**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**







**FORM
      10-KSB**




(Mark
      One)




x
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
                1934**




**For
      the fiscal year ended December 31, 2007**




o
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
                1934**




**For
      the transition period from ___________ to ___________**




**Commission
      file number 333-118155**







**MDWERKS,
      INC.**


(Name
      of
      Small Business Issuer in Its Charter)




**Delaware**
            **33-1095411**(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            (I.R.S.
                Employer
              Identification
                No.)




**Windolph
      Center, Suite I**


**1020
      N.W. 6th Street**


**Deerfield
      Beach, FL 33442**


(Address
      of Principal Executive Offices and Zip Code)







Issuer’s
      Telephone Number: (954) 389-8300




Securities
      registered under Section 12(b) of the Exchange Act: None




Securities
      registered under Section 12(g) of the Exchange Act: None




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No 
      o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. x




Revenues
      during the fiscal year ended December 31, 2007 were $577,251.




The
      aggregate market value of the issuer’s common equity held by non-affiliates, as
      of March 24, 2008 was $4,826,584.




As
      of
      March 24, 2008, there were 12,940,065 shares of the issuer’s common equity
      outstanding.




Documents
      incorporated by reference:  None




Transitional
      Small Business Disclosure Format ( *Check
      one* ): Yes o No 
      x














**TABLE
      OF CONTENTS**




**PAGE****PART
                I****ITEM
                1.**
            
            **DESCRIPTION
                OF BUSINESS**
            
            1**ITEM
                2.**
            
            **PROPERTY**
            
            41**ITEM
                3.**
            
            **LEGAL
                PROCEEDINGS**
            
            41**ITEM
                4.**
            
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS**
            
            41**PART
                II****ITEM
                5.**
            
            **MARKET
                FOR OUR COMMON STOCK AND RELATED STOCKHOLDER
                MATTERS**
            
            42**ITEM
                6.**
            
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
            
            52**ITEM
                7.**
            
            **FINANCIAL
                STATEMENTS**
            
            57**ITEM
                8.**
            
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**
            
            57**ITEM
                8A.**
            
            **CONTROLS
                AND PROCEDURES**
            
            57**ITEM
                8B.**
            
            **OTHER
                INFORMATION**
            
            58**PART
                III****ITEM
                9.**
            
            **DIRECTORS
                AND EXECUTIVE OFFICERS**
            
            59**ITEM
                10.**
            
            **EXECUTIVE
                COMPENSATION**
            
            65**ITEM
                11.**
            
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT**
            
            72**ITEM
                12.**
            
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS**
            
            73**ITEM
                13.**
            
            **EXHIBITS**
            
            74**ITEM
                14.**
            
            **PRINCIPAL
                ACCOUNTANT FEES AND SERVICES**
            
            77




i




**PART
      I**




**ITEM
                1.**
            **DESCRIPTION
                OF BUSINESS**




*Unless
      otherwise indicated, all references to ‘‘we’’, ‘‘us’’, ‘‘our’’, the ‘‘Company’’
and similar terms, as well as references to the ‘‘Registrant’’ in this Annual
      Report on Form 10-KSB, refer to MDwerks, Inc. (including its
      subsidiaries* ).




**Description
      of Business**




We
      offer
      a web-based comprehensive selection of electronic medical claims processing,
      funding and collection solutions to the healthcare provider industry. Our
      services can help doctors, clinics, surgical or hospital based practices, and
      other healthcare providers and their vendors significantly improve daily
      insurance claims transaction administration and management as
      follows:




·
            Increase
                office efficiencies and lower collection
                costs;




·
            Reduce
                administrative workload;




·
            Improve
                claims accuracy before submission to, and increase acceptance by,
                third
                party payers;




·
            Reduce
                payment cycle time;




·
            Improve
                cash flow management;




·
            Increase
                revenue control;




·
            Leverage
                receivables through competitive short term financing
                arrangements;




·
            Improve
                information management, financial security and provider regulatory
                compliance;




·
            ‘‘End-to-end’’
                solution for claims management; and




·
            Fully
                automate the revenue process by the use of electronic claims and
                remittance advice, and payment reconciliation




MDwerks,
      Inc., an OTC Bulletin Board company (OTCBB:MDWK) conducts its business through
      four wholly owned subsidiaries of our wholly-owned subsidiary, MDwerks Global
      Holdings, Inc., namely: Xeni Medical Systems, Inc. (‘‘Xeni Systems’’); Xeni
      Medical Billing, Corp. (‘‘Xeni Billing’’); Xeni Financial Services, Corp. (Xeni
      Financial); and, Patient Payment Solutions, Inc. (“PPS”). Xeni Systems, Xeni
      Billing and Xeni Financial are the ‘‘Xeni Companies’’. PPS planned to offer
      healthcare providers a payment improvement process for “out of network” claims,
      but never became operational and is a dormant entity.




**Business
      Services**




Our
      CLAIMwerksTM solutions, which are offered through Xeni Systems, can provide
      actual contract based, insurance company comparable screening and analysis
      of
      medical claims directly from a healthcare provider’s practice management system,
      so that deficiencies and errors can be corrected before they are submitted
      to
      insurance companies for electronic payment. Our CLAIMwerksTM solutions and
      services improve a healthcare provider’s ability to process and manage claims
      for reimbursement from third party payers by consolidating the process
      (including clearinghouse, contract management and remittance functions). As
      part
      of CLAIMwerksTM services, we integrate transactions involving insurance claims by
      providing a single interface for the healthcare provider, the payer (such as
      an
      insurance company) and the lender (when the healthcare provider elects to take
      advantage of receivables financing).




1




Xeni
      Systems collects transaction fees from healthcare providers for: the analysis,
      automated processing, electronic submission, and reporting of claim information;
      management of healthcare provider contracts for pricing and rules; electronic
      remittance of payments; explanations of benefits (payments) (“EOB’s”) made
      available from payers; and, reconciliation and posting of the payments and
      EOB’s. Fees may also be generated from lenders for the valuation of processed
      claims that are used as collateral for loans from lenders, as well as
      administrative tasks related to the disbursement of funds. Fees may also be
      collected from clearinghouses and insurance companies for submitting more
      accurate claims, once certain volume levels are achieved. Xeni Systems may
      also
      collect one-time implementation fees for initial set-up and
      training.




Although
      we do not currently offer asset and wealth management services, we may have
      the
      opportunity to offer asset and wealth management services through third party
      sources. We expect to receive referral or administrative handling fees for
      such
      services, as appropriate.




***Billing
      Services***




Our
      BILLwerksTM solutions provide value added billing services leveraging the Xeni
      Systems technology solutions and services for improved efficiencies. As part
      of
      our BILLwerksTM solutions, Xeni Billing offers collections and appeals services,
      as well as solutions for the collection of old existing medical claim
      submissions. Our BILLwerksTM solutions are designed to operate in an integrated
      fashion with the solutions and services offered by Xeni Systems. There are
      fewer
      manual and paper functions to be performed in the combined claims management
      processing/billing solutions process offered by Xeni Systems and Xeni Billing.
      This can reduce a healthcare provider’s claims related operations even more than
      using the stand-alone solutions offered by Xeni Systems.




Xeni
      Billing typically charges providers (directly or as a subcontractor of Xeni
      Systems) fees as a percentage of collected claims. Xeni Billing also shares
      fees
      (as a channel associate) with Xeni Systems for supporting its claims process
      and
      information management. Additionally, Xeni Billing can collect one-time set-up
      fees, appeals and third party appeals work fees and any consulting fees for
      customization or support of the healthcare provider outside the scope of
      services. Finally, Xeni Billing may share in claims revenue recovered when
      contracted to perform reviews of unpaid claims that were submitted to payers
      prior to use of our automated claims submission solutions and
      services.




***Lending
      Services***




Our
      FUNDwerksTM solutions can electronically manage loans, loan repayments and the
      movement of funds through linked bank accounts.




Through
      Xeni Financial, we can offer to lend or arrange lending from third parties
      to
      healthcare providers on a short term, revolving line of credit and sometimes
      on
      a term loan basis. The loans are secured by claims receivable of the healthcare
      provider. Like Xeni Billing, Xeni Financial leverages the solutions and services
      offered by Xeni Systems to value the claims, score risk, document and track
      claims payment status, verify remittance of payments from insurance companies
      and sweep funds to the appropriate accounts with the assistance of electronic
      and automated processes. Xeni Financial is able to arrange loans at attractive
      rates and terms, since it has not had to invest significant capital to develop
      or make a major hardware and software purchase of a system to make loans secured
      by receivables. It also does not need to maintain a large workforce as it can
      manage many of its business processes through the solutions and services offered
      by Xeni Systems. Xeni Financial can lend to healthcare providers on the merit
      of
      the receivables and can even lend on Medicare claims.




***Consulting
      Service*** *s*




Although
      we provide Internet-based solutions that do not require our customers to
      purchase new hardware or software, healthcare providers can take advantage
      of
      customized and premium enhancements through our third party associates,
      including enhanced billing and collection services. Consulting services are
      also
      available to enhance healthcare provider practices or business
      operations.




2




***Workers’
      Compensation, Durable Medical Equipment and Pharmacy Claim
      Services***




Our
      current products and services have been focused on improving the ability of
      healthcare providers to collect on commercial and government insurance claims,
      and to enhance their cash flow controls. We have decided to expand our current
      service offerings to include workers’ compensation, durable medical equipment
      and pharmacy claims electronic processing, management, and funding.




By
      using
      our present technology we plan to offer a greatly improved electronic workers’
compensation, durable medical equipment and pharmacy claims collections and
      remittance process to our clients in place of today’s existing error ridden
      paper based method. Most provider practices avoid workers’ compensation patients
      because of the time, effort, and cost associated with getting paid, thereby
      giving up perhaps as much as10% to 25% of their revenue. MDwerks can greatly
      improve the ability of healthcare providers to be paid on workers’ compensation
      claims, and enable them to continue to provide or expand these services.




We
      can
      manage claims transactions electronically from three perspectives in connection
      with workers’ compensation claims: the provider, the insurance company payer and
      the lender (when the provider elects to take advantage of our receivables
      financing). Our system can manage each workers’ compensation claims transaction
      by leveraging our tools to automatically analyze claims, and record collections,
      appeals and funding. Since we designed our products and services to operate
      in a
      fully integrated electronic environment with provider and payer systems, there
      are fewer manual and paper functions to perform in the combined claims
      processing/billing solution, which should result in reduced errors as well
      as
      fewer payment delays and lower collection costs.




Through
      Xeni Billing, MDwerks can offer collections and appeals services for workers’
compensation claims. This allows healthcare providers to outsource these tasks
      from their offices and focus resources in other areas.




