||
| Cost of Sales | ||||||||
| Two Trees Distilling | $ | $ | ||||||
| RF Specialties | ||||||||
| Total | $ | $ | ||||||
| Cost of Sales | $ | $ | ||||||
| Gross profit | ||||||||
| Two Trees Distilling | $ | ( | ) | $ | ||||
| RF Specialties | ( | ) | ||||||
| Total | $ | ( | ) | $ | ||||
| Gross profit | $ | ( | ) | $ | ||||
| General & Administrative Expense | ||||||||
| Two Trees Distilling | $ | $ | ||||||
| RF Specialties | ||||||||
| Corporate | ||||||||
| Total | $ | $ | ||||||
| General & Administrative Expense | $ | $ | ||||||
| Salary and Wages | ||||||||
| Two Trees Distilling | $ | - | $ | |||||
| RF Specialties | - | - | ||||||
| Corporate | ||||||||
| Total | $ | $ | ||||||
| Salary and Wages | $ | $ | ||||||
| Depreciation and Amortization Expense | ||||||||
| Two Trees Distilling | $ | $ | ||||||
| RF Specialties | ||||||||
| Corporate | ||||||||
| Total | $ | $ | ||||||
| Depreciation and Amortization Expense | $ | $ | ||||||
| Net loss from operations | ||||||||
| Two Trees Distilling | $ | ( | ) | $ | ( | ) | ||
| RF Specialties | ( | ) | ( | ) | ||||
| Corporate | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
| Net loss from operations | $ | ( | ) | $ | ( | ) | ||
| Capital expenditures | ||||||||
| Two Trees Distilling | $ | $ | ||||||
| RF Specialties | ( | ) | ||||||
| Total | $ | ( | ) | $ | ||||
| Capital expenditures | $ | ( | ) | $ | ||||
| Assets | As Of March 31, 2026 | As of December 31, 2025 | ||||||
| Two Trees Distilling | $ | $ | ||||||
| RF Specialties | ||||||||
| Corporate | ||||||||
| Total | $ | $ | ||||||
| Assets | $ | $ | ||||||
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 three-month period ended March 31, 2026.
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 $
| F-18 |
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.
The Company is currently deploying its first industrial application of our Molecular sawdust drying system with a lumber mill. 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.
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.
| 4 |
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 second 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
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.
| 5 |
Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
For the Three Months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | ||||||||
| Two Trees Distilling | $ | 313,739 | $ | 252,837 | ||||
| RF Specialties | 120,348 | 261,093 | ||||||
| Total | $ | 434,087 | $ | 513,930 | ||||
| Cost of Sales | ||||||||
| Two Trees Distilling | $ | 371,051 | $ | 168,715 | ||||
| RF Specialties | 199,299 | 212,683 | ||||||
| Total | $ | 570,350 | $ | 381,398 | ||||
| Gross profit | ||||||||
| Two Trees Distilling | $ | (57,312 | ) | $ | 84,122 | |||
| RF Specialties | (78,951 | ) | 48,410 | |||||
| Total | $ | (136,263 | ) | $ | 132,532 | |||
Revenue. Revenue for the three months ended March 31, 2026 was $434,087 compared to $513,930 for the three months ended March 31, 2025. Revenue of $313,739 for three months ending March,31,2026 is attributable to the Two Trees business, compared to $252,837 in 2025, and $120,348 of revenue for three months ending March 31,2026 attributable to product and service income from RFS, compared to $261,093 in 2025. The $60,092 increase revenue in the Two Trees business was primarily attributable to increased bulk alcohol sales in the current period which was partially offset by a decline in sales of RF Specialties of approximately $140,745 related to nearing completion on the MSD project and lower service revenue compared to the prior year.
In February 2025, the Company executed contracts with two customers related to the lease of an aggregate of three SRAS that are expected to begin producing revenue to the Company in the second half of 2025. The Company began building the machines for these customers in the first quarter, and we expect to drive significant growth in revenue and gross profit in our Two Trees Distilling business from this new revenue stream going forward.
