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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): December 27, 2023
MDwerks,
Inc.
(Exact
name of registrant as specified in its charter)
| Delaware |
|
000-56299 |
|
33-1095411 |
(State
or other jurisdiction of
incorporation or organization) |
|
(Commission
File Number) |
|
(IRS
Employer
Identification No.) |
411
Walnut Street, Suite 20125
Green
Cove Springs, FL
(Address
of principal executive offices)
32043
(Zip
code)
(252)
501-0019
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions (see General Instruction A.2. below):
| ☐ |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ☐ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12) |
| |
|
| ☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b)) |
| |
|
| ☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
| Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
| N/A |
|
N/A |
|
N/A |
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Current Report on Form 8-K, including the sections entitled “Business” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” contains express or implied forward-looking statements that are based on our
management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial
performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.
Forward-looking statements in this Current Report on Form 8-K include, but are not limited to, statements about:
| ● |
the
implementation of our strategic plans for our business; |
| ● |
our
financial performance; |
| ● |
developments
relating to our competitors and our industry, including the impact of government regulation; |
| ● |
estimates
of our expenses, future revenues, capital requirements and our needs for additional financing; and |
| ● |
other
risks and uncertainties, including those listed under the captions “Business,” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” |
In
some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential,” “continue,” “could,” “project,” “intend,” “will,”
“will be,” “would,” or the negative of these terms or other comparable terminology and expressions. However,
this is not an exclusive way of identifying such statements. These statements are only predictions. You should not place undue reliance
on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current
expectations include, among other things, those listed in this Current Report on Form 8-K. If one or more of these risks or uncertainties
occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or
projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this
Current Report on Form 8-K and the documents that we reference in this Current Report on Form 8-K and have filed with the Securities
and Exchange Commission (“SEC”) as exhibits hereto completely and with the understanding that our actual future results may
be materially different from any future results expressed or implied by these forward-looking statements.
The
forward-looking statements in this Current Report on Form 8-K represent our views as of the date of this Current Report on Form 8-K.
We anticipate that subsequent events and developments will cause our views to change. Except as expressly required under federal securities
laws and the rules and regulations of the SEC, we do not undertake any obligation to update any forward-looking statements to reflect
events or circumstances arising after the date of this Current Report on Form 8-K, whether as a result of new information or future events
or otherwise. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to
the date of this Current Report on Form 8-K. You should not place undue reliance on the forward-looking statements included in this Current
Report on Form 8-K. All forward-looking statements attributable to use are expressly qualified by these cautionary statements.
INDUSTRY
DATA
This
Current Report on Form 8-K includes industry and market data and other information, which we have obtained from, or is based upon, market
research, independent industry publications, surveys and studies conducted by third parties or other publicly available information.
Although we believe each such source to have been reliable as of its respective date, none guarantees the accuracy or completeness of
such information. We have not independently verified the information contained in such sources. Any such data and other information are
subject to change based on various factors, including those described elsewhere in this Current Report on Form 8-K.
TABLE
OF CONTENTS
Background
On
January 19, 2023, MDwerks, Inc. (the “Company”) entered into an Exchange Agreement (the “Exchange Agreement”),
by and between the Company, RF Specialties LLC (“RFS”) and Keith A. Mort as the sole member of RFS. Pursuant to the terms
of the Exchange Agreement, the Company agreed to acquire from Mr. Mort, and Mr. Mort agreed to sell to the Company, 100% of the equity
interests and membership interests of RFS, in exchange for the issuance by the Company to Mr. Mort of 7,500,000 shares of the Company’s
common stock, par value $0.001 per share (the “Exchange”). Immediately following the Exchange, RFS will become a wholly owned
subsidiary of the Company.
Item
2.01 Completion of Acquisition or Disposition of Assets.
On
December 27, 2023, the Company completed the acquisition of RFS and the Exchange and issued to Mr. Mort 7,500,000 shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”). On the same date, and immediately following the completion
of the Exchange, RFS became a wholly owned subsidiary of the Company. Pursuant to the Common Stock issuance to Mr. Mort, the number of
shares of the Company’s Common Stock issued and outstanding was 198,391,536.
The
Exchange Shares are subject to a 24-month lock-up; provided, however, that (i) one-third of the Exchange Shares will be released from
the lock-up restrictions on the 12-month anniversary of the closing of the Exchange, and (ii) one-third of the Exchange Shares will be
released from the lock-up restrictions on the 18-month anniversary of the closing of the Exchange. The remaining one-third of the Exchange
Shares will be released from the lock-up restrictions on the 24-month anniversary of the closing of the Exchange.
The
foregoing description of the Exchange Agreement and the transaction contemplated thereby does not purport to be complete and is subject
to, and qualified in its entirety by, the full text of the Exchange Agreement attached as Exhibit 10.1 to the Current Report on Form
8-K filed with the SEC by the Company on December 28, 2023 and incorporated herein by reference.
Item
3.02 Unregistered Sales of Equity Securities.
The
Company incorporates the disclosure in Item 2.01 herein.
The
securities issuances described herein were exempt from registration under the Securities Act in reliance on the exemptions provided by
Regulation D and Section 4(a)(2) and Section 3(a)(10), as applicable under the Securities Act.
Item
9.01 Financial Statement and Exhibits.
(a)
Financial Statements of Business Acquired.
The
audited financial statements of RF Specialties LLC from for the years ended December 31, 2021 and December 31, 2022 are attached to this
Current Report on Form 8-K as Exhibit 99.2 and are incorporated by reference herein. The unaudited financial statements of RF Specialties
LLC for the period ended September 30, 2023 are attached to this Current Report on Form 8-K as Exhibit 99.3 and are incorporated by reference
herein.
(b)
Pro Forma Financials.
The
unaudited pro forma condensed combined financial statements of the Company and RF Specialties LLC for the nine month period ended September
30, 2023 and the year ended December 31, 2022 are attached to this Current Report on Form 8-K as Exhibit 99.3 and incorporated by reference
herein.
(d)
Exhibits
The
following exhibits are filed with this Current Report on Form 8-K:
| Exhibit
No. |
|
Description |
| |
|
|
| 2.1 |
|
Exchange Agreement entered into between MDwerks, Inc. and Keith Mort dated January 19, 2023 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 25, 2023). |
| 2.2 |
|
Amendment No. 1 dated as of December 20, 2023 to the Exchange Agreement entered into between MDwerks, Inc. and Keith Mort dated January 19, 2023 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2023). |
| 10.4 |
|
Asset Purchase Agreement between MDwerks, Inc. and Dream Workz Automotive LLC dated as of August 25, 2023, 2023 (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 25, 2023). |
| 99.2* |
|
RF Specialties LLC Audited Financial Statements for the periods ended December 31, 2022 and 2021. |
| 99.3* |
|
RF Specialties LLC Unaudited Financial Statements for the nine month period ended September 30, 2023. |
| 99.4* |
|
Unaudited Pro Forma Combined Balance Sheet as of September 30, 2023 and Unaudited Pro Forma Combined Statement of Operations for the nine month period ended September 30, 2023 and the year ended December 31, 2022. |
| 104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL document) |
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 hereunto duly authorized.
| |
MDwerks,
Inc. |
| |
|
| Date:
May 24, 2024 |
/s/
Seven C. Laker |
| |
Steven
C. Laker |
| |
Chief
Executive Officer |
Exhibit
99.2
RF
Specialties, LLC
Audited
Financial Statements
December
31, 2022 and 2021
Table
of Contents
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of RF Specialties, LLC
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of RF Specialties, LLC, (the Company) as of December 31, 2022 and 2021, and the related
statements of operations, changes in members’ equity (deficit), and cash flows for each of the years in the two-year period ended
December 31, 2022, 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, 2022 and 2021, and the
results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with
accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has suffered a net loss from operations and has a net working capital deficiency, which raises
substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in
Note 1. 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 audits 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 the significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide
a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current period 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 matter
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
matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Going
Concern
As
discussed in Note 1, the Company has a going concern due to a negative working capital and losses from operations.
Auditing
management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates
on future revenues and expenses, which are not able to be substantiated.
To
evaluate the appropriateness of the going concern, we examined and evaluated the financial information that was the initial cause along
with management’s plans to mitigate the going concern and management’s disclosure on going concern.