Through
      Xeni Financial, MDwerks can offer funding to healthcare providers on a short
      term, revolving line of credit basis, or in some cases can purchase healthcare
      providers’ receivables, which are secured by claims processed through the
      MDwerks System. Our system can also include MDwerks’ tools to help lenders value
      claims, score risk, document and track claims payments, verify remittance and
      sweep funds to appropriate bank accounts with electronic and automated
      processes.




MDwerks
      can collect transaction fees for automated processing, submission, reporting
      and
      analysis of workers’ compensation claims information and management of payer
      contracts rules and pricing. Fees can be collected for information management
      on
      processed claims that are used as collateral and for administrative tasks
      related to the movement of funds among bank accounts. Fees can also be collected
      from clearinghouses and insurance companies to which MDwerks sends cleaner
      claims electronically. One time fees can be charged for initial set-up and
      training.




**Market
      for Our Solutions and Services**




Healthcare
      providers face serious challenges in processing claims submitted to third party
      payers, as well as in getting correct and prompt payment from payers. Claims
      must be prepared by gathering data from the front office to the back, with
      processing often occurring at different times and locations for each procedure.
      Many healthcare providers’ current billing systems require the performance of
      different steps by different third party sources. Claims can move among the
      healthcare provider’s internal staff, through a practice management system and
      across multiple offices, to billing, editing engines, clearinghouse, contract
      management, banking and other resources.




3




The
      need
      for security and privacy of patient information requires complex data
      management. Claims may be processed on the payer end through out-of-network
      claims administrators, re-pricing organizations, third party administrators,
      managed care organizations, independent physician associations, and preferred
      provider organizations. Further, healthcare providers face continuing pressure
      from payers to accept lower fees on changing definitions of covered claims,
      with
      variations in customary remittance values. At the same time, payers require
      precise documentation and justification for covered claims.




Claims
      may be rejected for a variety of reasons including medical necessity,
      eligibility, coding errors, tardiness, deductibles, referrals,
      pre-certifications and improper documentation. Lack of access to basic, but
      important, claim information and the lack of real-time data and feedback may
      waste office hours and affect reimbursement. Repetitive paperwork and phone
      conversations dealing with disputes, errors and rejections may be typical
      occurrences in the provider’s office. Additionally, the failure, or inability,
      to match claims against existing contracts, when added to these other factors,
      can make it extremely difficult to determine how much and when the healthcare
      provider will be paid.




Management
      of the status of claims and valuation, remittance and validation of proper
      payment and disbursement requires detailed real time information. If claims
      are
      not being compared to contracts in real time, and if robust tracking and
      auditing mechanisms are not in place, then the availability and transparency
      of
      data cannot be optimized. As a result, the healthcare provider’s financial
      managers may only estimate results, with varying degrees of volatility, cash
      flow predictability and accuracy. Moreover, they may miss, ignore or abandon
      incorrect or partial payments.




The
      challenges faced in connection with claims management can result in lost
      revenue, volatile and unsatisfactory cash flow, inaccurate reporting,
      inefficient management of operations and attendant increases in office workload,
      expenses and costs of borrowing. In the past, healthcare providers have been
      required to use a patchwork of internal and third party resources to address
      these problems, with mixed results. For example, billing and practice management
      systems attempt to address the claims processing market predominantly by selling
      proprietary hardware and software products (and maintenance and upgrades or
      customization), with various degrees of success in features and benefits. They
      may or may not generate Health Insurance Portability and Accountability Act
      of
      1996 (‘‘HIPAA’’) compliant electronic forms from their systems, and if they do,
      such forms may be mapped and formatted in different ways, leading to potential
      errors and problems with acceptance and payment. Ultimately, they offer tools
      that require office staff and/or external resources to perform critical claims
      management functions.




Claims-related
      management challenges have also greatly impacted the borrowing abilities of
      healthcare providers. Healthcare providers typically borrow by factoring their
      receivables arising out of non-Medicare insurance claims, personally guarantying
      a loan with their own credit, bundling large provider claims for sale to wealthy
      private investors or taking an expensive asset-based loan against claims
      receivables at a significant discount with significant required reserves.
      Lenders typically have not been able to offer short term, revolving credit
      lines
      on receivables arising out of insurance claims, because of the existing
      difficulty in qualifying them as low risk, high quality, and commoditized
      collateral. Lenders remain concerned about safely and accurately assessing
      either the true value or the payment risk associated with any given claim or
      group of claims. Any solution to this problem is further complicated by the
      lender’s resistance to risking the purchase of an inadequate or expensive
      customized solution to serve this market.




Short
      term, revolving lines of credit on medical receivables require a solution that
      mitigates the uncertainty of quickly and accurately assessing the true market
      value of claims, their aging and cycle times and their inherent lending risk
      through a complex series of verifications and evaluations. Assessment, and
      the
      subsequent presentation of results, must be accomplished in a real time, secure
      environment. Cycle times for claims remittances must be short (ideally at or
      below 45-60 days). Additionally, the cost of administering and processing must
      leave net interest margins that justify the loan.




4




We
      believe our integrated suite of solutions and services are the first to market,
      offering healthcare providers and their lenders comprehensive, cost efficient
      and superior claims processing and management solutions over the Internet.
      Our
      system can become a healthcare provider’s single source platform for integrating
      claims management and funding functions. Our solutions and services quickly
      improve claims accuracy, valuation and remittance success, enable outsourced
      payer contract management, facilitate prompt financing of claims, and produce
      superior cash and information management. Our technology also offers benefits
      to
      small and medium healthcare provider practices with limited resources and staff,
      allowing them to perform or facilitate the performance of tasks and functions
      previously only available to much larger practices capable of purchasing more
      sophisticated and expensive tools and hiring more people to use them. It also
      allows many financial institutions to lend to healthcare providers on qualified
      receivables, at risk and cost factors not previously available. With our
      products and services, healthcare providers of a variety of specialties and
      sizes have the ability to leverage an ‘‘end-to-end’’ claims management
      solution.




By
      combining automated batched and real time functionality into a proprietary
‘‘end
      to end’’ claims management and funding system, we believe that our solutions and
      services offer superior value and competitive advantages, including the
      following:




·
            Reduced
                Workload: Healthcare
                providers can reduce and/or eliminate manual, labor intensive, repetitive
                and inefficient administrative functions. The level of reduction
                depends
                on many factors, including the type of practice management and billing
                systems in use, number of staff members and their training and skills
                in
                operating existing systems, practice size and mix and contractual
                relationships with payers, and how paper intensive or electronic
                their
                existing process may be.




·
            ‘‘Pay
                As You Go’’: Fees
                charges to healthcare providers for processing insurance claims typically
                are fixed monthly or calculated as a percentage of each claim’s contract
                valuation or predicted value, based on history and regional Medicare
                tables for reference, if, for example a healthcare provider is
                out-of-network. The use of our solutions and services doesn’t require high
                up-front investment, hardware and software purchases, or payment
                based on
                the number of claims submitted or the amount of billed
                claims.




·
            Superior
                Cash Management: In
                as little as five business days or less, healthcare providers can
                borrow
                funds from us at competitive short-term rates against a determined
                value
                of each submitted claim. Healthcare providers and lenders can choose
                amounts or categories of claims for funding, including Medicare claims.
                Financial institutions have an automated risk profile and lending
                process
                available to them on a daily claim-by-claim basis, which is customized
                to
                their own lending parameters, without the necessity of building new
                lending tools.




·
            Increased
                Efficiency/Lower Costs: Claims
                that we process are ‘‘flagged’’ for potential errors as they are received,
                based on a combination of proprietary technology and use of the same
                type
                of rules engine as many insurance companies. Healthcare providers
                managing
                their own claims can edit flagged claims using simple prompts, so
                a
                ‘‘cleaner’’ claim can be submitted to the payer. Claim values are
                determined daily against actual contracts and payment tables, when
                available, and are adjusted for history and changes in insurance
                plans.
                Healthcare providers can know almost exactly how much they will get
                paid
                on claims. Also, multiple healthcare provider locations can be connected
                to capture information earlier and more
                accurately.




·
            Superior
                Information Management: Healthcare
                providers have access to daily reports on claims status, their expected
                (not just billed) value, and tools for tracking, auditing and confirming
                claims remittance, verification and payment. This means they can
                spend
                less time trying to determine what is owed and by whom and more time
                taking action to collect what is
                owed.




5




·
            Web-based,
                User Friendly Technology: The
                solutions and services that we offer can be accessed over the Internet
                using standard Microsoft Explorer software (or most other browser
                software) on standard Windows desktop hardware and software. The
                systems
                are designed to be used ‘‘off the shelf’’ with no need to purchase
                hardware or software, and are designed to support large numbers of
                users.
                They also can be easily expanded to accommodate future
                growth.




·
            Integrated
                Functions: Healthcare
                providers can integrate and consolidate, through a single source,
                multiple
                claims processing and management functions within their offices,
                across
                multiple offices and across third party vendors, including insurance
                companies, banks and
                clearinghouses.




We
      believe that the technology that we deploy offers the following competitive
      advantages:




·
            First
                In Marketplace: We
                believe we are one of the first application service providers to
                offer a
                fully electronic comprehensive bundled service that provides web-based
                insurance claims management, billing services and lending services
                (for
                both borrowers and lenders). This creates a unique, cost effective
                advantage in capturing clients and developing brand
                loyalty.




·
            Barriers
                to Entry: We
                believe potential competitors face significant barriers to
                duplicating what we have to offer, including the
                following:




*Process:*  Aggregating
      and integrating healthcare providers, insurance companies and financial
      institutions in a legally compliant manner requires a very complex business
      process.




*Cost
      to Develop:*  Matching
      features and benefits of our systems would require substantial investment and
      substantial time and technical resources.




*Extensive/Proprietary
      Feature Set:*  We
      offer
      an extensive and unique feature set.




*Complex
      to Build:*  The
      solutions and services that we offer were developed as a multi-tiered high
      availability solution, requiring substantial software engineering expertise.
      Solutions were derived from expertise in insurance, banking, medical, legal
      and
      other industries, requiring more than just technical production.




*Extensive
      Compliance Issues:*  We
      operate amidst a highly regulated environment. For example, we must operate
      in
      accordance with HIPAA, the Financial Holding Company Act and the Gramm Leach
      Bliley Act. Requirements for handling patient information and claims securely
      are complex and may serve as a major development challenge to some competitors.
      Furthermore, we must operate in accordance with state regulations regarding
      fee-splitting with medical professionals.




·
            Features
                Appeal to Lenders: Our
                solutions and services appeal to lenders, because lenders do not
                have to
                negotiate to purchase receivables, acquire a system to process claims
                for
                financing or buy hardware and software from us. At the same time,
                asset
                based loan assessments can be performed against actual claims value
                and
                status on a daily basis, potentially increasing the value and collateral
                associated with a loan and reducing
                risk.




