10-K: MDwerks Reports Increased Losses Amid Strategic Growth

MDwerks, Inc. reported a significant increase in net losses for 2025 despite strategic advancements in its energy wave and spirits rapid aging technologies, raising going concern doubts.

Summary

• MDwerks, Inc. is a technology company specializing in energy wave solutions, including radio wave and microwave technologies, with applications in industrial and commercial sectors.
• The company operates two main segments: RF Specialties (RFS) focusing on sustainable radio frequency applications like the Spirits Rapid Aging System (SRAS) and Molecular Sawdust Drying System (MSDS), and Two Trees Distilling, which utilizes SRAS for rapid aging of alcoholic beverages.
• Total revenue for the year ended December 31, 2025, was $2,214,542, a decrease from $2,364,093 in 2024.
• Two Trees Distilling revenue increased slightly to $1,350,114 in 2025 from $1,324,823 in 2024, driven by $222,300 from the new Whiskey-as-a-Service (WaaS) model, partially offset by declines in brand and bulk sales.
• RF Specialties revenue decreased to $864,428 in 2025 from $1,039,270 in 2024, primarily due to a non-recurring service revenue of $520,000 in the prior year, partially offset by milestones from the MSDS deployment.
• The company incurred a gross loss of $(350,315) in 2025, a significant decline from a gross profit of $874,029 in 2024, largely due to increased cost of sales and a $140,067 inventory impairment.
• Net loss for 2025 was $(3,797,990), substantially higher than the $(1,621,117) net loss in 2024, contributing to an accumulated deficit of $6,158,495.
• Cash balance at December 31, 2025, was $211,948, up from $11,159 in 2024, primarily due to $2,939,401 in proceeds from common stock sales.
• The company's independent auditors expressed substantial doubt about its ability to continue as a going concern without additional capital.
• MDwerks launched its Whiskey-as-a-Service (WaaS) business model and secured contracts for SRAS deployment with a major U.S. distillery and a leading U.S. wholesaler/broker, with installations anticipated in Q2 and Q3 2026.
• An agreement was signed with an international spirits investment fund for limited exclusivity of SRAS deployment in three countries outside the U.S., requiring at least one unit annually per country.
• The first Molecular Sawdust Drying System (MSDS) is currently being deployed at a lumber mill, with plans for expansion across the southeast U.S. in 2026.
• David Stephens was appointed Chief Financial Officer effective March 1, 2025.
• The company's disclosure controls and procedures were deemed not effective as of December 31, 2025, due to material weaknesses including lack of a functioning audit committee, inadequate segregation of duties, and insufficient written policies.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with low sentiment due to significant financial deterioration, including increased net losses and a shift to gross loss, coupled with a going concern warning and ineffective internal controls, despite some positive strategic developments.

Positives

• Successfully launched the Whiskey-as-a-Service (WaaS) business model, offering flexible technology licenses and securing long-term, predictable revenue streams.
• Signed new contracts for the construction and deployment of proprietary Spirits Rapid Aging System (SRAS) units with two significant customers, including one of the largest distilleries in the U.S. and a leading U.S. wholesaler/broker.
• Secured an agreement with an international spirits investment fund for limited exclusivity of SRAS deployment in three countries outside the United States, requiring annual unit deployments.
• Completed installation of a higher capacity SRAS at the Two Trees facility in early 2026 to increase production across aging services and brand production.
• Two Trees brands have received multiple awards, including 'Best of Ashville' in 2023, 2024, and 2025, a Gold Award in the 2025 New York International Spirits Competition, and Silver and Innovation awards at the 2025 SIP Awards.
• Successfully completed testing and is deploying the first industrial application of the Molecular Sawdust Drying System (MSDS) at a lumber mill, with plans for expansion.
• Cash balance increased significantly to $211,948 at December 31, 2025, from $11,159 in 2024, primarily due to proceeds from common stock sales.
• Appointed David Stephens as Chief Financial Officer, effective March 1, 2025, bringing extensive financial reporting and auditing experience.
• Adopted the MDwerks, Inc. 2025 Equity Incentive Plan, reserving 10,000,000 shares for future incentive awards.