/s/
M&K CPAS, PLLC
We
have served as the Company’s auditor since 2022
Houston,
TX
May
24, 2024
RF
Specialties, LLC
Balance
Sheets
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Assets | |
| | | |
| | |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | 35,916 | | |
$ | 5,571 | |
| Accounts Receivable, Net | |
| 7,533 | | |
| 23,522 | |
| Total Current Assets | |
| 43,449 | | |
| 29,093 | |
| | |
| | | |
| | |
| Property & Equipment, Net | |
| 205,492 | | |
| 54,380 | |
| Other Asset | |
| - | | |
| 1,250 | |
| Total Assets | |
$ | 248,941 | | |
$ | 84,723 | |
| | |
| | | |
| | |
| Liabilities and Members’ Equity (Deficit) | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts Payable | |
$ | 26,015 | | |
$ | 23,083 | |
| Loans Payable, current | |
| 21,774 | | |
| 31,468 | |
| Accrued Expenses | |
| - | | |
| 3,301 | |
| Total Current Liabilities | |
| 47,789 | | |
| 57,852 | |
| Loans Payable, net of current portion | |
| 80,882 | | |
| 35,097 | |
| | |
| | | |
| | |
| Total Liabilities | |
| 128,671 | | |
| 92,949 | |
| | |
| | | |
| | |
| Members’ Equity (Deficit) | |
| | | |
| | |
| Members’ equity (deficit) | |
| (540,000 | ) | |
| (518,595 | ) |
| Retained earnings | |
| 660,270 | | |
| 510,369 | |
| Total Members’ Equity (Deficit) | |
| 120,270 | | |
| (8,226 | ) |
| Total Liabilities and Members’ Equity (Deficit) | |
$ | 248,941 | | |
$ | 84,723 | |
The
accompanying notes are an integral part of these financial statements.
RF
Specialties, LLC
Statements
of Operations
For
the years ended December 31, 2022 and 2021
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Revenue | |
$ | 552,792 | | |
$ | 296,669 | |
| | |
| | | |
| | |
| Cost of Revenue | |
| 226,120 | | |
| 149,130 | |
| | |
| | | |
| | |
| Gross Profit | |
| 326,672 | | |
| 147,539 | |
| | |
| | | |
| | |
| Operating Expenses | |
| | | |
| | |
| General & Administrative Expenses | |
| 160,675 | | |
| 105,037 | |
| Depreciation and Amortization Expense | |
| 20,643 | | |
| 16,209 | |
| Total Operating Expenses | |
| 181,318 | | |
| 121,246 | |
| | |
| | | |
| | |
| Net Income (Loss) from Operations | |
| 145,354 | | |
| 26,293 | |
| | |
| | | |
| | |
| Other Expenses (Income) | |
| | | |
| | |
| Interest Income | |
| (2,751 | ) | |
| - | |
| Gain on Sale of Asset | |
| (4,848 | ) | |
| - | |
| Interest Expense - Net | |
| 3,052 | | |
| 6,025 | |
| Total Other Expenses (Income) | |
| (4,547 | ) | |
| 6,025 | |
| | |
| | | |
| | |
| Net Income | |
$ | 149,901 | | |
$ | 20,268 | |
The
accompanying notes are an integral part of these financial statements.
RF
Specialties, LLC
Statements
of Members’ Equity (Deficit)
| | |
Members’
Equity | | |
Retained | | |
Total
Members’
Equity | |
| | |
Amount | | |
Earnings | | |
(Deficit) | |
| Balance, December 31, 2020 | |
$ | (494,012 | ) | |
$ | 490,101 | | |
$ | (3,911 | ) |
| | |
| | | |
| | | |
| | |
| Distribution to Member(s) | |
| (24,583 | ) | |
| - | | |
| (24,583 | ) |
| | |
| | | |
| | | |
| | |
| Net Income | |
| - | | |
| 20,268 | | |
| 20,268 | |
| | |
| | | |
| | | |
| | |
| Balance, December 31, 2021 | |
| (518,595 | ) | |
| 510,369 | | |
| (8,226 | ) |
| | |
| | | |
| | | |
| | |
| Distribution to Member(s) | |
| (21,405 | ) | |
| - | | |
| (21,405 | ) |
| | |
| | | |
| | | |
| | |
| Net Income | |
| - | | |
| 149,901 | | |
| 149,901 | |
| | |
| | | |
| | | |
| | |
| Balance, December 31, 2023 | |
$ | (540,000 | ) | |
$ | 660,270 | | |
$ | 120,270 | |
The
accompanying notes are an integral part of these financial statements.
RF
Specialties, LLC
Statements
of Cash Flows
For
the years ended December 31, 2022 and 2021
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | |
| | |
| | | |
| | |
| Net Income | |
$ | 149,901 | | |
$ | 20,268 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Gain on sale of assets | |
| (4,848 | ) | |
| - | |
| Depreciation expense | |
| 20,643 | | |
| 16,210 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| 15,989 | | |
| (5,999 | ) |
| Other assets | |
| 1,250 | | |
| - | |
| Accounts payable | |
| 2,932 | | |
| (8,240 | ) |
| Accrued expenses | |
| (3,301 | ) | |
| 3,301 | |
| | |
| | | |
| | |
| CASH PROVIDED BY OPERATING ACTIVITIES | |
| 182,566 | | |
| 25,540 | |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
| Cash paid for purchase of fixed assets | |
| (108,424 | ) | |
| (8,000 | ) |
| | |
| | | |
| | |
| CASH USED IN INVESTING ACTIVITIES | |
| (108,424 | ) | |
| (8,000 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
| Proceeds from loans payable | |
| - | | |
| 31,045 | |
| Payments on loans payable | |
| (22,392 | ) | |
| (28,199 | ) |
| Distribution to member(s) | |
| (21,405 | ) | |
| (24,583 | ) |
| | |
| | | |
| | |
| CASH USED IN FINANCING ACTIVITIES | |
| (43,797 | ) | |
| (21,737 | ) |
| | |
| | | |
| | |
| NET INCREASE (DECREASE) IN CASH | |
| 30,345 | | |
| (4,197 | ) |
| CASH AT BEGINNING OF PERIOD | |
| 5,571 | | |
| 9,768 | |
| | |
| | | |
| | |
| CASH AT END OF PERIOD | |
$ | 35,916 | | |
$ | 5,571 | |
| | |
| | | |
| | |
| NON-CASH TRANSACTIONS | |
| | | |
| | |
| Vehicles acquired with loans payable | |
$ | 108,331 | | |
$ | - | |
| Loans payable settled with vehicle trade-in | |
$ | 45,000 | | |
$ | - | |
The
accompanying notes are an integral part of these financial statements.
RF
Specialties, LLC
Notes
to the Financial Statements
December
31, 2022 and 2021
| Note
1: |
Summary
of Significant Accounting Policies |
Company
Operations
RF
Specialties, LLC is an innovative company pushing the boundaries of sustainable Radio Frequency applications. For over 12 years RF Specialties
has addressed companies’ most pressing challenges by implementing automated Radio Frequency Technology in a sustainable way reducing
energy costs and increasing speed to market when compared to traditional methods. By bringing Radio Frequency applications to market
RF Specialties has successfully elevated a wide range of industries including structural engineering, food & beverage, and manufacturing.
Basis
of Presentation
The
accompanying audited financial statements for RF Specialties, LLC were prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for financial information. In management’s opinion, the audited financial
statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s
financial position as of December 31, 2022, and 2021.
Going
Concern
The
Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company
has had minimal working capital since inception and expects to continue to have minimal working capital. The Company’s management
has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements
do not include any adjustments that may result from the outcome of this uncertainty.
Revenue
Recognition
The
Company provides products and services for automated Radio Frequency applications. 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.
Basis
of Accounting and Use of Estimates
The
accompanying financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally
accepted in the United State of America (US GAAP).
The
preparation of the financial statements in conformity with US GAAP requires management to make certain estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Cash
and Cash Equivalents
All
highly liquid temporary cash investments with original maturities of three months or less are considered to be cash equivalents.
| Note
1: |
Summary
of Significant Accounting Policies (Continued) |
The
Company maintains its cash balances in financial institutions. The balances in the financial institutions are insured by the Federal
Deposit Insurance Corporation up to $250,000. At times, the Company’s cash balances may be in excess of the insured limit.
Other
Assets
Prepaid
expenses consist of deposits on rented or leased space. These amounts are recognized as an expense in the period the related service
or benefit is received.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation of property and equipment is calculated on a straight-line basis over the estimated
useful lives of the assets. Furniture and fixture assets are depreciated over seven years, vehicles are depreciated over five years,
and computer and equipment are depreciated over three years. Expenditures for renewals and betterments that extend the useful lives of
or improve existing property or equipment are capitalized. Expenditures for maintenance and repairs are expensed as incurred.