·
            Contract
                management is critical to maximizing reimbursement. Complying
                with terms for getting paid on a claim, accurately valuing the claim
                and
                monitoring pricing for each contract creates more reliable receivables
                and
                more desirable collateral to secure desired
                loans.




·
            Superior
                Claims Engine: We
                aggregate the insurance carrier network through the use of a combination
                of third party and proprietary claims engine functions. This enables
                healthcare providers to have access to all available insurance carriers
                for electronic claims handling through a single
                solution.




6




·
            Module
                Independence: Many
                components of our solutions and services can be utilized independently
                of
                each other, making different technologies rapidly available, and
                allowing
                us to adapt quickly to new client
                requests.




**Industry
      Analysis**




**Industry
      Size:**




Healthcare
      has been called the single largest U.S. industry. According to the Centers
      for
      Medicare and Medicaid Services (CMS), it is expected to reach **$3.0
      trillion plus** over the
      next three years. The National healthcare expenditure projections are produced
      annually by the Office of the Actuary at the CMS. They are based on historical
      national health expenditures and a model framework that incorporates actuarial,


econometric
      and judgmental factors. National health expenditures are forecast to reach ***$3.3
      trillion by 2012*** ,
      growing
      at a mean annual rate of 7.3%. During this period, health spending is expected
      to grow 2.5% per year faster than nominal gross domestic product (GDP), so
      that
      by 2012 it will constitute approximately 18.8% of GDP compared to its 2000
      level
      of 13.8%.









7




The
      general term "Healthcare" encompasses a multitude of products and
      services. **In 2007, CMS forecasted** ***$2.33
      trillion in health expenditures,*** expected
      to be distributed by type of expenditure as follows:









The
      source of payment for 2007 expenditures was distributed as follows (source:
      CMS): *Private
      health insurance: $806.2 billion* ,
      Federal: $789.5 billion, out-of-pocket payments: $261.9 billion, state and
      local: $299.2 billion, and other private funds: $169.0 billion.




**Market
      Needs**




Technology
      has provided increased efficiency, especially in the delivery of healthcare.
      However, one of the most troubled areas is the medical claims billing,
      processing, and payment area. This segment continues to suffer errors and
      inefficiencies, as well as large amounts of paper transactions and piecemeal
      solutions, leaving a significant claims management burden in the provider’s back
      office.




Claims
      processing is a chief contributor, since the vast majority of claim transactions
      require a large amount of manual intervention. Healthcare is unlike many other
      businesses in that the value of the service is determined retrospectively.
      This
      negative aspect of the business becomes more evident and pronounced when coupled
      with Workers Compensation and Personal Injury medical services, which have
      additional administrative hurdles to overcome to receive payment. These facts,
      combined with a paper and manual work dependent system, result in significant
      inefficiencies in the claims filing, payment and reconciliation process. Our
      system can greatly reduce these inefficiencies by automating and replacing
      many
      manual labor intensive paper-ridden processes with fully electronic processes,
      which increase the information available to manage and collect outstanding
      claims. Medical claims processed in the United States escalated from just 5
      billion in 1990 to more than 10 billion at the turn of the 21st century and
      this
      figure has been steadily increasing. According to the AMA, the average number
      of
      claims generated per doctor is 440 claims per month.




8




Payers
      realize the importance of moving claim transactions to electronic media through
      the Internet. From the payers’ perspective, administrative costs could be
      substantially lowered if claims were submitted electronically and were accurate
      enough to be adjudicated by a computer system without any requirement for manual
      intervention and/or resubmission. Payers could also save administrative costs
      by
      implementing electronic payment systems, including electronic explanation of
      payments.




HIPAA
      requires payers to move to electronic claim transactions and establish format
      standards. Although payers continue to make significant technology investments
      to comply, as well as for their own e-commerce objectives, providers are behind
      in technical expertise and system resources necessary to effect change, and
      are
      burdened with paying for systems and processes to become compliant. As HIPAA
      compliance is now enforceable by fines, the pressure for secure and compliant
      solutions has become greater than ever.




HIPAA
      has
      compelled health plans, clearing houses and other healthcare providers to move
      to a uniform electronic format. Specifically, HIPAA requires standard electronic
      formats for the following transactions:




·
              Healthcare
                  claims or equivalent encounter
                  information;




·
            Healthcare
                payment and remittance advice;




·
            Coordination
                of benefits when separate plans have differing payment
                responsibilities;




·
            Health
                claims status when providers inquire about claims they have
                submitted;




·
            Plan
                enrollment and dis-enrollment;




·
            Health
                plan eligibility;




·
            Health
                plan premium payments;




·
            Referral
                certifications and authorizations;




·
            First
                reports of injuries or illnesses;


·
              Health
                  claims attachments used to justify services;
                  and




·
            Other
                transactions the federal government may specify in the
                future.




We
      view
      this highly inefficient market as our primary opportunity. Our solutions and
      services can significantly decrease the cost of claims processing for both
      providers and payers, and can also create a new asset class consisting of
      claims, against which financial institutions can lend.




**Market
      Strategy**




We
      plan
      to sell to physician and clinical service group practices, hospitals,
      rehabilitation centers, nursing homes and certain related practice vendors
      by
      using internal and external resources. Internal resources will consist mainly
      of
      specialized sales executives with industry knowledge and/or a portfolio of
      contacts. External resources will consist primarily of independent sales
      representatives as well as channel associates such as vendors of practice
      management systems and medical industry specific sales groups such as office
      management consultants. These sales resources can leverage an existing customer
      base and contacts.




Our
      marketing is based on prioritizing potential subscribers by size, location
      and
      density, need for our products and services and distribution opportunities.
      Accordingly, we expect to focus our marketing efforts in geographic areas that
      contain high concentrations of prospective clients, such as
      California, Florida, Massachusetts, Texas, New York and New Jersey. Since part
      of our business involves management and review of healthcare provider contracts
      with payers, and their contracts tend to be similar by region, we believe that
      a
      concentration of marketing efforts in areas with high concentrations of
      prospective clients will also reduce costs (for example, by reducing processing
      of repetitive contract pricing and increasing set-up efficiencies for field
      reps) as well as increasing revenues.




9




**Media
      Marketing**




Our
      advertising strategy prioritizes spending to facilitate sales goals. We expect
      to utilize internal and external resources to develop advertising mediums
      to open the appropriate sales opportunities, which may include the
      following:




·
            Business-to-business
                advertising;


·
                Search
                    engine and Web-site
                    advertising;




·
              Direct
                  marketing;




·
            Magazine/trade
                journal advertising;




·
                Trade-show
                    advertising, slogans and headlines;
                    and




·
              Media
                  Advertising (television, radio, billboards, Internet,
                  etc.).




**Non-Media
      Marketing**




We
      expect
      to accelerate client acquisition by marketing through independent sales and
      affinity business representatives. Typical independent sales representatives
      are
      already selling other products and services of other companies to the same
      target market and may be looking for new, non-competitive lines to promote.
      Affinity business representatives sell their own complimentary products or
      services, and may see our solutions and services as a new product line,
      enhancement or up-sell to their existing line. Affinity business representatives
      are expected to include vendors and suppliers of healthcare providers, such
      as
      clearinghouses, diagnostic services and medical supply companies, as well as
      billing and practice management product sellers. Banks and insurance companies
      can make excellent affinity business representatives, as we offer
‘‘off-the-shelf’’ access to the lucrative healthcare provider community for a
      new lending product, with tremendous up-selling opportunities, including by
      co-branding and return referrals to the other services that they
      represent.




We
      believe independent representatives will offer us access to healthcare providers
      based on existing relationships, as well as pre-determined variable costs of
      subscriber acquisition tied to sales or referral success. We believe we will
      rapidly gain field presence, experienced personnel and credibility without
      investing in, and building, resources from the ground up. Multiple resources
      can
      be engaged in less time to acquire subscriber prospects.




**Sales
      Methods**




Sales
      will be generated by conventional methods, which may include direct sales calls,
      trade shows, seminars, dinners, Webcasts and direct mail. Lead generation will
      include Internet presence and third party referral sources. We also expect
      to
      obtain sales from strategic business alliances.




**Revenue
      Generation**




***Current
      Businesse*** **s**




We
      expect
      to generate revenues derived from healthcare providers, their payers and
      lenders, as well as strategic associates that pay referral fees. Examples
      include the following:




10




*CLAIMwerks* TM *Subscription
      Fees* :  Healthcare
      providers are typically charged a percentage of the value of every claim that
      we
      process for administration of claims, including claims remittances through
      various accounts, with a minimum monthly fee; occasionally, other payment
      arrangements are made.




*FUNDwerks* TM *Fees* :  Providers
      are typically charged an increased percentage (from that charged for
      CLAIMwerksTM) of the value of every claim that we process in consideration of
      administration of the loan, including for its settlement and posting, with
      a
      minimum monthly fee. A provider cannot subscribe to FUNDwerksTM without also
      subscribing to CLAIMwerksTM, the underlying technology platform.




*BILLwerks* TM *Fees* :  Providers
      are typically charged a percentage of the value of every claim that is collected
      by Xeni Billing for collections, appeals and patient letter billing services;
      occasionally, other payment arrangements are made. Like FUNDwerksTM, BILLwerksTM
billing functionality is a value-added service to CLAIMwerksTM solutions and
      cannot be subscribed to separately.




*Support
      Fees:*  Healthcare
      providers and financial institutions are typically charged a one-time setup
      and
      training fee.




*Payer
      and Clearinghouse Fees:*  We
      may be
      able to charge payers and clearinghouses fees per clean claim submitted, based
      on achieving minimum volume requirements.




*Financial
      Institution Fees:*  Lenders
      may pay basis points or other fees to us based on the value of each new claim
      loaned against, for accessing and using the lending tools that we
      offer.




*Customization
      and Consulting Fees:*  Clients
      will be charged for any non-standard client support, consulting and any
      customization, such as for electronic interfaces from the healthcare provider’s
      existing legacy management system to our systems.




*Referral
      Fees:*  Lenders,
      billing companies and others may generate referral or administrative fees for
      cross or up selling of their products.




***New
      lines of Business***




We
      plan
      to capitalize on our proven technology and apply it to solving the more complex
      administrative issues associated with Workers Compensation and Personal Injury
      claims. We expect to generate new revenue derived from healthcare providers,
      their payers and lenders, as well as strategic associates who pay referral
      fees.




Providers
      can also be charged a percentage of the value or discount fee for every workers’
compensation claim that we process in consideration of administration of the
      loan or purchases, including settlement and posting, with a minimum monthly
      fee.




