MDWerks, Inc.

Previous wording

Among our accomplishments to start the year, we successfully launched our “Whiskey-as-a-Service” (“WaaS”) business model, signing new contracts with two companies for the construction and deployment of our proprietary Spirits Rapid Aging Systems (“SRAS”) at their facilities. We also began aging tanker loads of distillate for one of these customers to fill immediate demand for aged spirits.

Current wording

Among our accomplishments to start the year, we successfully launched our “Whiskey-as-a-Service” (“WaaS”) business model, signing new contracts with two companies for the construction and deployment of our proprietary Spirits Rapid Aging Systems (“SRAS”) at their facilities. We also began aging tanker loads of distillate for one of these customers to fill immediate demand for aged spirits. We are currently installing a new higher capacity SRAS at our Two Trees facility in order to increase existing production by the end of the year.

Previous wording

The first unit is scheduled to be installed at the facilities of one of the largest distilleries in the U.S. in the fourth quarter of 2025 and we expect to deliver a second SRAS unit to this customer in the first quarter of 2026. Additionally, we anticipate deploying the third SRAS unit at the facilities of a U.S. broker of bulk spirits in the first half of 2026. 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. We are currently building units, and an additional unit to be deployed on our premises during the third quarter of 2025 to quintuple existing production capacity at our Two Trees facility. We are also currently providing aging services for tanker loads of single malt at our facility while the customer’s SRAS units are under construction.

Current wording

The first two units are scheduled to be installed at the facilities of one of the largest distilleries in the U.S. in the first quarter of 2026. Additionally, we anticipate deploying the third SRAS unit at the facilities of a U.S. broker of bulk spirits in the first half of 2026. 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. We are currently building units, and an additional unit to be deployed on our premises during the third quarter of 2025 to quintuple existing production capacity at our Two Trees facility. We are also currently providing aging services for tanker loads of single malt at our facility while the customer’s SRAS units are under construction.

Previous wording

These contracts not only validate the economic and sustainability benefits of our SRAS units but also are expected to provide us with attractive recurring revenue streams through licensing agreements and ancillary fees for ongoing machine servicing and maintenance. Our upfront investment in these units will begin to pay off as they go live later this year, providing us with new recurring cash flow streams.

Current wording

These contracts not only validate the economic and sustainability benefits of our SRAS units but also are expected to provide us with attractive recurring revenue streams through licensing agreements and ancillary fees for ongoing machine servicing and maintenance. Our upfront investment in these units will begin to pay off as they go live, providing us with new recurring cash flow streams.

Previous wording

Subsequtn to June 30, 2025, we completed testing and deployed our first Molecular Sawdust Drying System, which utilizes a proprietary molecular energy wave technology to adjust the moisture content of sawdust for production of wood pellets, an alternative green energy source.

Current wording

We completed testing and deployed our first Molecular Sawdust Drying System (“MSDS”), which utilizes a proprietary molecular energy wave technology to adjust the moisture content of sawdust for production of wood pellets, an alternative green energy source.

Previous wording

Cost of Sales. Cost of sales for the three months ended June 30, 2025 was $701,906 compared to $343,408 for three months ended June 30, 2024. Cost of sales for the Company’s Two Trees Distilling operations was $220,638 in 2025 compared to $169,629 in 2024, with the increase driven by volume increases described above, and increased input costs. Our gross profit improved due to the our efforts to streamline costs and increase efficiency. The Company’s RF Specialties business incurred costs of sales of $481,268 in 2025 compared to $173,779 in 2024. The increase is due to the costs associated with the molecular sawdust drying module contract ongoing since November 2024 as the project nears completion.

Current wording

Cost of Sales. Cost of sales for the three months ended September 30, 2025 was $661,871 compared to $325,839 for three months ended September 30, 2024. Cost of sales for the Company’s Two Trees Distilling operations was $375,405 in 2025 compared to $179,717 in 2024, with the increase driven by increased input costs, an inventory impairment of $61,897 and new costs associated with our WaaS revenue. The Company’s RF Specialties business incurred costs of sales of $286,466 in 2025 compared to $146,122 in 2024 due to the costs associated with the MSDS contract ongoing since November 2024. Gross profit for the three months ended September 30, 2024 benefitted significantly from one-time service revenue of $520,000 in the RF Specialties business.