On
September 19, 2022, the Company sold a 2020 Ford Expedition in conjunction with the acquisition of another vehicle. The Ford Expedition
had a cost of $66,947 with a net book value of $40,152 on the date of the sale. The trade in resulted in a credit of $45,000 applied
against the new vehicle purchase and a gain of $4,848 being recorded on the sale.
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.
The
Company evaluated all rental agreements for the years ended December 31, 2022, and 2021 noting no ROU Assets or Liabilities existed for
these years ended.
Impairment
of Long-Lived Assets
Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the fair market value of the assets. During the years ended
December 31, 2022, and 2021, no impairment expense was recognized.
| Note
1: |
Summary
of Significant Accounting Policies (Continued) |
Accounts
Receivable and the Allowances for Doubtful Accounts
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 doubtful accounts 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 $7,533 net of zero allowance for doubtful accounts as of December 31, 2022. The company had an accounts receivable balance of $23,522
net of zero allowance for doubtful accounts as of December 31, 2021.
Use
of Estimates
The
preparation of financial statements in accordance with GAAP requires 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 financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair
Value Measurement
GAAP
defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements.
GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement
presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. As of December 31, 2022
and 2021, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value
option” provided by GAAP.
The
hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair
value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets
and liabilities under GAAP’s fair value measurement requirements are as follows:
| |
Level
1: |
Fair
value of the asset or liability is determined using cash or unadjusted quoted prices in active markets for identical assets or liabilities. |
| |
|
|
| |
Level
2: |
Fair
value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset
or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in
active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
| |
|
|
| |
Level
3: |
Fair
value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect
management’s own assumptions regarding the applicable asset or liability. |
| Note
1: |
Summary
of Significant Accounting Policies (Continued) |
None
of the Company’s assets or liabilities were measured at fair value as of December 31, 2022, or 2021. However, GAAP requires the
disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally
of trade receivables, accounts payable, accrued liabilities, loans payable, and the secured credit facilities. The estimated fair value
of trade receivables, accounts payable, and accrued liabilities approximate their carrying value due to the short period of time to their
maturities. As of December 31, 2022, and 2021, the principal amounts of the Company’s loans payable approximate fair value.
Recently
Adopted Accounting Pronouncements
In
October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08,
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, (“ASU 2021-08”) which requires
an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic
606, Revenue Recognition. This ASU is effective for annual and interim periods beginning after December 15, 2022. Early adoption
is permitted. The Company early adopted ASU 2021-08 for the year ended December 31, 2021.
In
August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,
(“ASU 2020-06”) which simplifies the accounting for convertible instruments by eliminating the beneficial conversion feature
and cash conversion models. Certain convertible instruments will be accounted for as a single unit of account, unless the conversion
feature requires bifurcation and recognition as a derivative. Additionally, this ASU simplifies the earnings per share calculation, by
eliminating the treasury stock method and requiring entities to use the if-converted method. This guidance is effective for annual periods
beginning after December 31, 2021 with early adoption permitted. The Company early adopted ASU 2020-06 for the year ended December 31,
2021.
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” (“ASU 2016-13”).
The standard introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit
losses and will apply to trade receivables. The new guidance will be effective for the Company’s annual and interim periods beginning
after December 15, 2022. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial
statements.
In
February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02-Leases (Topic 842), which significantly amends
the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported
previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was
previously classified as an operating expense must now be allocated between amortization expense and interest expense. ASU 2016-02 is
effective for the Company in the first quarter of its fiscal year ending December 31, 2019 using a modified retrospective approach with
the option to elect certain practical expedients. The Company adopted ASU 2016-02 for the year ended December 31, 2021.
Income
Taxes
The
Company is a limited liability company recognized as a partnership for income tax purposes. Accordingly, federal income taxes on the
net earnings of the Company are payable by the Member individually and no provision for federal income taxes is included in the accompanying
financial statements.
The
Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Accordingly, only those tax benefits that have
a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. The Company’s
management has reviewed the Company’s tax positions and determined there were no significant outstanding or retroactive tax positions
with less than a 50% likelihood of being sustained upon examination by the taxing authorities.
Based
upon its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial
statements. The Company’s evaluation was performed for the tax periods ended December 31, 2020, through December 31, 2022, for
U.S. Federal and applicable state returns, the tax years which principally remain subject to examination by major tax jurisdictions as
of December 31, 2022.
The
Company is 100% owned by the sole owner Keith Mort. During the years ended December 31, 2022, and 2021, distributions to the owner were
$21,405 and $24,583, respectively.
Other
Assets consists of a deposit on a 12-month rental agreement as of December 31, 2021. Other assets as of December 31, 2022, were zero.
| Note
4: |
Accounts
Payable and Accrued Expenses |
The
Company’s accounts payable was $26,015 and $23,083 as of December 31, 2022 and 2021, respectively and consists of trade payables.
The
Company’s accrued expenses was $0 and $3,301 as of December 31, 2022, and 2021, respectively and consists of accrued interest on
loans payable.
| Note
5: |
Contingencies
and Concentration of Risks |
Contingencies
The
Company is subject to various claims that arise in the normal course of business. In the opinion of management, the ultimate disposition
of such claims will not have a material adverse effect on the financial position or results of operations of the Company.
Concentration
of risks
Four
of the Company’s customers accounted for more than 10% of its revenues as of December 31, 2022, Customer A with 25%, Customer B
with 24%, Customer C with 22% and Customer D with 18%. Two of the Company’s customers accounted for more than 10% of its revenues
as of December 31, 2021, Customer A with 42% and Customer B with 15%.
Two
of the Company’s customers accounted for more than 10% of its accounts receivable as of December 31, 2022, Customer A with 80%
and Customer B with 20%. . Two of the Company’s customers accounted for more than 10% of its accounts receivable as of December
31, 2021, Customer A with 73% and Customer B with 22%.
The
Company is 100% owned by the sole owner Keith Mort. During the years ended December 31, 2022, and 2021, distributions to the owner were
$21,405 and $24,583, respectively.
Loans
payable for the years ended December 31, 2022, and 2021 are listed in the table below:
| Loans | |
Origination
Date | |
Interest
Rate | | |
12/31/21
Balance | | |
2022
Borrowings | | |
2022
Repayments | | |
12/31/22
Balance | |
| Loan Payable - Ally | |
3/12/2020 | |
| 5.79 | % | |
| 41,869 | | |
| - | | |
| 41,869 | | |
| - | |
| Loan Payable - Mercedes | |
9/19/2022 | |
| 6.79 | % | |
| - | | |
| 72,393 | | |
| 684 | | |
| 71,709 | |
| Loan Payable - Dodge | |
6/18/2022 | |
| 0.00 | % | |
| - | | |
| 35,938 | | |
| 4,991 | | |
| 30,947 | |
| Line of Credit - Wells Fargo | |
Various | |
| 11.25 | % | |
| 24,696 | | |
| - | | |
| 24,696 | | |
| - | |
| Total | |
| |
| | | |
$ | 66,565 | | |
$ | 108,331 | | |
$ | 72,240 | | |
$ | 102,656 | |
Interest
expense of $3,052 was recorded in the year ended December 31, 2022. Accrued interest as of December 31, 2022, was $0.
On
September 19, 2022, the Company sold a 2020 Ford Expedition in conjunction with the acquisition of another vehicle. The Ford Expedition
had a cost of $66,947 with a net book value of $40,152 on the date of the sale. The trade in resulted in a credit of $45,000 applied
against the new vehicle purchase and a gain of $4,848 being recorded on the sale.
During
the year ended December 31, 2022, the Company acquired two vehicles through financing in the amount of $108,331. During the year ended
December 31, 2022, the Company repaid various loan payables and a line of credit for a total amount of $30,372 in repayments.
| Loans | |
Origination
Date | |
Interest Rate | | |
12/31/20
Balance | | |
2021
Borrowings | | |
2021
Repayments | | |
12/31/21
Balance | |
| Loan Payable - Ally | |
3/12/2020 | |
| 5.79 | % | |
| 52,669 | | |
| - | | |
| 10,800 | | |
| 41,869 | |
| Line of Credit - Wells
Fargo | |
Various | |
| 11.25 | % | |
| 11,050 | | |
| 31,045 | | |
| 17,399 | | |
| 24,696 | |
| Total | |
| |
| | | |
$ | 63,719 | | |
| 31,045 | | |
$ | 28,199 | | |
$ | 66,565 | |
Interest
expense of $6,025 was recorded in the year ended December 31, 2021. Accrued interest as of December 31, 2021, was $3,301.