We
      also
      plan to generate additional revenues through strategic
      acquisitions.




11




**Competition**




The
      market for medical claims-related products and services is generally highly
      competitive and subject to constant change as a result of new product
      introductions, technological developments and market activities of industry
      participants. We anticipate competition from a number of public and private
      companies involved in the business of medical claims transaction processing
      and
      solutions, including editing engines, claims management and/or practice
      management systems, clearinghouses, and medical receivable funding companies.
      We
      are also aware that other companies offer products and services with some or
      many features similar to those that we offer. However, we are not aware of
      any
      direct competition that offers in one system the full set of comprehensive
      features that we offer, including our proprietary combination of automation,
      batching and real time functionality, especially as it relates to our planned workers’
      compensation, durable medical equipment and pharmacy claims services. Some
      of
      the various types of services or systems that offer aspects found in the suite
      of products that we offer include the following:




·
              **Claims
                  Management/Practice Management Systems:** Claims management and/or
                  practice management systems are used by all forms of healthcare
                  providers
                  and medical billing companies. They offer such services as eligibility
                  verification, claim scrubbing, claim status inquiry, claim submission
                  and
                  remittance, comprehensive reporting, patient statement processing
                  and
                  patient scheduling, although we believe only a few offer the full
                  range of
                  services that we offer.




For
      example, AthenaHealth is a Web-based practice management system offering
      subscribers all the above services, including a sophisticated rules engine
      similar to ours, and charges on a flat monthly fee per provider and/or a
      percentage of revenue collected depending on the products and services selected.
      AthenaHealth offers products and services that are similar to ours; however,
      we
      do not believe they offer advance funding features. Most critically, the use
      of
      AthenaHealth products and services is dependent on the purchase or subscription
      to the AthenaHealth practice management system, requiring a change of
      technology, management, use of tools and processes in the provider’s
      office.




OrthoMart
      provides an entry level web based practice management system that caters
      exclusively to workers’ compensation type claims, and does not offer any
      services for commercial or government claims. We do not believe OrthoMart
      provides contract-based claims analysis, advance funding or automated account
      reconciliation functions. Like AthenaHealth, the provision of these solutions
      offered by OrthoMart and similar competitors would require a significant change
      in the provider’s office, and continue to rely on the combination of their
      system tools and office or external resources to perform many critical functions
      which may be simplified or eliminated by our solutions. Our solutions connect
      into practice management systems and help enhance and optimize their use by
      the
      provider through the performance of functions outside of the office and by
      not
      requiring a fundamental change of process and technology in the
      office.




We
      believe other practice management systems, such as the EZDME web based solution,
      cater only to processing durable medical equipment type claims and require
      the
      healthcare provider to purchase or subscribe to an array of ‘‘add-on’’ modules
      to take advantage of a complete package of tools and services. By comparison,
      our services are packaged as bundled services offering end-to-end solutions.
      Additionally, these competitors are marketed as an alternative to the healthcare
      provider’s current billing system. Our products and services are designed to
‘‘plug in’’ to, and work in conjunction with, a healthcare provider’s existing
      system to simplify and accelerate the means of claims payment.




·
            **Clearinghouses:**A
                clearinghouse functions primarily as a conduit between a healthcare
                provider and payer by electronically transmitting claims, or converting
                claims to paper format when necessary. Currently, there are many
                clearinghouses in operation and competition is fierce amongst
                them.




Although
      many clearinghouses boast about their particular ‘‘claim scrubbing’’ features,
      these are typically limited to the most basic editing functions, namely
      validating for format and completeness. Some clearinghouses claim to maintain
      or
      access payer specific databases. Such databases allow potential editing
      enhancements, but not analysis of claims prior to submission. They also are
      not
      verifying and fixing claims against specific contracts, rules and fee schedules
      applicable to the specific provider and particular claim. One advantage
      clearinghouses do have is their ability to meet the specific data requirements
      of designated payers. However, we offer this same advantage, by contracting
      directly with clearinghouses such as Emdeon and including their value added
      services with our own. The end result is that all the unique features offered
      by
      clearinghouses are passed on to our clients, eliminating the need for a
      healthcare provider’s separate clearinghouse submission and
      expense.




12




One
      competitor, Providerpay.com, claims it will process a healthcare provider’s
      submissions against payer-specific edits, send the claim on to the payer,
      advance funds on a line of credit and deposit those funds into the provider’s
      operating account within two business days. Providerpay.com also claims to
      process the payment and deposit it to the provider’s account. The healthcare
      provider may access certain information regarding the history of submitted
      claims, including claims status.




Providerpay.com’s
      website states that Providerpay.com is a cooperative effort of P5, Inc. and
      a
      bank, and involves technology that may be patent protected or patent pending.
      Providerpay.com is advertised as ‘‘complete payment solutions’’.




Providerpay.com
      appears to have some Web-based tools for performing data-based edits, like
      other
      clearinghouses, and then funding on a line of credit with a bank. There is
      no
      indication the edits are based on actual payer contracts or an outsourced
      contract management system with automated, batched and/or real time
      functionality. There is no indication of eligibility, pre-certification or
      referral analysis. The loan is not advertised as a revolving line of credit,
      but
      rather a more conventional type of loan as described below. Similarly, it is
      unclear Providerpay.com automates/batches reconciliation, settlement and account
      management for all providers and payers, or posts critical information back
      to
      the provider’s practice management system. Rather, its website and published
      online help documentation seems to indicate the potential for extensive user
      interaction with its system. This user intervention may include providers
      performing their own reconciliation and sending and managing claims through
      multiple sources and clearinghouses. Finally, there is no indication of billing
      or collection services, either as a separate or integrated feature of their
      system. Additionally, Providerpay.com’s website does not indicate funding or
      electronic submission and/or remittance reconciliation for workers’
compensation, durable medical equipment and pharmacy claims.




·
            **Editing
                Engines:**Some
                form of ‘‘editing engine’’ is integrated into most practice management or
                claims management systems, as well as clearinghouses. These engines
                allow
                healthcare providers to submit ‘‘cleaner’’ claims to payers, thereby
                reducing the percentage of rejections, reductions or denials. The
                significant difference with most editing engines, however, is that
                the
                healthcare provider maintains them, which can be costly and time
                consuming. Our clients do not have to continually monitor and update
                the
                rules engine to ensure the proper edits are in
                place.




·
            **Medical
                Receivables Funding:**Until
                recently, a healthcare provider’s options for immediate cash flow were
                mostly limited to bank loans based on personal credit and personal
                guarantees, sales of claims to factoring companies, or bundling of
                claims
                in large volume practices for sale to wealthy private investors.
                Collateral security could include medical equipment and office assets
                such
                as fixtures and furnishings, as well as compensating
                balances.




A
      bank
      loan is reflected on a healthcare provider’s balance sheet as a debt, and
      requires repayment of the debt with cash. Factoring companies actually purchase
      claims from healthcare providers, creating ‘‘off balance sheet’’ funding. This
      may seem like an attractive offer and quick solution for healthcare providers;
      however, it requires selling a claim for a significantly reduced price, as
      the
‘‘purchase’’ amount is determined to a great extent by the estimated risk and
      time that it will take for a particular payer to adjudicate or deny payment
      of
      the claims, as well as allowing for a substantial discount on the claims,
      because of the typically significant variation in billing-to-collection ratios
      experienced by most healthcare providers.




13




True
      advance funding of medical receivables is a relatively new service in the
      healthcare industry. One competitor offering these services is Medical Capital
      Financing, which purports to lend up to 85% of the estimated reimbursement
      on a
      weekly basis, calculated as an aggregate value based on past billing and
      collection history. The fees charged to the healthcare provider are also based
      on such factors as size of practice, size of weekly receivables, and average
      turnaround time. Triad Capital is another competitor. It currently only offers
      lending to healthcare providers with net receivables of $50,000 or more, funds
      on a weekly basis, and charges a set-up fee with an average fee of 3-4 percent
      of the value of every invoice purchased. It will also purchase aged and
      charged-off invoices.




First
      Capital Funding, Corp. (‘‘First Capital’’) represents a typical medical
      receivables funding service. It currently arranges for funding of up to 85%
      of
      net receivables (as determined by First Capital) within 48 hours. First Capital
      merely performs a due diligence audit of outstanding receivables and then finds
      a lending source to provide funding. One significant disadvantage of First
      Capital is that the healthcare provider has no control over the loaned amounts
      each month. The amount is established at the time of application and remains
      the
      same throughout the term of the contract.




Providerpay.com
      offers a funding service with some features bearing some similarity to ours.
      Providerpay.com states that it will provide a line of credit within two business
      days of a claim passing certain claim edits and submitted only through its
      clearinghouse. Interest, guarantee types, asset security and covered payer
      claims are undisclosed. Comprehensive integrated claims management and billing
      solutions do not appear to be offered. Claims must be funded only through its
      clearinghouse and only with a single bank. Our revolving line of credit
      capabilities appear more extensive, including in areas critical to the
      automation and reduction of administrative workload and human intervention,
      as
      well as information demanded of a complete claims management and payment
      solutions for providers and lenders. For instance, all of our solutions and
      services are designed to work with multiple clearinghouses and
      lenders.




Despite
      the increasing business of medical receivable purchasing and/or funding
      services, we distinguish ourselves by offering a short term (120 days or less)
      revolving line of credit where the primary security is intended to be the claims
      receivables and not other provider assets or personal credit. As an asset-based
      loan, Medicare claims can be leveraged. Since claims are flagged and scrubbed
      before submission, and are valued against actual payer contracts and rules,
      valuation is enhanced, risk is reduced and costs of money can be more
      competitive. Since we can offer to advance funds to healthcare providers in
      as
      little as five business days or less from the date of claim submission for
      payment, coupled with low administrative fees and a proprietary combination
      of
      automated or batched reconciliation, posting, settlement, reporting and billing
      solutions, we believe this service to be a major marketing edge. Our new
      offerings extend this edge to the very unique workers’ compensation, durable
      medical equipment and pharmacy claims processing, purchasing and/or funding
      market.




