10-Q: MDwerks, Inc. Reports Q3 2024 Results, Revenue Growth Following Acquisitions

MDwerks, Inc. reports its Q3 2024 results, showing revenue growth driven by recent acquisitions, but also highlights ongoing concerns about its ability to continue as a going concern.

Summary

• MDwerks, Inc. reported its financial results for the third quarter of 2024, which includes the operations of Two Trees Beverage Co. and RF Specialties, LLC, acquired in December 2023.
• The company generated revenue of $1,058,707 for the three months ended September 30, 2024, and $2,015,261 for the nine months ended September 30, 2024, compared to no revenue in the same periods of 2023.
• The cost of sales was $325,839 for the quarter and $1,059,088 for the nine-month period, primarily due to liquor sales and labor costs.
• Operating expenses increased significantly to $569,938 for the quarter and $1,799,948 for the nine-month period, driven by legal, accounting, and payroll expenses related to the acquisitions and public company reporting.
• The company reported a net income of $157,024 for the quarter, but a net loss of $909,480 for the nine-month period.
• As of September 30, 2024, the company had a cash balance of $62,478 and a working capital deficit of $762,357.
• The company's management has expressed substantial doubt about its ability to continue as a going concern without raising additional capital.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with positive revenue growth offset by significant losses, a going concern warning, and ineffective disclosure controls. The overall sentiment is negative due to the financial instability and uncertainty about the company's future.

Positives

• The company successfully integrated two acquisitions, Two Trees Beverage Co. and RF Specialties, LLC, which contributed to revenue growth.
• MDwerks, Inc. achieved a net income of $157,024 for the three months ended September 30, 2024.
• The company has secured a new 15-year license agreement with Shine Time, LLC, expanding its territories for Tim Smith Spirits.

Negatives

• The company incurred a net loss of $909,480 for the nine months ended September 30, 2024.
• Operating expenses increased significantly due to acquisition-related costs and public company reporting obligations.
• The company has a working capital deficit of $762,357 as of September 30, 2024.
• Management has expressed substantial doubt about the company's ability to continue as a going concern without raising additional capital.
• The company has not paid $112,500 due under the terms of the license agreement with Shine Time, LLC as of the filing date.

Risks

• The company's ability to continue as a going concern is dependent on raising additional capital.
• The company may be required to reduce the scope of its business development activities if it is unable to obtain additional financing.
• The company's financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the uncertainty of its ability to continue as a going concern.
• The company's disclosure controls and procedures were not effective as of September 30, 2024.
• The company has significant lease liabilities with future minimum payments totaling $1,335,853.

Future Outlook

The company anticipates that its current cash and cash generated from financing activities will be insufficient to satisfy its liquidity requirements for the next 12 months and requires additional funding to meet its ongoing obligations and to fund anticipated operating losses.

Management Comments

• Management has expressed substantial doubt about the company's ability to continue as a going concern.
• Management believes that it will be able to successfully execute a business combination, which includes third party financing and the raising of capital to meet the Company's future liquidity needs.

Industry Context

The company's acquisitions in the alcoholic beverage and radio frequency technology sectors reflect a broader trend of companies seeking growth through diversification and innovation. The company's challenges in achieving profitability and maintaining liquidity are common among smaller companies in these sectors.

Comparison to Industry Standards

• The company's revenue growth following acquisitions is a positive sign, but its operating expenses are high compared to industry benchmarks for similar-sized companies.
• The company's negative cash flow and working capital deficit are concerning and indicate a need for improved financial management and cost control.
• The company's reliance on external financing and related party transactions is not uncommon for early-stage companies, but it increases the risk of financial instability.
• The company's license agreement with Shine Time, LLC is a positive step towards expanding its market reach, but the unpaid amount due under the agreement is a concern.
• The company's goodwill and intangible assets are significant, but their value may be subject to impairment if the company's performance does not meet expectations.

Management Changes

Related Party Transactions

• The company entered into a short-term loan agreement with an existing shareholder for $25,000 in cash proceeds.
• The company received a total of $120,500 in proceeds from shareholders.
• The company sold two vehicles to Keith Mort, the former owner of RFS, and recognized a loss on disposal of $57,900.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern warning.
• Employees may be impacted by potential cost-cutting measures or business development reductions.
• Customers may be affected by potential disruptions in the company's operations.
• Suppliers and creditors face increased risk due to the company's financial challenges.

Next Steps

• The company needs to secure additional financing to continue operations.
• The company needs to improve its financial management and cost control.
• The company needs to address the deficiencies in its disclosure controls and procedures.

Key Dates

Keywords

MDwerks, Two Trees Beverage, RF Specialties, acquisitions, revenue, net loss, operating expenses, liquidity, going concern, capital raise, financial results, license agreement, radio frequency, alcoholic beverages