Previous wording

Operating Expenses. We reported operating expenses of $1,043,215 consisting primarily of legal, accounting, payroll, and general business related expenses for the three months ended June 30, 2025 compared to $630,044 for the three months ended June 30, 2024. The $413,171 increase in operating expenses was primarily attributable to increased payroll costs from new officer and director contracts, increased stock-based compensation of $39,774 from those new contracts, and increased travel costs as part of our efforts to increase brand awareness and drive revenue volume increases.. Operating expenses included depreciation and amortization expense of $78,588 and $75,164 for the three months ended June 30, 2025 and 2024, respectively.

Current wording

Operating Expenses. We reported total operating expenses of $1,110,518 consisting primarily of legal, accounting, payroll, and general business related expenses for the three months ended September 30, 2025 compared to $569,938 for the three months ended September 30, 2024. The $540,580 increase in operating expenses was primarily attributable to increased payroll costs from new officer and director contracts, increased stock-based compensation of $490,808 from those new contracts. Operating expenses included depreciation and amortization expense of $84,817 and $58,969 for the three months ended September 30, 2025 and 2024, respectively.

Previous wording

Total Other Expenses. Total other expense was $12,380 for the three months ended June 30, 2025 compared to $62,557 for the three months ended June 30, 2024. Other expense for the three months ended June 30, 2025 primarily consisted of interest expense of $12,380. Other expense for the three months ended June 30, 2024 primarily consisted of $57,700 of losses on disposal of assets, interest expense of $6,757 and interest income of $1,900.

Current wording

Total Other Expenses. Total other expense was $26,189 for the three months ended September 30, 2025 compared to $5,906 for the three months ended September 30, 2024. Other expense for the three months ended September 30, 2025 primarily consisted of interest expense of $26,189. Other expense for the three months ended September 30, 2024 primarily consisted of interest expense of $7,806 and interest income of $1,900.

Previous wording

Revenue. Revenue for the six months ended June 30, 2025 was $934,539 compared to $956,554 for the six months ended June 30, 2024. The $186,489 decrease in revenue for Two Trees Distilling was primarily attributable to decreased liquor sale volumes in the current period primarily from lower bulk alcohol sales, partially offset by new revenues from the aging services that began in May 2025. The increase in revenue in our RF Specialties division is from progress made on the molecular sawdust drying system contract, which neared completion during the current period.

Current wording

Revenue. Revenue for the nine months ended September 30, 2025 was $1,714,680 compared to $2,015,261 for the nine months ended September 30, 2024. The $108,771 decrease in revenue for Two Trees Distilling was primarily attributable to decreased liquor sale volumes in the current period primarily from lower bulk alcohol sales, partially offset by new revenues from the WaaS that began in May 2025, which contributed $188,100 of revenue in the current period. The decrease in revenue in our RF Specialties division is primarily attributable to significant non-recurring service revenue from RF Specialties during the nine months ended September 30, 2024 totaling $550,000. This was partially offset by increased product revenue as a result of the MSDS in the current period.

Previous wording

Cost of Sales. Cost of sales for the six months ended June 30, 2025 was $918,848 compared to $733,249 for six months ended June 30, 2024. Cost of sales for the Company’s Two Trees Distilling operations was $389,353 in 2025 compared to $457,308 in 2024, with the decrease driven by volume decreases described above. The Company’s RF Specialties business incurred costs of sales of $693,951 in 2025 compared to $275,941 in 2024. The increase is due to the costs associated with the molecular sawdust drying module contract ongoing since November 2024.

Current wording

Cost of Sales. Cost of sales for the nine months ended September 30, 2025 was $1,745,175 compared to $1,059,088 for nine months ended September 30, 2024. Cost of sales for the Company’s Two Trees Distilling operations was $764,758 in 2025 compared to $637,025 in 2024, with the increase driven by increased input costs, an inventory impairment of $61,897 and additional costs associated with the WaaS revenue. The Company’s RF Specialties business incurred costs of sales of $980,417 in 2025 compared to $422,063 in 2024. The increase is due to the costs associated with the MSDS contract ongoing since November 2024.