14




**Competitive
      Analysis - Feature Comparison Chart**




**Features**
            
            **MDwerks**
            
            **ProviderPay**
            
            **EMDEON**
            
            **ATHENA**
            
            **Orthomart**
            
            **EZDME****HIPAA
                Compliant EDI**
            
            **X**
            
            **X**
            
            **X**
            
            **X**
            
            
            
            **X****Processes
                commercial and Medicare claims**
            
            **X**
            
            **X**
            
            **X**
            
            **X****Processes
                Worker’s Comp and Personal Injury claims**
            
            **X**
            
            
            
            **X**
            
            
            
            **X**
            
            **X****Processes
                DME and Pharmacy claims**
            
            **X**
            
            
            
            **X**
            
            
            
            **X**
            
            **X****Electronic
                claim submission to Medical Insurance companies**
            
            **X**
            
            **X**
            
            **X**
            
            **X****Electronic
                claim submission to Causality Insurance companies**
            
            **X**
            
            
            
            
            
            
            
            **X**
            
            **X****Online
                claim status inquiry**
            
            **X**
            
            **X**
            
            **X**
            
            **X**
            
            **X**
            
            **X****Online
                patient eligibility verification**
            
            **X**
            
            
            
            **X**
            
            **X****Fully
                managed network Payer Contract Service**
            
            **X**
            
            
            
            
            
            **X****In-depth
                real-time clinical claim edits and error analysis**
            
            **X**
            
            **X**
            
            
            
            **X****Automatic
                data table updates (CPTs, ICDs, and Fee Schedules)**
            
            **X**
            
            
            
            **X**
            
            **X****Advanced
                reporting and statistical analysis**
            
            **X**
            
            
            
            
            
            **X****Electronic
                remittance processing (ERA)**
            
            **X**
            
            **X**
            
            **X**
            
            **X**
            
            
            
            **X****Automatic
                payment posting and reconciliation**
            
            **X**
            
            
            
            **X**
            
            
            
            
            
            **X****Funding/Purchasing
                of medical receivables**
            
            **X**
            
            **X****Full
                Web-based platform (ASP)**
            
            **X**
            
            **X**
            
            **X**
            
            **X**
            
            **X**
            
            **X****Full
                conversion of all paper ERA’s to electronic HIPAA compliant
                EDI**
            
            **X****Comprehensive
                Billing and Collections Service**
            
            **X**
            
            
            
            
            
            **X**




**History
      of the Company**




After
      5
      years of research, development and testing with strategic and ‘‘name brand’’
resources, the designer of Xeni Systems’ products, MEDwerks, LLC, substantially
      completed the initial product development cycle for the products offered by
      Xeni
      Systems. The solutions developed by MEDwerks, LLC were tested with 2 doctors
      and
      2 banks. In October of 2003, MEDwerks, LLC ceased operations, due to a lack
      of
      continuing operating capital. In October of 2004, substantially all of the
      assets of MEDwerks, LLC were acquired by Xeni Systems pursuant to a Contribution
      and Stockholders Agreement (the ‘‘Contribution Agreement’’) in exchange for
      MEDwerks, LLC receiving approximately a 67% equity interest in Xeni Systems.
      The
      purpose of the Contribution Agreement transaction was to launch and market
      the
      MDwerks System commercially, utilizing a growth oriented management team of
      seasoned professionals. Xeni Systems successfully obtained investment and
      financing of $450,000 and positioned the technology for demonstration and
      pre-commercial sale.




15




Xeni
      Financial was organized in February 2005, to finance providers seeking loans
      on
      receivables processed through Xeni Systems. Xeni Billing was organized in March
      2005, to provide billing services to providers processing their claims through
      Xeni Systems.




MDwerks
      Global Holdings, Inc. was originally formed under the name Global IP
      Communications, Inc., in October 2003, as a provider of telecommunications
      products and services. In April 2004, MDwerks Global Holdings, Inc. decided
      to
      discontinue its telecommunications business and in December 2004, it decided
      to
      focus on a new line of business in the area of providing insurance claims
      transaction solutions and related services through investment in Xeni Systems.
      In December 2004, MDwerks Global Holdings, Inc. loaned $250,000 to Xeni Systems
      in exchange for a promissory note and in early May 2005, MDwerks Global
      Holdings, Inc. invested another $200,000 into Xeni Systems in exchange for
      a
      promissory note. In late May 2005, the Xeni Companies and MDwerks Global
      Holdings, Inc. determined that a holding company structure with MDwerks Global
      Holdings, Inc. serving as a holding company and overseeing the business of
      the
      Xeni Companies provided certain strategic advantages to the Xeni Companies.
      In
      addition, it also provided the Xeni Companies with access to cash held by
      MDwerks Global Holdings, Inc. to continue to fund the business of the Xeni
      Companies. As a result, the Xeni Companies became wholly-owned subsidiaries
      of
      MDwerks Global Holdings, Inc., pursuant to share exchange agreements between
      MDwerks and each of the shareholders of the Xeni Companies. Each of the
      promissory notes issued by Xeni Systems to MDwerks Global Holding, Inc. was
      cancelled in connection with the share exchange.




Western
      Exploration, Inc.(later to be known as MDwerks, Inc.) was incorporated in the
      State of Delaware on July 22, 2003. From then, until November, 2005, it was
      a
      resource exploration stage company. In December, 2003, Western Exploration,
      Inc.. was presented with the opportunity to purchase a property that potentially
      contains a large resource of limestone. Based on such opportunity, Western
      Exploration, Inc. carried out research on the limestone market in the province
      of British Columbia as well as the Pacific Northwest region of the United
      States. Western Exploration, Inc. was unable to obtain adequate financing to
      continue its operations as they were conducted and determined to cease
      operations.




On
      October 12, 2005, Western Exploration, Inc., MDwerks Global Holdings, Inc.
      and
      MDwerks Acquisition Corp., a Florida corporation (‘‘Acquisition Corp.’’), and
      wholly-owned subsidiary of Western Exploration, Inc., entered into an Agreement
      of Merger and Plan of Reorganization (the ‘‘Merger Agreement’’) pursuant to
      which, on November 16, 2005, Acquisition Corp. was merged with and into MDwerks
      Global Holdings, Inc., with MDwerks Global Holdings, Inc. surviving as a
      wholly-owned subsidiary of Western Exploration, Inc. (the ‘‘Merger’’). MDwerks,
      Inc. acquired all of the outstanding capital stock of MDwerks Global Holdings,
      Inc. in exchange for issuing shares of Common Stock of Western Exploration,
      Inc.
      to MDwerks Global Holdings Inc.’s stockholders at a ratio of 0.158074 shares of
      Common Stock for each share of MDwerks Global Holdings, Inc. common stock
      outstanding at the effective time of the Merger. Upon the closing of the Merger,
      we changed our corporate name from ‘‘Western Exploration, Inc.’’ to ‘‘MDwerks,
      Inc.’’ and succeeded to the business of MDwerks Global Holdings, Inc. as our
      sole line of business under the direction of MDwerks Global Holdings, Inc.’s
      management.




In
      connection with the Merger described above, we completed the closing of a
      private offering of our securities in which, through December 31, 2005, we
      sold
      an aggregate of approximately 64 Units to accredited investors in the
      Private Placement, pursuant to the terms of a Confidential Private Placement
      Memorandum dated June 13, 2005, as supplemented. Each Unit consisted of 10,000
      shares of common stock and a warrant to purchase 10,000 shares of common stock.
      Each warrant entitles the holder to purchase 10,000 shares of common stock
      for
      $2.50 per share. The Units were offered by Brookshire Securities Corporation,
      as
      placement agent, pursuant to a placement agent agreement under which the
      placement agent, in addition to a percentage of gross proceeds of the Private
      Placement, received 96,000 shares of common stock and a warrant to purchase
      up
      to an aggregate of 64,000 shares of common stock. We realized gross proceeds
      from the Private Placement of $1,600,000, before payment of commissions and
      expenses.




16




On
      June
      28, 2006 we completed a private placement offering of units, pursuant to the
      terms of a Confidential Private Placement Memorandum dated February 1, 2006.
      Each unit consisted of one share of Series A Convertible Preferred Stock and
      a
      detachable three-year Series A Warrant to purchase twenty thousand (20,000)
      shares of our common stock at an exercise price of $3.00 per share (‘‘Series A
      Preferred Units’’). We sold an aggregate of 28.3 Series A Convertible Preferred
      Units to accredited investors in this private placement. As of December 31,
      2007, 26.3 shares of Series A Convertible Preferred Stock had been converted
      into 526,667 shares of common stock. The Series A Preferred Units were offered
      by Brookshire Securities Corporation, as placement agent. The placement agent,
      in addition to a percentage of gross proceeds of the second private placement,
      received 170,000 shares of common stock and, for nominal consideration, a
      warrant to purchase up to an aggregate of 56,667 shares of common stock at
      an
      exercise price of $1.50 per share. We realized gross proceeds from the second
      private placement of $1,700,000, before payment of commissions and
      expenses.




Pursuant
      to the Private Placement Subscription documents, we agreed to file a
      registration statement with the Securities and Exchange Commission to register
      the shares and warrants held by the selling security holders for resale. That
      registration statement was declared effective on December 7, 2006. We have
      agreed to maintain the effectiveness of the registration statement from the
      effective date through and until the earlier of two years following December
      31,
      2005 (which was the termination date of the first private placement described
      above) or the earlier of two years following June 28, 2006 (which was the
      effective date of the termination of the second private placement described
      above) and such time as exempt sales pursuant to Rule144(k) under the Securities
      Act of 1933 (‘‘Rule 144(k)’’) may be permitted for purchasers of
      Units.




On
      August
      24, 2006, we received gross proceeds of $250,000 (net proceeds of $236,566,
      after expenses) in connection with a financing provided by an unrelated party.
      These notes bore interest at 7% per year, and both interest and principal were
      paid in full on October 1, 2007.




On
      August
      24, 2006, we received gross proceeds of $110,000 (net proceeds of $100,000,
      after expenses) in connection with a financing provided equally by two unrelated
      parties. These notes bore interest at 10% per year, and both interest and
      principal were paid in full on the January 21, 2007 maturity date




On
      each
      of October 20, 2006 and November 9, 2006 we received net proceeds of $2,375,000
      for total net proceeds of $4,750,000 in the aggregate in connection with a
      financing provided by Gottbetter Capital Master, Ltd., an unaffiliated
      accredited institutional investor (”Gottbetter’’). Pursuant to the terms of a
      Securities Purchase Agreement that we entered into with Gottbetter in connection
      with the financing, we issued two senior secured convertible promissory notes
      to
      Gottbetter, each in the original principal amount of $2,500,000 (each a ‘‘Senior
      Note’’ and collectively, the ‘‘Senior Notes’’), five year Series D Warrants to
      purchase 375,000 shares of our common stock at a price of $2.25 per share
      (‘‘Series D Warrants’’) and five year Series E Warrants to purchase 375,000
      shares of our common stock at a price of $3.25 per share (‘‘Series E
      Warrants’’).




The
      Gottbetter Securities Purchase Agreement provides to Gottbetter, for so long
      as
      the Senior Notes remain outstanding, a right of first refusal to purchase
      securities offered by MDwerks, Inc., except for the issuance of Excluded
      Securities (as defined in the Gottbetter Securities Purchase Agreement). The
      Gottbetter Securities Purchase Agreement also contains restrictions against
      issuing shares of our Common Stock for a price per share that is less than
      the
      price at which our Common Stock is traded on any national exchange or market.
      This restriction also covers the issuance of convertible securities with an
      exercise or conversion price that is lower than the price at which our Common
      Stock is traded on any national exchange or market.




