MDWK 10-K & 10-Q changes, risk factors and insider trading

We generated revenues of $2,364,093$2,214,542 and $2,364,093, respectively, for the yearyears ended December 31, 2024 from the operations of the business acquired,2025 and $104,066, during the year ended December 31, 2023.2024. Our ability to continue to generate revenue and grow our revenue will depend, in part, on our ability to execute our business plan, expand our business model in a timely manner. We may fail to do so. A variety of factors outside of our control could affect our ability to generate revenue and increase revenue growth.

Our independent registered public accounting firm included in its opinion for the years ended December 31, 20242025 and 20232024 an explanatory paragraph referring to our recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, reduce expenditures and generate significant revenue. Our financial statements as of December 31, 2025 and 2024 did not include any adjustments that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by our auditors, and our potential inability to continue as a going concern, in future years could materially adversely adversely affect our share price and our ability to raise new capital.

Unfavorable publicity, whether accurate or not, related to our industry or to us or our products, brands, marketing, executive leadership, employees, Board of Directors,Directors familymembers, family, stockholders, operations, current or anticipated business performance, or environmental or social efforts efforts could negatively affect our corporate reputation, stock price, ability to attract and retain high-quality talent, or the performance of our brands and business.

Our business is sensitive to changes in both direct and indirect taxes. New tax rules, accounting standards or pronouncements, and changes in interpretation of existing rules, standards, or pronouncements could have a material adverse effect on our business and financial results. As a multinational company based in the United States, we are more exposed to the impact of changes in U.S. tax legislation and regulations than most of our major competitors, especially changes that affect the effective corporate income tax rate. In August 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) which, among other provisions, implemented a 15% minimum tax on book income of certain large corporations. We continue to evaluate the various provisions of the IRA and currently anticipate that its impact, if any, will not be material to our operating results or cash flows. Additional tax proposals sponsored by the current U.S. presidential administration could lead to U.S. tax changes, including significant increases to the U.S. corporate income tax rate and the minimum tax rate on certain earnings of foreign subsidiaries. While we are unable to predict whether any of these changes will ultimately be enacted, if these or similar proposals are enacted into law, they could negatively impact our effective tax rate and reduce net earnings.

Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or impose limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products. Several such labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects. Our products already raise health and safety concerns for some regulators, and heightened requirements could be imposed. For example, in February 2021, the European Union published its Europe Beating Cancer Plan. As part of the plan, by the end of 2023, the European Union willprogressed issueon ainitiatives proposalunder forits “Europe’s Beating Cancer Plan” to introduce mandatory health warnings on beveragealcoholic alcoholbeverages, productaiming for implementation alongside ingredient/nutrient labels. Ireland led by signing regulations in May 2023 for comprehensive health warnings, including cancer and liver disease risks, by 2026, setting a potential standard for the EU. Such campaigns could result in additional governmental regulations concerning the production, marketing, labeling, or availability of our products, any of which could damage our reputation, make our brands unrecognizable, or reduce demand for our products, which could adversely affect our profitability. If additional or more severe requirements of this type are imposed on one or more of our products under current or future health, environmental, or other laws or regulations, they could inhibit sales of such products. Further, we cannot predict whether our products will become subject to increased rules and regulations, which, if enacted, could increase our costs or adversely impact sales.

Our current operating funds are less than necessary to complete our intended plan of operations. We will need additional funds. Our failure to obtain such additional financing could result in delay or indefinite postponement or further of any subsequent operations which would have a material adverse effect on our business. As of December 31, 2024 and 2023,2025, we had cash of $$211,948. 11,159 and $115,111, respectively. We do not expect that our existing cash and cash from revenue will be sufficient to fund our current operations through at least 12 months from the date of this annual report. We will need to raise additional funds in the future to fund our working capital needs and to fund further expansion of our business. We may require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, we may have to delay or scale back our growth plans.

The Company has 300,000,000 authorized common shares, of whichwhich, 215,247,730as of the date of this filing, 235,610,043 are currently issued and outstanding and 10,000,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), of which no shares are issued and outstanding. Pursuant toThe theCompany termsalso of the Exchange Agreement and the Merger Agreement, we issued an aggregate of 67,500,000 shares of common stock.has

Our wholly-owned subsidiary, Two Trees Beverage Company, utilizes ourthe Spirits Rapid Aging System,SRAS, validating the use of ourthis patented energy wave technology within the premium craft spirits industry. Our proprietary and patented molecular targeting system swiftly and sustainably transforms distillate to maturity, delivering traditional flavors in a fraction of the time with greatly reduced environmental impact and cost. Precision engineered to match traditional aging flavors and aromas, it has been used to produce over 50 SKUs and many award-winning products.