Previous wording

Operating Expenses. We reported operating expenses of $1,793,536 consisting primarily of legal, accounting, payroll, and general business related expenses for the six months ended June 30, 2025 compared to $1,230,010 for the six months ended June 30, 2024. The $563,526 increase in operating expenses was primarily attributable to increased payroll costs from new officer and director contracts, increased stock-based compensation of $106,095 from those new contracts and higher legal and other professional fees, partially offset by decreases in insurance costs. Operating expenses included depreciation and amortization expense of $151,195 and $153,094 for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Operating Expenses. We reported operating expenses of $2,904,054 consisting primarily of legal, accounting, payroll, and general business related expenses for the nine months ended September 30, 2025 compared to $1,799,948 for the nine months ended September 30, 2024. The $1,104,106 increase in operating expenses was primarily attributable to a $519,882 increase in payroll costs from new officer and director contracts and increased stock-based compensation of $581,904 from those new contracts and additional awards to employees, and higher legal and other professional fees, partially offset by decreases in insurance costs. Operating expenses included depreciation and amortization expense of $236,012 and $212,063 for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Total Other Expenses. Total other expense was $23,945 for the six months ended June 30, 2025 compared to $59,799 for the six months ended June 30, 2024. Other expense for the six months ended June 30, 2025 primarily consisted of interest expense of $24,145, and interest income of $200. Other expense for the six months ended June 30, 2024 primarily consisted of $54,000 of losses on disposal of assets, interest expense of $9,599 and interest income of $3,800.

Current wording

Total Other Expenses. Total other expense was $50,134 for the nine months ended September 30, 2025 compared to $65,705 for the nine months ended September 30, 2024. Other expense for the nine months ended September 30, 2025 primarily consisted of interest expense of $50,334, and interest income of $200. Other expense for the nine months ended September 30, 2024 primarily consisted of $54,000 of losses on disposal of assets, interest expense of $17,405 and interest income of $5,700.

Previous wording

As of June 30, 2025, and December 31, 2024, we had $13,330 and $11,159 of cash, respectively. We anticipate that our current cash and cash generated from financing activities will be insufficient to satisfy our liquidity requirements for the next 12 months. As of June 30, 2025, we have incurred operating losses since inception of $4,326,751. At June 30, 2025, we had working capital deficit of $1,104,922.

Current wording

As of September 30, 2025, and December 31, 2024, we had $181,278 and $11,159 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 September 30, 2025, we have incurred losses since inception of $5,345,188. At September 30, 2025, we had working capital deficit of $922,197.

Previous wording

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 six months ended June 30, 2025, we raised $1,649,000 in cash proceeds from the sale of common stock. We continue to need significant cash to execute our business plan, including funds needed to complete construction of the contracted SRAS units and expand our on-site production capacity. 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.

Current wording

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 nine months ended September 30, 2025, we raised $2,339,400 in cash proceeds from the sale of common stock. We continue to need significant cash to execute our business plan, including funds needed to complete construction of the contracted SRAS units and expand our on-site production capacity. 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.

Previous wording

Cash Used in Operating Activities. Net cash used in operating activities for the six months ended June 30, 2025 and 2024 was $831,152 and $458,335. 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.

Current wording

Cash Used in Operating Activities. Net cash used in operating activities for the nine months ended September 30, 2025 and 2024 was $1,194,182 and $662,693. 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.

Previous wording

Cash Used from Investing Activities. Cash used in investing activities for the six months ended June 30, 2025 and 2024 was $707,454 and $8,820, respectively, related to purchases of equipment in developing our SRAS units for its customer, and a new system to expand production capacity.

Current wording

Cash Used from Investing Activities. Cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $778,082 and $6,990, respectively, related to purchases of equipment in developing our SRAS units for its customer, and a new system to expand production capacity.

Previous wording

Cash Provided by Financing Activities. Net cash provided by financing activities for the six months ended June 30, 2025 and 2024 was $1,540,777 and $399,694, respectively. The cash provided by financing activities for the six months ended June 30, 2025 was attributable to proceeds from the sale of common stock of $1,649,000, including subscription payable of $50,000, proceeds from related party notes payable of $150,000, partially offset by repayments of notes payable of $258,223. The cash provided by financing activities for the six months ended June 30, 2024 was attributable to proceeds from subscriptions agreements of $390,000, proceeds from notes payable of $125,000, partially offset by repayments of notes payable of $115,306.

Current wording

Cash Provided by Financing Activities. Net cash provided by financing activities for the nine months ended September 30, 2025 and 2024 was $2,142,383 and $617,050, respectively. The cash provided by financing activities for the nine months ended September 30, 2025 was attributable to proceeds from the sale of common stock of $2,339,400, including subscription payable of $60,000, proceeds from related party notes payable of $150,000, partially offset by repayments of notes payable of $241,517. The cash provided by financing activities for the nine months ended September 30, 2024 was attributable to proceeds from subscriptions agreements of $640,000, proceeds from notes payable of $120,500, partially offset by repayments of notes payable of $143,450.

Previous wording

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.

Current wording

We recognize sales when liquor products are 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. We also perform aging services for certain customers, with revenue recognized upon completion of the aged product. 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.