17




The
      Senior Notes bear interest at the rate of 8% per year, payable monthly in
      arrears, commencing December 1, 2006. Subject to certain mandatory prepayment
      provisions, and events of default, unpaid principal and interest due under
      the
      Senior Notes, as amended, will become due and payable on January 1, 2011. The
      Senior Notes require monthly principal payments until the January 1, 2011
      maturity date. The Senior Notes are convertible, at the option of the holder,
      into shares of our common stock at a price of $2.25 per share (the ‘‘Conversion
      Price’’), subject to adjustment for stock splits, stock dividends, or similar
      transactions, sales of our common stock at a price per share below the
      Conversion Price or the issuance of convertible securities or options or
      warrants to purchase shares of our common stock at an exercise price or
      conversion price that is less than the Conversion Price.




The
      Senior Notes provide for optional redemption by us at a redemption price equal
      to 110% of the face amount redeemed plus accrued interest.




Events
      of
      default will result in a default rate of interest of 15% per year and the holder
      may require that the Senior Note be redeemed at the Event of Default Redemption
      Price (as defined in the Senior Notes). The Event of Default Redemption Price
      includes various premiums depending on the nature of the event of default.
      Events of default include, but are not limited to,: (i) the failure to keep
      the
      registration statement covering shares underlying the Senior Notes, the Series
      D
      Warrants and the Series E Warrants effective, as required by the Registration
      Rights Agreement that we entered into with Gottbetter; (ii) suspension from
      trading on the OTC Bulletin Board; (iii) failure to timely deliver shares in
      the
      event the Senior Notes are converted; (iv) failure to reserve adequate shares
      for conversion of the Senior Notes; (v) failure to pay principal, interest
      or
      late charges when due; (vi) any default in the payment of other indebtedness
      in
      excess of $250,000; (vii) bankruptcy events; and (viii) judgments against us
      in
      excess of $250,000.




The
      Senior Notes also provide that in the event of a Change of Control (as defined
      in the Senior Notes), the holder may require that such holder's Senior Note
      be
      redeemed at the Change of Control Redemption Price (as defined in the Senior
      Notes). The Change of Control Redemption Price includes certain premiums in
      the
      event a Senior Note is redeemed in the event of a Change of
      Control.




The
      Series D Warrants are exercisable at a price of $2.25 per share for a period
      of
      five years from the date of issuance. The Series D Warrants may be exercised
      on
      a cashless basis. The exercise price will be subject to adjustment in the event
      of subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series D Warrants, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series D Warrants, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series D Warrants.




The
      Series E Warrants, as amended, are exercisable at a price of $2.25 per share
      for
      a period of five years from the date of issuance. The Series E Warrants may
      be
      exercised on a cashless basis. The exercise price will be subject to adjustment
      in the event of subdivision or combination of shares of our common stock and
      similar transactions, distributions of assets, issuances of shares of common
      stock with a purchase price below the exercise price of the Series E Warrants,
      issuances of any rights, warrants or options to purchase shares of our common
      stock with an exercise price below the exercise price of the Series E Warrants,
      issuances of convertible securities with a conversion price below the exercise
      price of the Series E Warrants.




18




We
      entered into a Security Agreement with Gottbetter . The Security Agreement,
      as
      amended, provides for a lien in favor of Gottbetter on all of our assets except
      for certain assets of our subsidiary, Xeni Financial.




Our
      subsidiaries entered into a Guaranty Agreement with Gottbetter, pursuant to
      which they have agreed to unconditionally guaranty our obligations under the
      Senior Notes and the documents entered into by us in connection the sale of
      the
      Senior Notes.




We
      also
      entered into a Registration Rights Agreement and amendments thereto with
      Gottbetter. Pursuant to the amended Registration Rights Agreement, we included
      in our registration statement that was declared effective on December 7, 2006,
      2,777,778 shares underlying the Senior Notes. In addition to it being an event
      of default under the Senior Notes, if we fail to maintain the effectiveness
      of
      the registration statement as required by the Registration Rights Agreement,
      the
      exercise price of the Series D and the Series E Warrants will immediately be
      reduced by $0.25 per share and then reduced by an additional $0.10 per share
      for
      each thirty day period thereafter that the registration statement is not filed
      or effective, as the case may be, up to a maximum reduction of
      $0.65.




On
      August
      31, 2007 we received net proceeds of $250,000 in connection with a financing
      provided by Vicis Capital Master Fund (“Vicis”), an unaffiliated accredited. In
      connection with the financing, we issued a 31-day Convertible Note to Vicis
      in
      the original principal amount of $250,000 (the “Vicis Convertible
      Note”).




On
      September 28, 2007 we received net proceeds of $1,633,190, after repayment
      of the Vicis Convertible Note, interest and closing expenses, in connection
      with
      a financing provided by Vicis. In connection with the financing, pursuant to
      the
      terms of a Securities Purchase Agreement, we issued 200 shares of Series B
      Convertible Preferred Stock (“Series B Preferred Stock”), a seven year Series F
      Warrant to purchase 1,500,000 shares of our common stock at a price of $2.25
      per
      share and a seven year Series G Warrant to purchase 1,000,000 shares of our
      common stock at a price of $2.50 per share.





The
      following are summary descriptions of the material agreements entered into
      in
      connection with the transaction described above and such descriptions are
      qualified in its entirety by reference to the full agreements filed either
      as
      exhibits hereto or previous SEC filings.





*Securities
      Purchase Agreement*





The
      Securities Purchase Agreement provided for the sale of (i) 200 shares of Series
      B Preferred Stock (ii) Series F Warrants to purchase an aggregate of 1,500,000
      shares of Common Stock and (iii) Series G Warrants to purchase an aggregate
      of
      1,000,000 shares of Common Stock. Pursuant to the Securities Purchase Agreement,
      the aggregate purchase price for the Series B Preferred Stock, the Series F
      Warrants and the Series G Warrants was $2 million. Payment was made by
      $1,691,445 in cash, the conversion of $251,555 in principal and interest of
      the
      Vicis Convertible Note and deduction of certain closing expenses.





The
      Securities Purchase Agreement provides to Vicis, for a period of eighteen months
      after the closing date, a right of first refusal with respect to subsequent
      placements of equity or equity equivalent securities by us.





The
      Securities Purchase Agreement contains certain restrictions on our ability
      to:
      (i) declare dividends; (ii) reclassify, combine or reverse split our Common
      Stock; (iii) incur liens; (iii) incur certain types of indebtedness; (iv) issue
      classes of securities senior to, or *pari
      passu* with,
      the Series B Preferred Stock; (v) liquidate or sell a substantial portion of
      our
      assets; (vi) enter into transactions that would result in a Change of Control
      (as defined in the Securities Purchase Agreement); (vi) amend our charter
      documents in a way that adversely affects the rights of Vicis; (vii) except
      through Xeni Financial, make loans to, or advances or guarantee the obligations
      of, third parties; (viii) make intercompany transfers; (ix) engage in
      transactions with officers, directors, employees or affiliates; (x) divert
      business to other business entities; (xi) make investments in securities or
      evidences of indebtedness (excluding of loans made by Xeni Financial) in excess
      of $250,000 in a calendar year; and (xii) file registration
      statements.




19




Events
      of
      default under the Securities Purchase Agreement include: (i) default in the
      payment of dividends on or the failure to redeem the Series B Preferred Stock
      when due; (ii) failure to perform the covenants contained in the Securities
      Purchase Agreement or the related transaction documents; (iii) failure to file,
      or cause to become effective, a registration statement covering the shares
      of
      Common Stock underlying the Series F Warrants, the Series G Warrants and the
      Series B Preferred Stock within the timeframes required by the Registration
      Rights Agreement or the failure to keep such registration effective as required
      by the Registration Rights Agreement; (iv) suspension from listing on the OTC
      Bulletin Board or other exchange for 10 consecutive trading days; (v) the
      failure to timely deliver shares of Common Stock upon conversion of the Series
      B
      Preferred Stock or exercise of the Series F Warrants or the Series G Warrants;
      (vi) default in the payment of indebtedness in excess of $250,000; (vii) a
      judgment entered against us in excess of $250,000; and (viii) insolvency,
      bankruptcy and similar circumstances.





The
      Securities Purchase Agreement also contains customary representations,
      warranties, covenants and indemnification provisions for transactions of the
      type entered into between the Company and Vicis.





*Series
      B Preferred Stock*





The
      Certificate of Designations, which designates the rights, preferences,
      privileges and terms of the Series B Preferred Stock (the “Certificate of
      Designations”) provides that the Series B Preferred Stock will rank senior to
      other classes of Common Stock and preferred stock that are currently outstanding
      as to distributions of assets upon liquidation, dissolution or winding up and
      as
      to payment of dividends on shares of equity securities.





Each
      share of Series B Preferred Stock is entitled to cumulative dividends at the
      annual rate of 8% of the stated value of the Series B Preferred Stock. The
      stated value of each share of Series B Preferred Stock is $10,000. Dividends
      are
      payable in cash or additional shares of Series B Preferred Stock.





Each
      share of Series B Preferred Stock is convertible, at any time, at the option
      of
      the holder, into the number of shares of Common Stock determined by dividing
      the
      stated value of the Series B Preferred Stock by the conversion price. The
      initial conversion price of the Series B Preferred Stock is $2.25 per
      share.





The
      conversion price is subject to adjustment for stock splits, dividends,
      subdivisions, distributions, reorganizations and similar transactions.
      Furthermore, the conversion price is also subject to adjustment in the event
      of
      the issuance of securities for a price below the conversion price then in effect
      or the issuance of convertible securities with an exercise or conversion price
      that is less than the then current conversion price for the shares of Series
      B
      Preferred Stock.





To
      the
      extent that any shares of Series B Preferred Stock remain outstanding on
      September 28, 2008, each holder thereof shall have the option to either require
      us to redeem such holder’s shares of Series B Preferred Stock or convert such
      holder’s shares of Series B Preferred Stock into shares of Common Stock at the
      conversion price then in effect.





Holders
      of Series B Preferred Stock have the option to require us to redeem shares
      of
      Series B Preferred Stock in the event of a Change of Control (as defined in
      the
      Certificate of Designations).




20




Holders
      of Series B Preferred Stock are entitled to vote on matters submitted to our
      stockholders as if the Series B Preferred Stock had been converted into shares
      of Common Stock pursuant to the terms of the Certificate of Designations. To
      the
      extent the holders of Series B Preferred Stock are required to vote separately,
      as a class, the affirmative vote of the holders of a majority of the outstanding
      shares of Series B Preferred Stock will be required to approve the matter to
      be
      voted upon.