Cost of Sales. Cost of sales for the year ended December 31, 20242025 was $1,490,064$2,564,857 compared to $81,656$1,490,064 for the year ended December 31, 2024. 2023. Cost of sales for the Company’s Two Trees Distilling operations was $917,458$1,331,901 in 20242025 compared to $80,133$917,458 in 2023.2024, Thewith the increase is duedriven toan ainventory full yearimpairment of operations$140,067, incost 2024of comparedgoods tosold thefrom acquisitionsale inof Decemberbarrels 2023.of approximately $168,000, increased input costs for our brand products, and new costs associated with our WaaS revenue. The Company’s RF Specialties business incurred incurred costs of sales of $1,232,956 in 2025 as compared to $572,606 in 2024, including labor costs of $470,045 relateddue to the productcosts andassociated with the MSDS contract ongoing since November 2024. Gross profit for the year ended December 31, 2024 benefitted significantly from one-time service incomerevenue fromof $520,000 in the acquisition of RF Specialties,Specialties compared to $1,523 in 2023.business.

Operating Expenses. The Company reported operating expenses of $2,376,693$3,386,049 consisting primarily of legal, accounting, payroll, and general businessbusiness-related related expenses for the year ended December 31, 20242025 compared to $475,009$2,376,693 for the year ended December 31, 2023.2024. The $1,843,784$1,067,256 increase in in operating expenses was primarily attributable to increased salaries and wages from a full year of operationsofficer withcontracts bothcompared businesses.to the year ended December 31, 2024. Selling, general and administrative expenses was $1,853,335,$2,302,274 and $1,853,335 for the years ended December 31, 2025 and 2024, respectively, and included legal, accounting and audit fees related to our public company reporting obligations and increased activity from two operating business lines,obligations, including stock-based compensation of $71,938.$639,885 and $71,938, respectively due to new equity awards to employees and consultants in the current year. Operating expenses included salary and wages expense of $175,827$763,929 and $0$175,827 for the years ended December 31, 20242025 and 2023,2024, respectively. Operating expenses included depreciation and amortization expense of $289,631$319,846 and $15,126$289,631 for the years ended December 31, 20242025 and 2024, 2023,respectively, and a loss of $57,900 on disposal of assets to a related party.party for the year ended December 31, 2024.

Total Other Income/Expense. Total other expense was $61,626 for the year ended December 31, 2025 compared to the total other expense of $118,453 for the year ended December 31, 20242024. comparedThe decrease was primarily due to a loss on note receivable impairment in the totalyear otherended December income31, of $160,9272024, forpartially offset by increased interest expense in the year ended December 31, 2023. The $221,480 change was primarily attributable to a loss of $97,533 loss on impairment of note receivable compare to $0 in 2023, and a gain of $168,855 on the sale of assets in 2023.2025.

As of December 31, 20242025 and 2023,2024, our cash balance was $11,159$211,948 and $115,111,$11,159, 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. To date, the Company has incurred operating losses since inception of $2,360,505.$6,158,495. At December 31, 2024,2025, the Company had a working capital deficit of $1,244,697.$1,255,017. Subsequent to December 31, 2025, the Company has raised an additional $450,000 in proceeds from the sale of common stock.

Cash Used in Operating Activities. Net cash used in operating activities for the years ended December 31, 20242025 and 2023,2024, was $781,970$1,574,124 and $519,790.$781,970. The increase was attributable to an increase in net loss fromcompared to the increaseprior inyear operationsas ina 2024.result of increased operating expenses associated with the new businesses as described above.

Cash Used in Investing Activities. Net cash used in investing activities for the years ended December 31, 20242025 and net cash provided by investing activities for the year ended December 31, 2023,2024, was $6,990$872,247 and $39,041,$6,990, respectively.respectively, The decrease was attributable to a decrease in purchase of intangible assets of $19,500 and property and equipment of $88,000 in 2023related to purchases of propertyequipment in developing larger in house SRAS unit to expand production capacity and equipment of $6,990 in 2024. The Company had cash proceeds from the saleSRAS ofunits certainfor equipment of $100,000 and $46,541 net assets acquired from acquisitions in 2023.customers.

Cash Provided by Financing Activities. Net cash provided by financing activities for the years ended December 31, 20242025 and 2023,2024, was was $685,008$2,647,160 and $572,145.$685,008. Net cash provided by financing activities for the year ended December 31, 20242025 consisted of $745,000 $2,939,401 in proceeds from the sale of common stock, $155,500$150,000 in proceeds from related party notes payable, offset by repayments of notes payable to related parties and third parties of $32,500$105,500 and $182,982,$336,741, respectively, and redemption of preferred stock of $10.respectively. Net cash provided by financing activities for the year ended December 31, 20232024 consisted of $676,349$745,000 in proceeds from the sale of common stock, $155,500 in proceeds from related party notes payable, offset by $104,204repayments of notes payable to related parties and third parties of $32,500 and $182,982 respectively and repayments of advancespreferred payable.stock of $10.

The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company also performs aging services for certain customers, with revenue recognized upon completion of the aged product. For service revenue within the Company’s Company’s radio frequency applications, the Company recognizes revenue as the services are provided to the customer. The Company’s contracts contracts typically have a single performance obligation, and do not contain a significant financing component.