Negatives

• Total revenue decreased to $2,214,542 in 2025 from $2,364,093 in 2024, a decline of $149,551.
• Experienced a significant shift from a gross profit of $874,029 in 2024 to a gross loss of $(350,315) in 2025.
• Net loss increased substantially to $(3,797,990) in 2025 from $(1,621,117) in 2024.
• Accumulated deficit grew to $6,158,495 as of December 31, 2025, from $2,360,505 in 2024.
• Incurred a working capital deficit of $1,255,017 as of December 31, 2025.
• Cash used in operating activities increased to $(1,574,124) in 2025 from $(781,970) in 2024.
• The independent registered public accounting firm expressed substantial doubt about the company's ability to continue as a going concern without additional capital.
• Disclosure controls and procedures were deemed not effective as of December 31, 2025, due to material weaknesses, including a lack of a functioning audit committee, inadequate segregation of duties, and insufficient written policies.
• Incurred an inventory impairment of $140,067 in 2025 related to barrel inventory with a market price below carrying value.
• RFS revenue decreased by $174,842 in 2025, primarily due to the absence of significant non-recurring service revenue ($520,000) present in 2024.
• Operating expenses increased by over $1 million in 2025, largely due to increased salaries and wages from full-year officer contracts and higher stock-based compensation.

Risks

• Inability to generate and grow revenue or execute the business plan in a timely manner due to factors outside of control.
• Recurring net losses since inception and expectation of continued losses, potentially leading to inability to continue operations.
• Substantial doubt about the ability to continue as a going concern without obtaining additional equity or debt financing and generating significant revenue.
• Reliance on qualified servicers and availability of parts for specialized microwave technology machinery, risking unfavorable business results or contract losses if unavailable.
• Changes in consumer preferences, decline in social acceptability of beverage alcohol products, or governmental adoption of disadvantageous policies could negatively affect business results.
• Increased competition in the highly competitive beverage alcohol market from new entrants and smaller distilleries, potentially impacting market share, pricing, and requiring increased marketing.
• Production facility disruption at the single location where liquor products are distilled could adversely affect business and ability to meet consumer demand.
• Higher costs or unavailability of water, raw materials, product ingredients, or labor could adversely affect financial results.
• Adverse effects of weather, acute or chronic climate change impacts, fires, diseases, and other agricultural uncertainties on raw materials, maturation, and supply chain.
• Product recalls or other product liability claims could materially and adversely affect sales, reputation, and financial results.
• Negative publicity related to the industry, company, products, or management could harm corporate reputation, stock price, and talent attraction/retention.
• Requirements of remaining a public company may strain resources, making business management difficult and negatively affecting financial condition.
• Intense competition from companies with substantially greater financial, technological, managerial, and R&D resources and experience.
• Difficulties in managing organizational growth, imposing significant added responsibilities on management.
• Failure to develop and maintain brand and reputation for service and product offerings could materially harm business and prospects.
• National and local government regulations or investigations could limit business activities or increase costs, including those related to advertising, sales, climate change, and water use.
• Tax increases and changes in tax rules (e.g., U.S. corporate income tax rate, minimum tax rate on foreign subsidiaries) could adversely affect financial results.
• Increased social and political attention on the beverage alcohol industry, potentially leading to more regulations, higher taxes, or reduced social acceptability.
• Significant additional labeling or warning requirements or limitations on product availability could inhibit sales.
• Counterfeiting or inadequate protection of intellectual property rights could adversely affect business prospects.
• Litigation and legal disputes, including private or governmental actions, employment-related, cybersecurity-related, environmental claims, or securities-related class actions, could expose the business to financial and reputational risk.
• Unfavorable economic conditions (e.g., recessions, inflation, unemployment, credit market disruptions) could reduce consumer demand for products and increase costs.
• High dependence on key personnel, particularly CEO Steve Laker, with the loss of services potentially impeding business objectives.
• Uncertainty of access to additional capital, negative cash flow from operations, and dependence on equity financing and shareholder loans.
• Expectation of incurring losses in the future while integrating acquired businesses and potential failure to generate profitable operations.
• Operating results may prove unpredictable due to various factors, including ability to generate working capital from equity sales, commercial acceptance of products, and operating costs.
• Common stock is or may become subject to penny stock rules, limiting the trading market and potentially reducing investment value.
• Management expects to issue additional shares, which could lead to substantial dilution of stockholders.
• No anticipation of paying dividends on common stock in the foreseeable future, meaning stockholders will not receive a return unless they sell shares.
• Early-stage company lacking an operating history, making it difficult for investors to evaluate prospects and subject to inherent business development risks.
• Currently no formalized cybersecurity measures, dedicated team, or specific protocols, leaving the company vulnerable to cyberattacks and data breaches.