*Series
      F Warrants*





The
      Series F Warrants are exercisable at a price of $2.25 per share for a period
      of
      seven years from the date of issuance. The Series F Warrants may be exercised
      on
      a cashless basis. The exercise price will be subject to adjustment in the event
      of subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series F Warrants, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series F Warrants, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series F Warrants.




*Series
      G Warrants*





The
      Series G Warrants are exercisable at a price of $2.50 per share for a period
      of
      seven years from the date of issuance, with the same provisions as the Series
      F
      warrants.




*Security
      Agreement*





We,
      along
      with our subsidiaries MDwerks, Xeni Medical, Xeni Financial, Xeni Billing,
      and
      PPS entered into Security Agreements with Vicis. The Security Agreements provide
      for liens in favor of Vicis on all of our assets, including the assets of each
      of our subsidiaries, except for the accounts receivable and certain contract
      rights of Xeni Financial Services, Corp.





*Guaranty
      Agreement*





Our
      subsidiaries, MDwerks, Xeni Medical, Xeni Financial, Xeni Billing, and
      PPS entered into Guaranty Agreements with Vicis, pursuant to which they
      have agreed to unconditionally guaranty our obligations under the Series B
      Preferred Stock and the documents entered into by us in connection with the
      sale
      of the Series B Preferred Stock.





*Registration
      Rights Agreement*





We
      entered into a Registration Rights Agreement with Vicis. The Registration Rights
      Agreement requires us to file a registration statement covering the resale
      of
      the shares underlying the Series B Preferred Stock, the Series F Warrants and
      the Series G Warrants within 365 calendar days after the closing date. We are
      required to cause such registration statement to become effective on or before
      the date which is 485 calendar days after the filing of such registration
      statement. In addition to it being an event of default under the Securities
      Purchase Agreement, if we fail to file such registration statement in the time
      frame required, fail to cause it to become effective in the time frame required,
      or fail to maintain the effectiveness of the registration statement as required
      by the Registration Rights Agreement, we will be required to pay a cash penalty
      in the amount of 2% of the aggregate stated value of the Series B Preferred
      Stock for each month, or part thereof, that the registration statement is not
      filed or effective, as the case may be. The cash penalty is limited to 15%
      of
      the aggregate stated value of the Series B Preferred Stock.




21




The
      Registration Rights Agreement also provides for piggyback registration
      rights.





*Amendment,
      Consent & Waiver Agreement*





In
      connection with the transactions described above, we entered into a Consent
      and
      Waiver Agreement with Gottbetter (the “Consent and Waiver Agreement”), whereby,
      among other things: (i) Gottbetter consented to the transactions described
      above, (ii) Gottbetter agreed to delay, until February 1, 2008, principal
      payments under the Senior Secured Convertible Note issued by the Corporation
      to
      Gottbetter on October 19, 2006 (the “October Note”) and under the Senior Secured
      Convertible Note issued by the Corporation to Gottbetter on November 9, 2006
      (the “November Note”), (iii) Gottbetter agreed that its right of first refusal
      with respect to subsequent financings will be on a *pro
      rata, pari passu* basis
      with Vicis and (v) Gottbetter released its security interest in certain
      collateral of Xeni Financial.





Also
      in
      connection with the transactions described above, the conversion price of the
      Gottbetter Series E Warrants were reduced to $2.25 per share subject to further
      adjustment, and the number of Warrant Shares for which such warrants may be
      exercised were increased to 541,666 and 2/3 shares subject to further
      adjustment.





In
      consideration of Gottbetter entering into the Consent and Waiver Agreement,
      we
      issued to Gottbetter additional Series D Warrant to purchase 500,000 shares
      of
      our Common Stock.




*Amended
      & Restated Notes*




In
      order
      to memorialize the extension of the principal payment date to February 1, 2008
      in the October Note and the November Note, we issued to Gottbetter an amended
      and restated October Note and an amended and restated November
      Note.




22




On
      December 3, 2007 we received net proceeds of $575,000 in connection with a
      financing provided by Vicis. In connection with the financing, we issued a
      Convertible Note to Vicis in the original principal amount of $575,000 (the
      “Note”). The Note bears interest at the rate of 8% per year. Subject to certain
      prepayment provisions, unpaid principal and interest due under the Note will
      become due and payable on December 2, 2008.




On
      January 18, 2008, we received net proceeds of $500,000 in connection with a
      financing provided by Vicis. In connection with the financing, we and Vicis
      entered into a Securities Purchase Agreement, dated January 18, 2008 (the
“January Securities Purchase Agreement”), pursuant to which we issued to Vicis
      50 shares of Series B Preferred Stock, a Series F Warrant to purchase 375,000
      shares of our common stock at a price of $2.25 per share and a seven year Series
      G Warrant to purchase 250,000 shares of our common stock at a price of $2.50
      per
      share.




The
      Securities Purchase Agreement, dated January 18, 2008, by and between Vicis
      and
      us (the “January Securities Purchase Agreement”) provided that our obligations
      to Vicis under the Series B Preferred Stock, the January Securities Purchase
      Agreement and the various transaction documents entered into in connection
      with
      the January Securities Purchase Agreement (the “January Transaction Documents”)
      are secured by a lien on all of our assets pursuant to the Security Agreement,
      dated September 28, 2007, between us and Vicis.




The
      January Securities Purchase Agreement further provided that our obligations
      under the Series B Preferred Stock, the January Securities Purchase Agreement
      and the January Transaction Documents are guaranteed by each of our subsidiaries
      pursuant to the terms of the Guaranty Agreements previously entered into between
      Vicis and each of our subsidiaries in September 2007.




The
      January Securities Purchase Agreement also provided that the guaranty
      obligations of our subsidiaries in connection with the January Securities
      Purchase Agreement and the January Transaction Documents are secured by the
      liens on all of the assets of each our subsidiaries, except for the accounts
      receivable and certain contract rights of Xeni Financial Services, Corp.,
      created pursuant to the Security Agreements, previously entered into by and
      between our subsidiaries and Vicis in September 2007.




In
      connection with the sale of the Series B Preferred Stock, we amended the
      Registration Rights Agreement previously entered into, by and between Vicis
      and
      us in September 2007, pursuant to which we agreed, in addition to registering
      the securities previously covered by such Registration Rights Agreement, to
      register for resale, the shares of our common stock into which the Series B
      Preferred Stock sold pursuant to the January Securities Purchase Agreement
      is
      convertible and the shares of our common stock for which the Series F Warrants
      and the Series G Warrants sold pursuant to the January Securities Purchase
      Agreement are exercisable.




On
      March
      1, 2008, the Company and Gottbetter amended the Senior Notes to extend the
      maturity date of the Senior Notes to January 1, 2011 and delay principal
      payments until March 1, 2008, if the Company is able to secure additional
      financing by March 31, 2008. If the Company is unable to secure additional
      financing by March 31, 2008, the amendment to the Senior notes will be void
      and
      of no force and effect. In consideration of the amendment to the Senior Notes,
      if we are able to obtain at least $5,000,000 in additional financing, MDwerks,
      Inc. will issue to Gottbetter 2,000,000 warrants at an exercise price to be
      determined at the time of the financing. We are in discussions with Vicis
      regarding the provision of additional financing.




23




**Corporate
      Information Regarding the Company and its Subsidiaries**




MDwerks,
      Inc. is a corporation, organized under the laws of the State of Delaware,
      originally formed on July 22, 2003.




MDwerks
      Global Holdings, Inc. is a corporation, organized under the laws of the State
      of
      Florida, originally formed on October 23, 2003.




Xeni
      Systems, Inc. is a corporation organized under the laws of the State of
      Delaware, originally formed on July 21, 2004.




Xeni
      Financial Services Corporation is a corporation organized under the laws of
      the
      State of Florida, originally formed on February 3, 2005.




Xeni
      Medical Billing Corp. is a corporation organized under the laws of the State
      of
      Delaware, originally formed on March 2, 2005.




Patient
      Payment Solutions, Inc. is a corporation organized under the laws of the State
      of Florida, originally formed on May 30, 2007.




Our
      principal executive office is located at Windolph Center, Suite I, 1020 NW
      6th Street, Deerfield Beach, Florida 33442 and our telephone number is (954)
      389-8300. Our website address is www.mdwerks.com.




**Employees**




We
      employ
      approximately 16 people who devote their full business time to our activities
      and 1 person who devotes some of their business time to our
      activities.




**Intellectual
      Property**




A
      United
      States patent application regarding certain aspects of our systems was
      filed by our predecessor, MEDwerks, LLC, on April 15, 2002. The US Patent Office
      has recently issued
      an office action indicating that it will not allow a patent based upon
      our current
      claims .
      Our
      patent counsel, DLA Piper US
      LLP is in the process of modifying our
      patent application claims based
      upon the US Patent Office's action and will submit a
      response to the office action. If the response from the US Patent Office to
      our
      modified claims is unfavorable or only partially successful, the process may be extended up to
      3 years and we could incur substantial expenses
      in prosecuting the patent. We plan to undertake prosecution of the patent filing
      to conclusion, if practical and economical.




**Properties**




The
      Company sub-leased its facility, on a month-to-month basis, under a master
      lease
      expiring July 2008. Rent expense for the year ended December 31, 2007 was
      $83,772. On February 1, 2008, the Company was assigned the master lease and
      a
      5-year lease option was exercised which extends the master lease until June
      2013.




**Government
      Regulation**




See
      Risk
      Factors - ‘‘We are subject to substantial government regulations.’’




24




**RISK
      FACTORS**




***We
      have a very limited operating history, making it difficult to accurately
      forecast our revenues and appropriately plan our
      expenses.***




We
      began
      operations as Xeni Systems, when, in October 2004, Xeni Systems acquired
      substantially all of the assets of MEDwerks, LLC. MEDwerks, LLC, commenced
      operations in 2000 and focused the majority of its capital and time developing
      software programs for the medical transaction system employed by us. From its
      inception, MEDwerks, LLC incurred substantial net losses in each fiscal year
      of
      operation. MEDwerks, LLC closed down its business operations in October 2003,
      before ever launching its products and services commercially. Xeni Financial
      was
      formed in February 2005 and currently provides its products and services only
      to
      customers of Xeni Systems. Xeni Billing was formed in March 2005 and currently
      provides its products and services only to customers of Xeni Systems. MDwerks
      Global Holdings, Inc. was originally formed in October 2003 for the purpose
      of
      operating a business as a provider of telecommunications products and services.
      In April 2004, MDwerks Global Holdings, Inc. discontinued its telecommunications
      business and in December 2004, it began to focus on developing the business
      of
      Xeni Systems. Pursuant to share exchange agreements, MDwerks Global Holdings,
      Inc. acquired Xeni Systems, Xeni Financial and Xeni Billing as wholly-owned
      subsidiaries. In November, 2005, we acquired MDwerks Global Holdings, Inc.
      as a
      wholly-owned subsidiary and we operate the businesses of MDwerks Global
      Holdings, Inc. and the Xeni Companies as our sole lines of business.
      Accordingly, we should be viewed as an entity with a very limited operating
      history.