Cost of Sales. Cost of sales for the three months ended March 31, 2026 was $570,350 compared to $381,398 for three months ended March 31, 2025. Cost of sales for the Company’s Two Trees Distilling operations was $371,051 in 2026 compared to $168,715 in 2025, with the decline driven by higher input costs for our products, increase freight costs, and higher bulk alcohol sales. The Company’s RF Specialties business incurred costs of sales of $199,299 in 2026 compared to $212,683 in 2025. The slight decrease was due to lower activity associated with the MSD project nearing completion.
Operating Expenses. We reported operating expenses of $701,549 consisting primarily of legal, accounting, payroll, and general business related expenses for the three months ended March 31, 2026 compared to $750,321 for the three months ended March 31, 2025. The $122,801 decrease in operating expenses was primarily attributable to decreased general and administrative expense. Selling, general and administrative expenses was $467,366 and $583,905 for the three months ended March 31, 2026 and 2025, respectively, and included legal, accounting and audit fees related to our public company reporting obligations, stock-based compensation of $44,891 and $66,322, respectively due to new equity awards to employees and consultants in the prior year. Operating expenses also included salary and wages expense of $146,054 and $93,809 for the three months ended March 31, 2026 and 2025, respectively. Operating expenses included depreciation and amortization expense of $67,601 and $72,607 for the three months ended March 31, 2026 and 2025, respectively.
Total Other Expenses. Total other expense was $9,220 for the three months ended March 31, 2026 compared to $11,565 for the three months ended March 31, 2025. Other expense for the three months ended March 31, 2026 primarily consisted of interest expense of $9,220. Other expense for the three months ended March 31, 2025 primarily consisted of interest expense of $11,765 and interest income of $200
Liquidity and Capital Resources
As of March 31, 2026, and December 31, 2025, we had $95,754 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 March 31, 2026, we have incurred operating losses since inception of $7,005,527. At March 31, 2026, we had a working capital deficit of $1,782,901.
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.
| 6 |
We expect to incur marketing, professional, and administrative expenses as well 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. During the three months ended, we raised $450,000 in cash proceeds from the sale of common stock. 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.
Cash Flows
Cash Used in Operating Activities. Net cash used in operating activities for the three months ended March 31, 2026 and 2025 were $464,418 and $421,316. The increase was attributable to an increase in net loss compared to the prior year as a result of increased operating expenses associated with the new businesses as described above.
Cash Used from Investing Activities. Cash used in investing activities for the three months ended March 31, 2026 and 2025 was $62,907 and $604,377, respectively, with higher costs in the prior year associated with construction of the Company’s new SRAS equipment, deployed in the first quarter of 2026.
Cash Provided by Financing Activities. Net cash provided by financing activities for the three months ended March 31, 2026 and 2025 was $411,131 and $1,607,709, respectively. The cash provided by financing activities for the three months ended March 31, 2026 was attributable to proceeds from the sale of common stock of $450,000, including subscription payable of $205,000, partially offset by repayments of notes payable of $38,869. The cash provided by financing activities for the three months ended March 31, 2025 was attributable to proceeds from the sale of common stock of $1,434,000, including subscription payable of $150,000, proceeds from related party notes payable of $150,000, partially offset by repayments of notes payable of $126,291.
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.
| 7 |
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.
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 March 31, 2026. Based upon such evaluation, the principal executive officer and principal financial officer have concluded that, as of March 31, 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 March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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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.
During the three months ended March 31, 2026, we sold 2,833,333 shares of common stock in exchange for cash proceeds of $450,000, of which 2,500,000 shares are not yet issued.
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 March 31, 2026, no director or officer
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Item 6. Exhibits
| Exhibit No. | Description | |
| 10.1* | Convertible Promissory Note between the Company and Timothy Brocopp dated April 15, 2026 | |
| 10.2* | Convertible Promissory Note between the Company and Keggan Brocopp dated April 15, 2026 | |
| 10.3* | Convertible Promissory Note between the Company and Richard Blackstone dated April 15, 2026 | |
| 10.4* | Convertible Promissory Note between the Company and Joshua Blackstone dated April 15, 2026 | |
| 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. |
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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: May 15, 2026 | /s/ Steven C. Laker |
| Steven C. Laker | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer) | |
| Date: May 15, 2026 | /s/ David Stephens |
| David Stephens | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
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