Future Outlook

The company anticipates significant growth in revenue and gross profit in its Two Trees Distilling business from new Whiskey-as-a-Service (WaaS) revenue streams, with SRAS unit installations expected to begin in Q2 2026. The RF Specialties business expects to complete full installation of its Molecular Sawdust Drying System (MSDS) in the first half of 2026 and expand deployments across the southeast United States throughout 2026. Management believes additional acquisitions of technologies or assets will be needed to generate sufficient cash flow to cover overhead costs and plans to fund future operations through working capital, equity subscriptions, and shareholder loans. The company expects to incur operating losses in future periods while integrating acquired businesses and may incur additional costs related to integration.

Management Comments

• "Our patented energy wave technology introduces a revolutionary approach to industrial processes by specific molecular targeting, which can be applied at precise and multiple locations in a system in ways that conventional single point heat sources cannot, resulting in improved efficiency, higher quality, and reduced processing time."
• "Our proprietary and patented molecular targeting system swiftly and sustainably transforms distillate to maturity, delivering traditional flavors in a fraction of the time with greatly reduced environmental impact and cost."
• "We have signed new contracts with two companies for the construction and deployment of our proprietary SRAS and see excellent potential for multiple additional SRAS deployments by both customers within the next twelve months as well as by other third parties."
• "These contracts validate the economic and sustainability benefits of our SRAS units and provide us with attractive recurring revenue streams through licensing agreements and ancillary fees for ongoing machine servicing and maintenance."
• "We are proud of this initiative [Uplifting Spirits product line] and pleased to donate ten percent of Land of the Sky sales to relief efforts, including aiding Western North Carolina, where many of our teammates call home."
• "We expect our RFS business to complete full installation of the MSDS in the first half of 2026, and to expand the number of systems installed at lumber mills across the southeast United States throughout 2026."
• "We believe that if we do not raise additional capital over the next 12 months following the filing of this annual report, we may be required to suspend or cease the implementation of our business plans."
• "Management has expressed substantial doubt about our ability to continue as a going concern."
• "We expect to incur operating losses in future periods while integrating these businesses and may incur additional costs related to the integration."
• "We are committed to improving our financial organization. The Company intends to establish an audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures."

Industry Context

StockSavvy.ai notes that MDwerks' focus on innovative energy wave solutions, particularly in rapid aging of spirits and molecular sawdust drying, positions it at the intersection of the craft spirits and industrial sustainability sectors. The 'Whiskey-as-a-Service' model aligns with broader industry trends towards subscription-based services and technology licensing, offering a lower barrier to entry for customers and predictable revenue for the company. The expansion into molecular sawdust drying also taps into the growing demand for green energy sources and optimized industrial processes. However, the beverage alcohol industry faces increasing regulatory scrutiny and shifting consumer preferences, which could impact the Two Trees segment. The company's strategy to secure international exclusivity for SRAS units indicates an ambition to capture global market share in rapid aging technology, potentially disrupting traditional aging methods.

Comparison to Industry Standards

• MDwerks' Spirits Rapid Aging System (SRAS) claims to deliver traditional flavors in a fraction of the time with greatly reduced environmental impact and cost compared to traditional barrel aging methods. This directly challenges established players in the premium craft spirits industry who rely on lengthy and capital-intensive aging processes.
• The company's Two Trees brands have received multiple awards (e.g., Gold Award in 2025 New York International Spirits Competition, SIP Awards), indicating product quality comparable to or exceeding some traditional aged spirits, despite the accelerated aging process.
• The deployment of the Molecular Sawdust Drying System (MSDS) at a large lumber mill suggests a competitive advantage in optimizing moisture content for wood pellet production, a key aspect of the green energy and wood forest products industries. This technology could offer superior efficiency and cost savings compared to conventional drying methods used by competitors in these sectors.
• The WaaS model, offering technology licenses with minimal upfront investment, contrasts with the high capital expenditure typically required for traditional distillery expansion or entry into the aged spirits market, potentially attracting a wider range of customers than traditional equipment sales models.