During
the year ended December 31, 2021, the Company borrowed $31,045 under a line of credit. During the year ended December 31, 2021, the Company
repaid various loan payables and a line of credit for a total amount of $28,199 in repayments.
| Note
7: |
Loans
Payable (continued) |
The
following is a summary of the future minimum payments of loans payable:
| Year Ending | |
| |
| December 31, | |
| | |
| 2023 | |
$ | 21,774 | |
| 2024 | |
| 22,460 | |
| 2025 | |
| 19,201 | |
| 2026 | |
| 12,000 | |
| 2027 and Thereafter | |
| 27,221 | |
| | |
$ | 102,656 | |
| Note
8: |
Property
and Equipment |
Property
and equipment consisted of the following as of December 31:
| | |
2022 | | |
2021 | |
| Furniture & fixtures | |
$ | 2,101 | | |
$ | 2,100 | |
| Equipment | |
| 24,505 | | |
| 9,699 | |
| Vehicles | |
| 196,870 | | |
| 66,947 | |
| Computer equipment | |
| 5,778 | | |
| 5,778 | |
| Less accumulated depreciation | |
| (23,762 | ) | |
| (30,144 | ) |
| Total property and equipment, net | |
$ | 205,492 | | |
$ | 54,380 | |
Purchases
of property and equipment totaled $108,424 and $8,000 for the years ended December 31, 2022, and 2021, respectively, with $108,331 of
the 2022 additions being financed. Depreciation expense totaled $20,643 and $16,210 for the years ended December 31, 2022, and 2021,
respectively.
A
gain of $4,848 was recorded in the year ended December 31, 2022, for the September 19, 2022, sale of a 2020 Ford Expedition in conjunction
with the acquisition of another vehicle. The Ford Expedition had a cost of $66,947 with a net book value of $40,152 on the date of the
sale. The trade-in resulted in a credit of $45,000 applied against the new vehicle purchase and a gain of $4,848 being recorded on the
sale.
The
Company recorded $2,751 of interest income during the year ended December 31, 2022, for late fees charged to customers on invoices.
| Note
10: |
Subsequent
Events |
In
preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through
May 24, 2024, the date these financial statements were available to be issued. Other than those disclosed below, Management was
not aware of any subsequent events requiring additional accrual or disclosure in the accompanying financial statements.
On January
19, 2023, the Company entered into an Exchange Agreement (the “Exchange Agreement”), by and between the Company, MDwerks,
Inc. (“MDwerks”) and Keith A. Mort as the sole member of the Company. Pursuant to the terms of the Exchange Agreement, MDwerks
agreed to acquire from Mr. Mort, and Mr. Mort agreed to sell to MDwerks, 100% of the equity interests and membership interests of the
Company, in exchange for the issuance by MDwerks to Mr. Mort of 7,500,000 shares of MDwerk’s common stock, par value $0.001 per
share (the “Exchange”). The transaction closed on December 27, 2023. Immediately following the Exchange, RFS became a wholly
owned subsidiary of MDwerks.
Exhibit
99.3
RF
Specialties, LLC
Unaudited
Financial Statements
September
30, 2023
Table
of Contents
RF
Specialties, LLC
Balance
Sheets
(Unaudited)
| | |
September 30, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| ASSETS | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash | |
$ | 97,894 | | |
$ | 35,916 | |
| Accounts Receivable, Net | |
| 78,443 | | |
| 7,533 | |
| Total current assets | |
| 176,337 | | |
| 43,449 | |
| | |
| | | |
| | |
| Property & Equipment, Net | |
| 188,112 | | |
| 205,492 | |
| Other Assets | |
| 16,010 | | |
| - | |
| Right-of-use Asset | |
| 820,192 | | |
| - | |
| | |
| | | |
| | |
| Total assets | |
| 1,200,651 | | |
$ | 248,941 | |
| | |
| | | |
| | |
| LIABILITIES AND MEMBERS’ EQUITY(DEFICIT) | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts Payable | |
$ | - | | |
$ | 26,015 | |
| Loan Payable, current | |
| 22,342 | | |
| 21,774 | |
| Accrued Expenses | |
| 82,836 | | |
| - | |
| Right-of-use Liability, current portion | |
| 93,931 | | |
| - | |
| Total current liabilities | |
| 99,109 | | |
| 47,789 | |
| | |
| | | |
| | |
| Loan Payable, net of current portion | |
| 63,214 | | |
| 80,882 | |
| Right-of-use Liability, net of current portion | |
| 726,262 | | |
| - | |
| Total liabilities | |
| 988,584 | | |
| 128,671 | |
| | |
| | | |
| | |
| Members’ Equity (Deficit): | |
| | | |
| | |
| Members’ equity (deficit): | |
| (587,805 | ) | |
| (540,000 | ) |
| Retained Earnings | |
| 799,872 | | |
| 600,270 | |
| Total Members’ Equity (Deficit) | |
| 212,067 | | |
| 120,270 | |
| | |
| | | |
| | |
| Total liabilities and Members’ Equity (Deficit) | |
$ | 1,200,651 | | |
$ | 248,941 | |
See
the accompanying notes to these unaudited financial statements.
RF
Specialties, LLC
Statements
Of Operations
For
The Nine Months Ended September 30, 2023 and 2022
(Unaudited)
| | |
September 30, 2023 | | |
September 30, 2022 | |
| | |
| | |
| |
| Revenue | |
$ | 512,502 | | |
$ | 463,171 | |
| Cost of Revenues | |
| 149,325 | | |
| 172,244 | |
| | |
| 363,177 | | |
| 290,927 | |
| | |
| | | |
| | |
| OPERATING EXPENSES: | |
| | | |
| | |
| | |
| | | |
| | |
| General & Administrative Expense | |
| 182,456 | | |
| 110,575 | |
| Depreciation & Amortization Expense | |
| 35,246 | | |
| 18,813 | |
| Total operating expenses | |
| 217,702 | | |
| 129,388 | |
| | |
| | | |
| | |
| Net Income from operations | |
| 145,475 | | |
| 161,539 | |
| | |
| | | |
| | |
| OTHER (INCOME) EXPENSES: | |
| | | |
| | |
| Gain on Sale of Assets | |
| - | | |
| (4,848 | ) |
| Interest Expense - Net | |
| 5,873 | | |
| 2,684 | |
| Total other (income) expense | |
| 5,873 | | |
| (2,164 | ) |
| | |
| | | |
| | |
| NET INCOME | |
$ | 139,602 | | |
$ | 163,703 | |
See
the accompanying notes to these unaudited financial statements.
RF
Specialties, LLC
Statements
Of Members’ Equity (Deficit)
For
The Nine Months Ended September 30, 2023 and 2022
(Unaudited)
| | |
Members’
Equity | | |
Retained | | |
Total
Members’
Equity | |
| | |
Amount | | |
Earnings | | |
(Deficit) | |
| Balance, December 31, 2021 | |
$ | (518,595 | ) | |
$ | 510,369 | | |
$ | (8,226 | ) |
| | |
| | | |
| | | |
| | |
| Distribution to Member(s) | |
| (16,944 | ) | |
| - | | |
| (16,944 | ) |
| | |
| | | |
| | | |
| | |
| Net Income | |
| - | | |
| 163,703 | | |
| 163,703 | |
| | |
| | | |
| | | |
| | |
Balance,
September 30, 2022 | |
$ | (535,539 | ) | |
$ | 674,072 | | |
$ | 138,533 | |
| | |
| | | |
| | | |
| | |
| Balance, December 31, 2022 | |
$ | (540,000 | ) | |
$ | 660,270 | | |
$ | 120,270 | |
| | |
| | | |
| | | |
| | |
| Distribution to Member(s) | |
| (47,805 | ) | |
| - | | |
| (47,805 | ) |
| | |
| | | |
| | | |
| | |
| Net Income | |
| - | | |
| 139,602 | | |
| 139,602 | |
| | |
| | | |
| | | |
| | |
| Balance, September 30, 2023 | |
$ | (587,805 | ) | |
$ | 799,872 | | |
$ | 212,067 | |
See
the accompanying notes to these unaudited financial statements.