The Company recognizes deferred revenue for performance obligations not yet satisfied, primarily related to liquor sales not yet shipped. As of December 31, 2024, the Company had $226,066 in unsatisfied performance obligations that it expects to satisfy over the next 12 months, of which $25,366 related to shipment of liquor products and $200,700 related to the Company’s RF Specialties business Goodwill - Goodwill represents the excess of acquisition cost over the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it can conclude the assessment. If the Company concludes otherwise, the Company is required to perform a quantitative analysis to determine the amount of impairment. A quantitative analysis is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value to determine the amount of impairment, if any. The Company has determined that it has two reporting units. During the years ended December 31, 2024,2025, and 2023,2024, no impairment expense was recognized.

The CompanyWe ishave currentlycompleted deploying its first industrial applicationdeployment of our first Molecular Sawdust Drying System (“MSDS”) at a large lumber mill, which utilizes a proprietary molecular energy wave technology to adjust the moisture content of sawdust dryingfor systemproduction withof awood lumberpellets, an mill.alternative green energy source. The system offers scalable, flexible solutions for any tonnage of sawdust, catering to diverse pellet manufacturing needs. It utilizes patented technology to adjust moisture content as required, optimizing it to precise specifications. The system features precision automation for controlling temperature and drying parameters, ensuring consistent high-quality output. This adaptable system enhances safety and productivity, achieving uniform results with minimal downtime.

The first of these units is anticipated to be installed on site at one of the largest distilleries in the U.S. in the secondforuth quarter of 2026, with the second unit deployed approximately three months thereafter. The second contract is with a leading U.S. wholesaler and broker of bulk spirits for one SRAS unit at their facility, which is estimated to be installed in the third quarter of 2026.

Three and Six Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended March 31, 2025

Revenue.Revenue Revenuefor the three months ended June 30, 2026 was $524,090 compared to $420,609 for the three months ended MarchJune 31, 2026 was $434,087 compared to $513,930 for the three months ended March 31,30, 2025. Revenue of $313,739 $253,568 for three months ending March,31,2026June 30, 2026 is attributable to the Two Trees business, compared to $252,837$249,566 in 2025, and $120,348 $270,522 of revenue for three months ending MarchJune 31,202630, 2026 attributable to product and service income from RFS, compared to $261,093$171,043 in 2025. The increase $60,092in sales of RF Specialties of approximately $99,479 related to additional contracted work on the Company’s recently completed Molecular Sawdust Drying (“MSD”) system. The $4,002 increase revenue in the Two Trees business was primarily attributable to increased bulk alcohol sales in the current period which was partially offset by a decline in sales of RF Specialties of approximately $140,745 related to nearing completion on the MSD project and lower serviceTwo revenueTrees comparedbrand to the prior year.sales.

Cost of Sales. Cost of sales for the three months ended MarchJune 31,30, 2026 was $570,350$451,674 compared to $381,398$701,906 for three months ended March 31,June 30, 2025. Cost of sales for the Company’s Two Trees Distilling operations was $371,051$310,612 in 2026 compared to $168,715$220,638 in 2025, with the declineincrease driven primarily by higheran inputimpairment costsloss forof our$99,588 products,associated increasewith freightthe costs,Company’s andbarrel higher bulk alcohol sales.inventory. The Company’s RF Specialties business incurred costs of sales of $199,299$141,062 in 2026 compared to $212,683$481,268 in 2025. The slight decrease was due to lowerthe quarter ended June 30, 2025 including more activitysignificant related costs associated with the manufacturing of MSD projectproject, nearingwhich completion.was installed at the customer site in the current period.

As of MarchJune 31,30, 2026, and December 31, 2025, we had $95,754$13,258 and $211,948 of cash, respectively. We anticipate that our current cash and cash cash generated from financing activities will be insufficient to satisfy our liquidity requirements for the next 12 months. As of MarchJune 30, 31, 2026, we have incurred operating losses since inception of $7,005,527.$7,535,399. At MarchJune 31,30, 2026, we had a working capital deficit of $1,782,901.$2,082,091.

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.Commission. During the three six months ended,ended June 30, 2026, we raised $450,000 in cash proceeds from the sale of common stock.stock, and $115,000 from proceeds of convertible notes payable with related parties. We will require additional funds during this time and will seek to raise the necessary additional capital. 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.

CashNet Used in Operating Activities. Net cash used in operating activities for the threesix months ended MarchJune 31,30, 2026 and 2025 werewas $464,418 $605,916 and $421,316.$831,152, respectively. The increasedecrease in cash used by operating activities was attributabledriven toby anlower increasecosts inassociated netwith lossour comparedRFS business related to the priorMSD yearcontract, asand acost-reduction efforts resultin ofour increasedTwo operating expensesTrees associated with the new businesses as described above.business.

CashNet Used from Investing Activities. Cashcash used in investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 was $62,907 $38,333 and $604,377,$707,454, respectively, with higher costs in the priordecline driven yearby associated with constructioncompletion of the Company’s newin-house SRAS equipment, deployedsystem resulting in thelower firstcapital quarter of 2026.expenditures.