Management Changes

Corporate Governance

Legal Proceedings

• As of the filing date, there are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the company is a party.

Related Party Transactions

• The company received $150,000 in loan proceeds from shareholders in 2025 and $155,500 in 2024, repaying $105,500 and $32,500 respectively. The balance owed on these advances from shareholders was $167,500 as of December 31, 2025.
• Included in the advances from shareholders, $17,500 in 2025 and $23,000 in 2024 was owed to companies in which the company's Executive Chairman is a principal.
• In May 2024, the company sold two vehicles to Keith Mort, the former owner of RFS, who assumed the associated loans. This resulted in a loss on disposal of $57,900 for the company.
• As of December 31, 2025, the company owed $6,355 (down from $36,738 in 2024) to an entity controlled by the company's Chairman for expense reimbursements.
• As of December 31, 2025, the company owed $0 (down from $10,074 in 2024) to Mr. Mort for expense reimbursements.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk due to management's expectation to issue additional shares and the company's reliance on equity financing. The substantial increase in net losses and the going concern warning indicate a high investment risk. The common stock being subject to penny stock rules further limits liquidity and market value. No dividends are anticipated in the foreseeable future.
• **Employees**: The company considers relations with employees to be good and provides competitive pay and benefits. However, the company's financial instability and reliance on additional capital could pose risks to job security and future compensation if funding is not secured.
• **Customers**: New Whiskey-as-a-Service (WaaS) contracts and the deployment of SRAS units offer customers innovative, efficient, and sustainable solutions for spirits aging. The Molecular Sawdust Drying System (MSDS) also provides benefits to lumber mills. However, potential production facility disruptions or supply chain issues could impact product availability.
• **Suppliers**: The company's ability to make and sell products depends on the availability and cost of raw materials, product ingredients, and other supplies. Financial instability could affect the company's ability to pay suppliers, while geopolitical events or climate change could impact supply chains.
• **Creditors**: The company has a working capital deficit and relies on debt financing and shareholder loans. The going concern warning indicates increased risk for creditors regarding the repayment of outstanding notes payable and advances.

Next Steps

• Install the first SRAS unit at one of the largest distilleries in the U.S. in the second quarter of 2026.
• Deploy the second SRAS unit approximately three months after the first installation (Q3 2026).
• Install the SRAS unit at a leading U.S. wholesaler and broker of bulk spirits in the third quarter of 2026.
• The international spirits investment fund is required to deploy at least one SRAS unit annually in each of the three exclusive countries to retain exclusivity.
• Complete full installation of the Molecular Sawdust Drying System (MSDS) in the first half of 2026.
• Expand the number of MSDS systems installed at lumber mills across the southeast United States throughout 2026.
• Management intends to establish an audit committee to oversee internal controls and procedures.
• The company plans to create a position to segregate duties and increase personnel resources and technical accounting expertise within the accounting function when funds are available.
• Prepare and implement sufficient written policies and checklists for accounting and financial reporting.
• Continue to monitor and evaluate the effectiveness of internal controls and procedures and internal controls over financial reporting on an ongoing basis.

Key Dates

Recommendation

The filing presents a highly concerning financial picture, marked by a substantial increase in net losses, a shift from gross profit to gross loss, and a significant accumulated deficit. The explicit 'going concern' warning from auditors, coupled with management's acknowledgment of needing additional capital to continue operations, signals severe financial distress. Furthermore, the identified material weaknesses in internal controls over financial reporting indicate fundamental governance and operational deficiencies. While there are strategic initiatives and new contracts, the immediate financial instability and high operational risks far outweigh these potential future benefits, making the stock a 'strong sell' for any seasoned investor or institution.

Keywords

Energy Wave Technology, Spirits Rapid Aging System, Whiskey-as-a-Service, Molecular Sawdust Drying System, Distilled Spirits, RF Specialties, Two Trees Beverage Company, SEC Filing, 10-K, Financial Performance, Corporate Governance, Risk Factors, Technology Company, Craft Spirits, Industrial Applications, Sustainability