RF
Specialties, LLC
Statements
of Cash Flows
For
The Nine Months Ended September 30, 2023 and 2022
(Unaudited)
| | |
September 30, 2023 | | |
September 30, 2022 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
| Net Income | |
$ | 139,602 | | |
$ | 163,703 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Gain on Sale of Assets | |
| - | | |
| (4,848 | ) |
| Depreciation Expense | |
| 35,246 | | |
| 18,813 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts Receivable | |
| (70,910 | ) | |
| 5,049 | |
| Other Assets | |
| (16,010 | ) | |
| 1,250 | |
| Accounts Payable | |
| (26,015 | ) | |
| (23,083 | ) |
| Accrued Expenses | |
| 82,836 | | |
| 64,495 | |
| Net cash used in operating activities | |
| 144,749 | | |
| 225,379 | |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| Purchases of property and equipment | |
| (17,866 | ) | |
| (113,841 | ) |
| Net cash provided by (used in) investing activities | |
| (17,866 | ) | |
| (113,841 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
| Payments on loans payable | |
| (17,100 | ) | |
| (19,145 | ) |
| Distributions to Member (s) | |
| (47,805 | ) | |
| (16,944 | ) |
| Net cash provided by financing activities | |
| (64,905 | ) | |
| (36,089 | ) |
| | |
| | | |
| | |
| Net change in cash | |
| 61,978 | | |
| 75,449 | |
| | |
| | | |
| | |
| Cash at beginning of period | |
| 35,916 | | |
| 5,571 | |
| | |
| | | |
| | |
| Cash at end of period | |
$ | 97,894 | | |
$ | 81,020 | |
| | |
| | | |
| | |
| Supplemental disclosure of cash flow information: | |
| | | |
| | |
| Cash paid for interest | |
| - | | |
| - | |
| Cash paid for taxes | |
| - | | |
| - | |
| | |
| | | |
| | |
| Supplemental disclosure of cash flow from financing activities: | |
| | | |
| | |
| Vehicles purchased through loans payable | |
$ | - | | |
$ | 108,331 | |
| Initial recognition of ASC 842 | |
$ | 842,455 | | |
$ | - | |
| Loans payable settled with vehicle trade-in | |
$ | - | | |
$ | 45,000 | |
See
the accompanying notes to these unaudited financial statements.
RF
Specialties, LLC
Notes
to the Financial Statements
(Unaudited)
| Note
1: |
Organization,
Nature of Operations and Summary of Significant Accounting Policies |
Company
Operations
RF
Specialties, LLC is an innovative company pushing the boundaries of sustainable Radio Frequency applications. For over 12 years RF Specialties
has addressed companies’ most pressing challenges by implementing automated Radio Frequency Technology in a sustainable way reducing
energy costs and increasing speed to market when compared to traditional methods. By bringing Radio Frequency applications to market
RF Specialties has successfully elevated a wide range of industries including structural engineering, food & beverage, and manufacturing.
Basis
of Presentation
The
accompanying interim 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 audited financial statements and notes thereto
for the year ended December 31, 2022. Certain information and footnote disclosures normally included in the financial statements prepared
in accordance with U.S. GAAP have been omitted from this report.
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 financial statements include all adjustments
necessary to present fairly our interim financial statements as of September 30, 2023, and for the nine months ended September 30, 2023,
and 2022. These adjustments are of a normal recurring nature and consistent with the adjustments recorded to prepare the annual audited
financial statements as of December 31, 2022.
Going
Concern
The
Company’s interim financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The
Company has had minimal working capital since inception and expects to continue to have minimal working capital. The Company’s
management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments that may result from the outcome of this uncertainty.
Accounts
Receivable and the Allowances for Doubtful Accounts
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 doubtful accounts 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 $78,443 and $7,533 net of zero allowance for doubtful accounts as of September 30, 2023, and December 31, 2022.
Recently
Adopted Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” (“ASU 2016-13”).
The standard introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit
losses and will apply to trade receivables. The new guidance will be effective for the Company’s annual and interim periods beginning
after December 15, 2022. The Company is currently evaluating the impact of the adoption of the standard on the financial statements.
The
Company is 100% owned by the sole owner Keith Mort. During the year ended December 31, 2022, distributions to the owner were $21,405.
During the periods ended September 30, 2023, and 2022, distributions to the owner were $47,805 and $16,944, respectively.
Other
assets as of September 30, 2023 consist of a utility deposit and rent deposit for lease in 2023. Balances as of September 30, 2023, and
December 31, 2022, were $16,010 and $0, respectively.
| Note
4: |
Accounts
Payable and Accrued Expenses |
The
Company’s accounts payable were $0 and $26,015 as of September 30, 2023, and December 31, 2022, respectively and consists of trade
payables.
The
Company’s accrued expenses were $82,836 and $0 as of September 30, 2023, and December 31, 2022, respectively and consists of credit
cards, rent and payroll liabilities.
| Note
5 |
Contingencies
and Concentration of Risks |
Contingencies
The
Company is subject to various claims that arise in the normal course of business. In the opinion of management, the ultimate disposition
of such claims will not have a material adverse effect on the financial position or results of operations of the Company.
Concentration
of risks
Four
of the Company’s customers accounted for more than 10% of its revenues as of December 31, 2022, Customer A with 25%, Customer B
with 24%, Customer C with 22% and Customer D with 18%.
Two
of the Company’s customers accounted for more than 10% of its accounts receivable as of September 30, 2023, Customer A with 84%
and Customer B with 12%.
| Note 6: |
Member’s Equity (Deficit) |
The
Company is 100% owned by the sole owner Keith Mort. During the year ended December 31, 2022, distributions to the owner were $21,405.
During the periods ended September 30, 2023 and 2022, distributions to the owner were $47,805 and $16,944, respectively.
Loans
payable for the nine months ended September 30, 2023, are listed in the table below:
| Loans | |
Origination
Date | |
Interest
Rate | | |
12/31/22
Balance | | |
2023
Repayments | | |
9/30/2023
Balance | |
| Loan Payable - Mercedes | |
9/19/2022 | |
| 6.79 | % | |
| 71,709 | | |
| 8,115 | | |
| 63,594 | |
| Loan Payable - Dodge | |
6/18/2022 | |
| 0.00 | % | |
| 30,947 | | |
| 8,985 | | |
| 21,962 | |
| Line of Credit - Wells Fargo | |
Various | |
| 11.25 | % | |
| - | | |
| - | | |
| - | |
| Total | |
| |
| | | |
$ | 102,656 | | |
$ | 17,100 | | |
$ | 85,556 | |
Interest
expense of $5,875 and $1,891 was recorded in the periods ended September 30, 2023, and 2022, respectively. Accrued interest as of September
30, 2023, and December 31, 2022, was zero.
Loans
payable for the year ended December 31, 2022, are listed in the table below:
| Loans | |
Origination
Date | |
Interest
Rate | | |
12/31/21
Balance | | |
2022
Borrowings | | |
2022
Repayments | | |
12/31/22
Balance | |
| Loan Payable - Ally | |
3/12/2020 | |
| 5.79 | % | |
| 41,869 | | |
| - | | |
| 41,869 | | |
| - | |
| Loan Payable - Mercedes | |
9/19/2022 | |
| 6.79 | % | |
| - | | |
| 72,393 | | |
| 684 | | |
| 71,709 | |
| Loan Payable - Dodge | |
6/18/2022 | |
| 0.00 | % | |
| - | | |
| 35,938 | | |
| 4,991 | | |
| 30,947 | |
| Line of Credit - Wells Fargo | |
Various | |
| 11.25 | % | |
| 24,696 | | |
| - | | |
| 24,696 | | |
| - | |
| Total | |
| |
| | | |
$ | 66,565 | | |
$ | 108,331 | | |
$ | 72,240 | | |
$ | 102,656 | |
On
September 19, 2022, the Company sold a 2020 Ford Expedition in conjunction with the acquisition of another vehicle. The Ford Expedition
had a cost of $66,947 with a net book value of $40,152 on the date of the sale. The trade in resulted in a credit of $45,000 applied
against the new vehicle purchase and a gain of $4,848 being recorded on the sale.
During
the year ended December 31, 2022, the Company acquired two vehicles through financing in the amount of $108,331. During the year ended
December 31, 2022, the Company repaid various loan payables and a line of credit for a total amount of $30,372 in repayments.
The
following is a summary of the future minimum payments of loans payable:
| Year Ending | |
| |
| September 30, | |
| |
| 2024 | |
$ | 22,460 | |
| 2025 | |
| 19,201 | |
| 2026 | |
| 12,000 | |
| 2027 and Thereafter | |
| 31,895 | |
| | |
$ | 85,556 | |
| Note
8: |
Property and Equipment |
Property
and equipment consisted of the following as of September 30, 2023, and December 31, 2022:
| | |
2023 | | |
2022 | |
| Furniture & fixtures | |
$ | 3,299 | | |
$ | 2,101 | |
| Equipment | |
| 24,505 | | |
| 24,505 | |
| Building | |
| 10,919 | | |
| - | |
| Vehicles | |
| 196,870 | | |
| 196,870 | |
| Office & Computer equipment | |
| 11,527 | | |
| 5,778 | |
| Less accumulated depreciation | |
| (59,008 | ) | |
| (23,762 | ) |
| Total property and equipment, net | |
$ | 188,112 | | |
$ | 205,492 | |
Purchases
of property and equipment totaled $17,866 and $113,856 for the nine months ended September 30, 2023, and 2022, respectively, with $108,331
of the 2022 additions being financed.
A
gain of $4,848 was recorded in the period ended September 30, 2022, for the September 19, 2022, sale of a 2020 Ford Expedition in conjunction
with the acquisition of another vehicle. The Ford Expedition had a cost of $66,947 with a net book value of $40,152 on the date of the
sale. The trade-in resulted in a credit of $45,000 applied against the new vehicle purchase and a gain of $4,848 being recorded on the
sale.
The
Company maintains an operating lease for its office space and operating facility. The lease has a remaining term of 80 months. The Company
determines if an arrangement is a lease at inception. As the rate implicit in each lease is not readily determinable, the Company uses
its incremental borrowing rate based on information available at commencement to determine the present value of the lease payments. Right-of-use
assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases
with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet and are recognized
on a straight-line basis over the lease term. As of September 30, 2023, and December 31, 2022, the amount of right-of-use assets and
lease liabilities were $820,192 and $0, respectively. Aggregate lease expense for the nine months ended September 30, 2023, and 2022
were $22,263 and $0, respectively.
| | |
| | |
Remaining | |
| | |
Operating | | |
Term in | |
| | |
Lease | | |
Years | |
| 2024 | |
| 160,200 | | |
| | |
| 2025 | |
| 160,200 | | |
| | |
| 2026 | |
| 160,200 | | |
| | |
| 2027 | |
| 160,200 | | |
| | |
| 2028 | |
| 160,200 | | |
| | |
| 2029 | |
| 160,200 | | |
| | |
| 2030 | |
| 120,150 | | |
| | |
| Total lease payments | |
| 1,081,350 | | |
| | |
| Less: imputed interest | |
| (261,158 | ) | |
| | |
| Present value of lease liability | |
| 820,192 | | |
| 6.67 | |
The
Company recorded nominal interest income during the nine months ended September 30, 2022, for late fees charged to customers on invoices.
| Note
11: |
Subsequent
Events |
In
preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through
May 24, 2024, the date these financial statements were available to be issued. Other than those disclosed below, Management was
not aware of any subsequent events requiring additional accrual or disclosure in the accompanying financial statements.
On January 19, 2023, the Company entered
into an Exchange Agreement (the “Exchange Agreement”), by and between the Company, MDwerks, Inc. (“MDwerks”)
and Keith A. Mort as the sole member of the Company. Pursuant to the terms of the Exchange Agreement, MDwerks agreed to acquire from
Mr. Mort, and Mr. Mort agreed to sell to MDwerks, 100% of the equity interests and membership interests of the Company, in exchange for
the issuance by MDwerks to Mr. Mort of 7,500,000 shares of MDwerk’s common stock, par value $0.001 per share (the “Exchange”).
The transaction closed on December 27, 2023. Immediately following the Exchange, RFS became a wholly owned subsidiary of MDwerks.
Exhibit
99.4
UNAUDITED
PRO FORMA COMBINED FINANCIAL STATEMENTS
The
following unaudited pro forma combined financial data are presented to illustrate the effect of the following acquisitions (“the
Acquisitions”):
| 1.
|
On
February 13, 2023, MDwerks, Inc. (the “Company”) entered into a Merger Agreement (the “Merger Agreement”),
by and between the Company, MD-TT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”) and Two Trees
Beverage Co. (“Two Trees”). The Merger Agreement was amended on February 16, 2023, September 11, 2023, and December 7,
2023. The Company, Merger Sub and Two Trees may be referred to herein collectively as the “Parties” and separately as
a “Party.” The Merger closed on December 8, 2023. In consideration of the Merger Agreement, at the effective time of
the Merger, each of the holders of Two Trees stock, subject to certain exceptions set forth in the Merger Agreement, shall have the
right to convert all of the shares of Two Trees stock into a total of 60,000,000 shares of Company common stock, which shall be apportioned
between the Two Trees stockholders, pro rata, based on the number of shares of Two Trees stock held by each of the Two Trees stockholders
as of the closing of the Merger (the “Merger Consideration”), and |
| |
|
| 2.
|
On
January 19, 2023, MDwerks, Inc. (the “Company”) entered into an Exchange Agreement (the “Exchange Agreement”),
dated as of January 19, 2023, by and between the Company, RF Specialties LLC (“RFS”) and Keith A. Mort as the sole member
of RFS. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from Mr. Mort, and Mr. Mort agreed to sell
to the Company, 100% of the equity interests and membership interests of RFS, in exchange for the issuance by the Company to Mr.
Mort of 7,500,000 shares of the Company’s common stock (the “Exchange”). Immediately following the Exchange, RFS
will be a wholly owned subsidiary of the Company. The Exchange closed on December 27, 2023. |
Collectively,
the acquired companies of Two Trees and RFS will be referred to as the “Acquired Businesses.”
The
following unaudited pro forma combined balance sheet data as of September 30, 2023, is presented as if the Merger had occurred on September
30, 2023. The following unaudited pro forma combined statements of operations data for the nine months ended September 30, 2023, and
the year ended December 31, 2022, is presented as if the Merger occurred on January 1, 2022.
The
pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable under the
circumstances; however, the actual results could differ. The pro forma adjustments are directly attributable to the Merger and are expected
to have a continuing impact on the results of operations of the Company. Management believes that all adjustments necessary to present
fairly the unaudited pro forma combined financial statements have been made. The unaudited pro forma combined financial statements are
presented for informational purposes only and are not necessarily indicative of the results of operations that would have resulted had
the Merger been consummated on the dates indicated and should not be construed as being representative of the Company’s future
results of operations or financial position.
The
acquired assets, liabilities and results of operations presented herein were derived from the audited financial statements of the Acquired
Businesses for the year ended December 31, 2022 and the unaudited interim financial statements for the nine months ended September 30,
2023 (collectively, the “Financial Statements”).
The
unaudited pro forma combined financial statements included herein constitute forward-looking information and are subject to certain risks
and uncertainties that could cause actual results to differ materially from those anticipated. See the sections titled “Risk Factors”
and “Cautionary Statement Regarding Forward-Looking Information” in the Initial Registration Statement and the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, as filed with the Commission.
MDwerks,
Inc.
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
AS
OF SEPTEMBER 30, 2023
| | |
Historical Two
Trees Beverage
Company | | |
Historical
MDwerks, Inc. | | |
Two Trees
Acquisition
Pro Forma | | |
Historical
RF Specialties
LLC | | |
RF Specialties
Pro Forma | | |
Combined
Pro Forma | |
| | |
September 30,
2023 | | |
September 30,
2023 | | |
Adjustments
(See Notes) | | |
September 30,
2023 | | |
Adjustments
(See Notes) | | |
September 30,
2023 | |
| ASSETS | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Current Assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash | |
$ | 30,064 | | |
$ | 166,048 | | |
$ | - | | |
$ | 97,894 | | |
| - | | |
$ | 294,006 | |
| Accounts receivable, net | |
| 81,246 | | |
| - | | |
| - | | |
| 78,443 | | |
| - | | |
| 159,689 | |
| Loans receivable | |
| - | | |
| 75,000 | | |
| (75,000 | )(a) | |
| - | | |
| - | | |
| - | |
| Inventory | |
| 207,134 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 207,134 | |
| Prepaid expenses | |
| 11,170 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,170 | |
| Total current assets | |
| 329,614 | | |
| 241,048 | | |
| (75,000 | ) | |
| 176,337 | | |
| | | |
| 671,999 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-current Assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Right-of-use asset | |
| 337,155 | | |
| - | | |
| - | | |
| 820,192 | | |
| - | | |
| 1,157,347 | |
| Intangible Assets, net | |
| - | | |
| 18,864 | | |
| - | | |
| - | | |
| - | | |
| 18,864 | |
| Property & Equipment, net | |
| 180,379 | | |
| 61,856 | | |
| - | | |
| 188,112 | | |
| - | | |
| 430,347 | |
| Other Assets, net | |
| - | | |
| - | | |
| - | | |
| 16,010 | | |
| - | | |
| 16,010 | |
| Note receivable | |
| | | |
| 95,000 | | |
| | | |
| - | | |
| - | | |
| 95,000 | |
| Goodwill | |
| - | | |
| | | |
| 604,652 | (b) | |
| | | |
| 12,933 | (e) | |
| 617,585 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| TOTAL ASSETS | |
$ | 847,148 | | |
$ | 416,768 | | |
$ | 529,652 | | |
$ | 1,200,651 | | |
$ | 12,933 | | |
$ | 3,007,152 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Current liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Accounts payable & accrued expenses | |
$ | 328,060 | | |
$ | 6,640 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 334,700 | |
| Advances payable | |
| - | | |
| 203,504 | | |
| - | | |
| - | | |
| - | | |
| 203,504 | |
| Notes Payable, current | |
| 21,584 | | |
| - | | |
| - | | |
| 22,342 | | |
| - | | |
| 43,926 | |
| Loan Payable – Related Party | |
| 75,000 | | |
| - | | |
| (75,000 | )(a) | |
| - | | |
| - | | |
| - | |
| Deferred Revenue | |
| 44,759 | | |
| - | | |
| | | |
| - | | |
| - | | |
| 44,759 | |
| Accrued expenses | |
| 57,768 | | |
| - | | |
| | | |
| 82,836 | | |
| - | | |
| 140,604 | |
| Right-of-use liability, current portion | |
| 119,549 | | |
| - | | |
| | | |
| 93,931 | | |
| - | | |
| 213,480 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total current liabilities | |
| 646,720 | | |
| 210,144 | | |
| (75,000 | ) | |
| 199,109 | | |
| - | | |
| 980,973 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Long-term loans payable | |
| | | |
| | | |
| | | |
| 63,214 | | |
| - | | |
| 63,214 | |
| Right-of-use Liability, net of current portion | |
| 220,081 | | |
| | | |
| | | |
| 726,262 | | |
| - | | |
| 946,343 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total liabilities | |
| 866,801 | | |
| 210,144 | | |
| (75,000 | ) | |
| 988,584 | | |
| - | | |
| 1,990,529 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mezzanine | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Preferred stock, par value $0.0001; 2,045,940 shares authorized of which 2,045,940 shares are issued and outstanding as of September 30, 2023 | |
| 3,325,099 | | |
| | | |
| (3,325,099 | )(c) | |
| | | |
| | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Members’ Equity (Deficit) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Members’ equity (deficit) | |
| | | |
| | | |
| | | |
| (587,805 | ) | |
| 587,805 | (f)) | |
| | |
| Stockholders’ Equity (Deficit) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Preferred stock, par value .0001; 10,000,000 shares authorized, of which 8,957,500 are issued and outstanding as of September 30, 2023 | |
| | | |
| 8,958 | | |
| | | |
| - | | |
| | | |
| 8,958 | |
| Common stock, par value $0.0001; 9,999,605 shares authorized of which 9,999,605 shares are issued and outstanding as of September 30, 2023 | |
| 1,000 | | |
| | | |
| (1,000 | )(c) | |
| - | | |
| | | |
| - | |
| Common stock, par value .0001, 300,000,000 shares authorized, of which 122,260,208 shares issued and outstanding as of September 30, 2023 | |
| | | |
| 127,492 | | |
| 60,000 | (d) | |
| - | | |
| 7,500 | (g) | |
| 194,992 | |
| Additional paid-in capital | |
| 3,762,385 | | |
| 593,602 | | |
| (3,237,385 | )(c),(d) | |
| - | | |
| 217,500 | (g) | |
| 1,336,101 | |
| Accumulated deficit | |
| (7,108,137 | ) | |
| (523,428 | ) | |
| 7,108,137 | (c) | |
| 799,872 | | |
| (799,872 | )(f) | |
| (523,428 | ) |
| Total stockholders’ equity (deficit) | |
| (3,344,752 | ) | |
| 206,624 | | |
| 3,929,751 | | |
| 212,067 | | |
| 12,933 | | |
| 1,016,623 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES, MEZZANINE, MEMBERS’ AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
$ | 847,148 | | |
$ | 416,768 | | |
$ | 529,652 | | |
$ | 1,200,651 | | |
$ | 12,933 | | |
$ | 3,007,152 | |
See
the accompanying notes to these unaudited proforma consolidated financial statements.
MDwerks,
Inc.
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2023
| | |
Consolidated Historical Two Trees Beverage Company September 30, 2023 | | |
Historical MDwerks, Inc. September 30, 2023 | | |
Historical RF Specialties
LLC. September 30, 2023 | | |
Pro Forma Adjustments | | |
Combined Pro Forma September 30, 2023 | |
| | |
| | |
| | |
| | |
| | |
| |
| Total Income | |
$ | 1,251,408 | | |
$ | - | | |
$ | 512,502 | | |
$ | - | | |
$ | 1,763,910 | |
| Cost of Goods Sold | |
| 751,789 | | |
| - | | |
| 149,325 | | |
| - | | |
| 901,114 | |
| Gross profit | |
| 499,619 | | |
| - | | |
| 363,177 | | |
| - | | |
| 862,796 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | |
| General & Administrative Expense | |
| 1,002,082 | | |
| 234,659 | | |
| 182,456 | | |
| - | | |
| 1,419,197 | |
| Salary and Wages | |
| 431,653 | | |
| - | | |
| - | | |
| - | | |
| 431,653 | |
| Depreciation & Amortization Expense | |
| 44,607 | | |
| - | | |
| 35,246 | | |
| - | | |
| 79,853 | |
| Total operating expenses | |
| 1,478,342 | | |
| 234,659 | | |
| 217,702 | | |
| - | | |
| 1,930,703 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
| (978,723 | ) | |
| (234,659 | ) | |
| 145,475 | | |
| - | | |
| (1,067,907 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other Income | |
| 959 | | |
| - | | |
| - | | |
| - | | |
| 959 | |
| Interest Expense – Net | |
| (605 | ) | |
| (9,908 | ) | |
| (5,873 | ) | |
| - | | |
| (16,386 | ) |
| Gain on Sale of Asset | |
| - | | |
| 168,855 | | |
| - | | |
| - | | |
| 168,855 | |
| Total other income (expense) | |
| 354 | | |
| 158,947 | | |
| (5,873 | ) | |
| - | | |
| 153,428 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) before income taxes | |
| (978,369 | ) | |
| (75,712 | ) | |
| 139,602 | | |
| - | | |
| (914,479 | ) |
| Income tax benefit | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Net income (loss) | |
$ | (978,369 | ) | |
$ | (75,712 | ) | |
$ | 139,602 | | |
$ | - | | |
| (914,479 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| - | |
| Income (loss) per common share | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| | | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
| | | |
$ | (0.00 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares used in computing earnings/(loss) per common share | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| - | | |
| 124,077,691 | | |
| - | | |
| 67,500,000 | | |
| 191,577,691 | |
See
the accompanying notes to these unaudited proforma consolidated financial statements.
MDwerks,
Inc.
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2022
| | |
Historical Two Trees Beverage
Company December 31, 2022 | | |
Historical MDwerks, Inc. December 31, 2022 | | |
Historical RF Specialties
LLC. December 31, 2022 | | |
Pro Forma Adjustments | | |
Combined
Pro Forma December 31, 2022 | |
| | |
| | |
| | |
| | |
| | |
| |
| Total Income | |
$ | 2,602,058 | | |
$ | - | | |
$ | 552,792 | | |
$ | - | | |
$ | 3,154,850 | |
| Cost of Goods Sold | |
| 1,489,036 | | |
| - | | |
| 226,120 | | |
| - | | |
| 1,715,156 | |
| Gross profit | |
| 1,113,022 | | |
| - | | |
| 326,672 | | |
| - | | |
| 1,439,694 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Selling, general and administrative expenses | |
| 2,288,731 | | |
| 153,713 | | |
| 160,675 | | |
| - | | |
| 2,602,939 | |
| Salaries and Wages | |
| 1,148,364 | | |
| - | | |
| - | | |
| - | | |
| 1,148,364 | |
| Depreciation and Amortization | |
| 108,439 | | |
| - | | |
| 20,643 | | |
| - | | |
| 129,082 | |
| Total operating expenses | |
| 3,545,534 | | |
| 153,713 | | |
| 181,318 | | |
| - | | |
| 3,880,385 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
| (2,432,332 | ) | |
| (153,713 | ) | |
| 145,354 | | |
| - | | |
| (2,440,691 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other (income) expense: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Gain on Sale of Assets | |
| - | | |
| - | | |
| (4,848 | ) | |
| - | | |
| (4,848 | ) |
| Interest Income | |
| - | | |
| - | | |
| (2,751 | ) | |
| - | | |
| (2,751 | ) |
| Interest Expense | |
| 10,996 | | |
| - | | |
| 3,052 | | |
| - | | |
| 14,048 | |
| Total other (income) expense | |
| 10,996 | | |
| - | | |
| (4,547 | ) | |
| - | | |
| 6,449 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) before income taxes | |
| (2,443,508 | ) | |
| (153,713 | ) | |
| 149,901 | | |
| - | | |
| (2,440,691 | ) |
| Income tax benefit | |
| - | | |
| | | |
| | | |
| | | |
| - | |
| Net income (loss) | |
| $(2, 423,508) | | |
$ | (153,713 | ) | |
$ | 149,901 | | |
$ | - | | |
$ | (2,447,140 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) per common share | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| | | |
$ | (0.01 | ) | |
| | | |
| | | |
$ | (0.03 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares used in computing earnings/(loss) per common share | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| | | |
| 24,565,003 | | |
| | | |
| 67,500,000 | | |
| 95,065,003 | |
See
the accompanying notes to these unaudited proforma consolidated financial statements.
MDwerks,
Inc.
NOTES
TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
| 1. |
DESCRIPTION
OF TRANSACTIONS |
Two
Trees Merger Agreement
On
February 13, 2023, MDwerks, Inc. (the “Company”) entered into a Merger Agreement (the “Merger Agreement”), dated
as of February 13, 2023, by and between the Company, MD-TT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger
Sub”) and Two Trees Beverage Co. (“Two Trees”). The Company, Merger Sub and Two Trees may be referred to herein collectively
as the “Parties” and separately as a “Party.”
The
Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, the Parties wish to effect a business
combination through a merger of Merger Sub with and into Two Trees (the “Merger”), subject to the terms and conditions set
forth in the Merger Agreement, with Two Trees continuing as the surviving corporation (“Surviving Corporation”). As a result
of the Merger, the certificate of incorporation of Two Trees as in effect immediately prior to the closing date will be the certificate
of incorporation of the Surviving Corporation, and the bylaws of Two Trees as in effect immediately prior to the closing date will be
the bylaws of the Surviving Corporation.
Pursuant
to the terms of the Merger Agreement, at the closing of the Merger, the Company’s Board of Directors (the “Company Board”)
will be expanded and a number of persons as named by Two Trees will be named to the Company Board such that such persons comprise a majority
of the Company Board, and the Company Board as such newly constituted will name or replace any officers of the Company as it may determine.
In addition, at the closing of the Merger, the directors and officers of Two Trees as in place immediately prior to the closing will
remain in place as the directors and officers of the Surviving Corporation.
The
transaction closed on December 8, 2023 and will be accounted for as a business combination under ASC 805.
RF
Specialties Exchange Agreement
As
disclosed in the Current Report on Form 8-K filed with the United States Securities and Exchange Commission (the “SEC”) by
MDwerks, Inc. (the “Company”) on January 25, 2023, the Company entered into an Exchange Agreement dated as of January 19,
2023 (the “Exchange Agreement”) with Keith A. Mort, the sole member of RF Specialties LLC (“RFS”) as amended
on December 20, 2023 (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from
Mr. Mort, and Mr. Mort agreed to sell to the Company, 100% of the equity interests and membership interests of RFS, in exchange for the
issuance by the Company to Mr. Mort of 7,500,000 shares of the Company’s common stock (the “Exchange Shares”).
On
December 27, 2023, the Company completed the acquisition of RFS and the Exchange and issued to Mr. Mort 7,500,000 shares of the Company’s
common stock, $0.001 par value per share (the “Common Stock”). Immediately following the completion of the Exchange, RFS
became a wholly owned subsidiary of the Company and the number of shares of the Company’s Common Stock outstanding is 198,391,536.
The
Exchange Shares are subject to a 24-month lock-up; provided, however, that (i) one-third of the Exchange Shares will be released from
the lock-up restrictions on the 12-month anniversary of the closing of the Exchange, and (ii) one-third of the Exchange Shares will be
released from the lock-up restrictions on the 18-month anniversary of the closing of the Exchange. The remaining one-third of the Exchange
Shares will be released from the lock-up restrictions on the 24-month anniversary of the closing of the Exchange.
The
transaction closed on December 27, 2023, and will be accounted for as a business combination under ASC 805.
The
accompanying unaudited pro forma combined financial statements are based on the Company’s, and the Acquired Businesses’ historical
financial as adjusted to give effect to the pro forma adjustments necessary to reflect the Merger and the Company’s new equity
issuance to finance the acquisition. The unaudited pro forma combined statement of operations for the nine months ended September 30,
2023, and the year ended December 31, 2022, gives effect to the Acquired Businesses as if it had occurred on January 1, 2022, respectively
and the pro forma combined balance sheet as of September 30, 2023, gives effect to the Merger as if it had occurred on September 30,
2023.
| 3. |
PRELIMINARY
PURCHASE PRICE ALLOCATIONS |
The
preliminary purchase prices for the Acquired Businesses have been allocated to the assets acquired and liabilities assumed for purposes
of this pro forma financial information based on their estimated relative fair values. The purchase price allocations herein are preliminary.
The final purchase price allocations for the Acquired Businesses will be determined after completion of a thorough analysis to determine
the fair value of all assets acquired and liabilities assumed but in no event later than one year following completion of the Merger.
Accordingly, the final merger accounting adjustments could differ materially from the accounting adjustments included in the pro forma
financial statements presented herein. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as
compared to the information shown herein, could also change the portion of purchase price allocable to goodwill and could impact the
operating results of the Company following the merger due to differences in purchase price allocation, depreciation and amortization
related to some of these assets and liabilities.
Two
Trees Preliminary Purchase Price Allocation
The
merger with Two Trees is being accounted for as a business combination under Financial Accounting Standards Board Accounting Standards
Codification (ASC) 805. The following information summarizes the provisional purchase consideration and preliminary allocation of the
fair values assigned to the assets at the purchase date:
| Preliminary Purchase Price: | |
| |
| | |
| |
| 60,000,000 common share @ $0.01 per share | |
$ | 660,000 | |
| Total preliminary purchase consideration | |
$ | 660,000 | |
| | |
| | |
| Preliminary Purchase Price Allocation | |
| | |
| Cash | |
$ | 30,064 | |
| Accounts receivable | |
| 81,246 | |
| Inventory | |
| 207,134 | |
| Prepaid expenses | |
| 11,170 | |
| Other assets | |
| 337,155 | |
| Fixtures and equipment | |
| 180,379 | |
| Liabilities assumed | |
| (866,801 | ) |
| Goodwill | |
| 604,652 | |
| Net assets acquired | |
$ | 660,000 | |
RF
Specialties LLC Preliminary Purchase Price Allocation
| Preliminary Purchase Price: | |
| |
| | |
| |
| 7,500,000 common share @ $0.03 per share based on closing price of the Company’s common stock at December 27, 2023 | |
$ | 225,000 | |
| Total preliminary purchase consideration | |
$ | 225,000 | |
| | |
| | |
| Preliminary Purchase Price Allocation | |
| | |
| Cash | |
$ | 97,894 | |
| Accounts receivable | |
| 78,443 | |
| Other assets | |
| 16,010 | |
| Fixtures and equipment | |
| 188,112 | |
| Right of use assets | |
| 820,192 | |
| Liabilities assumed | |
| (988,584 | ) |
| Goodwill | |
| 12,933 | |
| Net assets acquired | |
$ | 225,000 | |
Proforma
adjustments
| |
(a)
|
To
eliminate working capital balance between Two Trees and the Company. |
| |
(b)
|
To
recognize the preliminary purchase price acquisition of Two Trees acquisition. |
| |
(c)
|
To
eliminate historical equity accounts of Two Trees. |
| |
(d)
|
To
recognize the estimated fair value of common shares issued in the Merger based on the closing price of the Company’s common
stock on December 8, 2023. |
| |
(e)
|
To
recognize preliminary price acquisition of the RF Specialties acquisition. |
| |
(f)
|
To
recognize the estimated fair value of common shares issued in the Exchange based on the closing price of the Company’s common
stock on December 27, 2023. |
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MDWerks (QB) (USOTC:MDWK)
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부터 11월(11) 2024 으로 12월(12) 2024
MDWerks (QB) (USOTC:MDWK)
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부터 12월(12) 2023 으로 12월(12) 2024