Because
      we have had a limited operating history, it is difficult to accurately forecast
      our revenues and expenses. Additionally, our operations will continue to be
      subject to risks inherent in the establishment of a developing new business,
      including, among other things, efficiently deploying our capital, developing
      our
      product and services offerings, developing and implementing our marketing
      campaigns and strategies and developing awareness and acceptance of our
      products. Our ability to generate future revenues will be dependent on a number
      of factors, many of which are beyond our control, including the pricing of
      other
      services, overall demand for our products, market competition and government
      regulation. As with any investment in a company with a limited operating
      history, ownership of our securities may involve a high degree of risk and
      is
      not recommended if an investor cannot reasonably bear the risk of a total loss
      of his or her investment.




***We
      have historically incurred net losses and may not be profitable in the future.
      In addition, we intend to continue to spend resources on maintaining and
      strengthening our business and this may cause our operating expenses to increase
      and operating results to decrease.***




Our
      net
      loss attributable to common shareholders for the year ended December 31, 2007
      was $9,882,330 and since our inception, our accumulated deficit as of December
      31, 2006 was $36,490,240. We expect to continue to incur additional substantial
      operating and net losses for the foreseeable future. The profit potential of
      our
      business model is unproven, and, to be successful, we must, among other things,
      develop and market products and services that would be widely accepted by
      potential users of such products and services at prices that will yield a
      profit. If our products and services cannot be commercially developed and
      launched, and do not achieve or sustain broad market acceptance we will not
      achieve sufficient revenues to continue to operate our business.




If
      we
      continue to incur losses in future periods, we may be unable to retain employees
      or fund investments in our systems development, sales and marketing programs,
      research and development and business plan. There can be no assurance that
      we
      will ever obtain sufficient revenues to exceed our cost structure and achieve
      profitability. If we do achieve profitability, there can be no assurance that
      we
      may sustain or increase profitability in the future.




25




The
      report of our independent registered public accountants contains the following
      statement with which we concur: ‘‘the accompanying consolidated 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 recurring losses from operations that raises substantial doubt about
      its ability to continue as a going concern.’’




***We
      will need to raise additional capital in the future and may need to initiate
      other operational strategies to continue our
      operations.***




As
      of
      December 31, 2007, we had a cash balance of $320,903. The amount of cash
      available to us will be insufficient for us to service our current indebtedness
      and implement our business plan as anticipated and will require us to seek
      additional debt or equity financing in the near future, as we will be unable
      to
      generate sufficient cash flow from our operations. As our business develops,
      we
      will need to raise capital through the incurrence of additional long-term or
      short-term indebtedness or the issuance of additional equity securities in
      private or public transactions in order to complete further investments. This
      could result in dilution of existing equity positions, increased interest
      expense, decreased net income and diminished shareholder’s value. In addition,
      significant capital requirements associated with such investments may impair
      our
      ability to pay dividends (although we do not anticipate paying any dividends
      on
      common stock in the foreseeable future) or interest on indebtedness or to meet
      our operating needs. There can be no assurance that acceptable financing for
      future investments can be obtained on suitable terms, if at all. If we do not
      raise additional capital, we may cease to operate as a going
      concern.




***Competition
      from providers of similar products and services could adversely affect our
      revenues and financial condition.***




We
      compete in a rapidly evolving, highly competitive and fragmented market. We
      expect competition to intensify in the future. There can be no assurance that
      we
      will be able to compete effectively. We believe that the main competitive
      factors in the medical transactions processing, billing, payment and financing
      industry include effective marketing and sales, brand recognition, product
      quality, ease of product use, niche marketing and segmentation and value
      propositions. Competitive factors also include the features, functionality
      and
      cost of product and services. Many of our competitors are established,
      profitable and have strong attributes in many, most or all of these areas.
      They
      may be able to leverage their existing relationships to offer alternative
      products or services on more attractive terms or with better customer support.
      Other companies may also enter our markets with better products or services,
      greater financial and human resources and/or greater brand recognition.
      Competitors may continue to improve or expand current products and introduce
      new
      products. We may be perceived as relatively too small or untested to be awarded
      business relative to the competition. To be competitive, we will have to invest
      significant resources in business development, advertising and marketing. We
      may
      also have to rely on strategic partnerships for critical branding and
      relationship leverage, which partnerships may or may not be available or
      sufficient. We cannot assure that we will have sufficient resources to make
      these investments or that we will be able to make the advances necessary to
      be
      competitive. Increased competition may result in fee reductions, reduced gross
      margin and loss of market share. Failure to compete successfully against current
      or future competitors will result in less revenue and have a material adverse
      effect on our business, operating results and financial condition.




***If
      our technology is not operational and usable it could adversely affect our
      business.***




Xeni
      Financial and Xeni Billing rely almost exclusively on the technology of Xeni
      Systems. We believe that neither Xeni Financial nor Xeni Billing can operate
      as
      a stand-alone business, but will provide products and services that are
      ancillary to the products and services of Xeni Systems. As a result, the success
      of our business proposition is materially and substantially dependent on the
      technology of Xeni Systems (and the availability, operability and use of such
      technology in whole or in part). If the technology of Xeni Systems is not
      usable, we will be unable to operate, as our systems are dependent upon such
      technology.




26




Our
      products and services were designed and built using certain key technologies
      and
      licenses from a limited number of suppliers. We will depend on these other
      companies for software updates, technical support and possibly for system
      management or for new product development. Although we believe there might
      be
      alternative suppliers for some or all of these technologies, it would take
      a
      significant period of time and money to establish relationships with alternative
      suppliers and substitute their technologies for technologies currently being
      used. The loss of any of our relationships with these suppliers could result
      in
      system shut downs and/or the inability to offer services we offer, or intend
      to
      offer, which could result in a material adverse effect on our business,
      operating results and financial condition.




***If
      our systems fail, it could interrupt operations and could adversely impact
      us.***




Our
      operations are dependent upon our ability to support our highly complex network
      infrastructure and avoid damage from fires, earthquakes, floods, hurricanes,
      power losses, war, terrorist attacks, telecommunications failures and similar
      natural or manmade events. The occurrence of a natural disaster, intentional
      or
      unintentional human error or action, or other unanticipated problem could cause
      interruptions in the services that we provide. Additionally, the failure of
      our
      third-party backbone providers to provide the data communications capacity that
      we require, as a result of natural disaster, operational disruption or any
      other
      reason could cause interruptions in the services that we provide. Any damage
      or
      failure that causes interruptions in our operations could result in loss of
      revenues from clients, loss of clients, monetary damage, or increased costs
      of
      operations, any or all of which could have a material adverse effect on our
      business, operating results and financial condition.




***If
      we do not protect our proprietary technology and intellectual property rights
      against infringement or misappropriation and defend against third parties
      assertions that we have infringed on their intellectual property rights, we
      may
      lose our competitive advantage, which could impair our ability to grow our
      revenues.***




A
      United
      States patent application regarding certain aspects of our systems was
      filed by our predecessor, MEDwerks, LLC, on April 15, 2002. The US Patent Office
      has recently issued an office action indicating that it will not
      allow a patent based upon our current claims. Our patent counsel, DLA
      Piper US LLP is in the process of modifying our patent
      application claims based upon the US Patent Office's action
      and will submit a response to the office action. If the response from the
      US Patent Office to our modified claims is unfavorable or only
      partially successful, the process may be extended up to 3 years and we
      could incur substantial expenses in prosecuting the patent. We plan to undertake
      prosecution of the patent filing to conclusion, if practical and
      economical.




There
      is
      no assurance that the patent application will be successfully completed and
      if
      completed, there can be no assurance that the patent will afford meaningful
      protection of our intellectual property rights. Despite efforts to protect
      our
      intellectual property rights, unauthorized parties may attempt to copy aspects
      of our systems or our source code to software or to obtain or use information
      that is proprietary. The scope of any intellectual property rights that we
      have
      is uncertain and is not sufficient to prevent infringement claims against us
      or
      claims that we have violated the intellectual property rights of third parties.
      While we know of no basis for any claims of this type, the existence of and
      ownership of intellectual property can be difficult to verify and we have not
      made an exhaustive search of all patent filings. If any of our proprietary
      rights are misappropriated or we are forced to defend our intellectual property
      rights, we will have to incur substantial costs. We may not have the financial
      resources to prosecute any infringement claims that we may have or defend
      against any infringement claims that are brought against us, or choose to defend
      such claims. Even if we do, defending or prosecuting our intellectual property
      rights will divert valuable working capital and management’s attention from
      business and operational issues.




27




***If
      we are unable to retain key personnel it will have an adverse effect on our
      business. We do not maintain ‘‘key man’’ life insurance policies on our key
      personnel.***




Our
      operations have been and will continue be dependent on the efforts of Mr. Howard
      Katz, our Chief Executive Officer, Mr. Solon Kandel, our President and Mr.
      Vincent Colangelo, our Chief Financial Officer and Corporate Secretary. The
      commercialization of our products and the development of improvements to our
      products and systems, as well as the development of new products is dependent
      on
      retaining the services of certain technical personnel who were involved in
      the
      development of MDwerks’ products and services. The loss of key management, the
      inability to secure or retain such key legacy personnel with unique knowledge
      of
      our products and services and the technology and programming employed as part
      of
      our products and services, the failure to transfer knowledge from legacy
      personnel to current personnel, or an inability to attract and retain sufficient
      numbers of other qualified management personnel would adversely delay and affect
      our business, products and services and could have a material adverse effect
      on
      our business, operating results and financial condition.




We
      do not
      have ‘‘key man’’ life insurance policies for Mr. Katz, Mr. Kandel or Mr.
      Colangelo. Even if we were to obtain ‘‘key man’’ insurance for Mr. Katz, Mr.
      Kandel or Mr. Colangelo of which there can be no assurance, the amount of such
      policies may not be sufficient to cover losses experienced by us as a result
      of
      the loss of Mr. Katz, Mr. Kandel or Mr. Colangelo.




***If
      we fail to attract skilled personnel it could adversely affect our
      business.***




Our
      future success depends, in large part, on our ability to attract and retain
      highly skilled personnel. If we are unable to attract or retain qualified
      personnel in the future or there are any delays in hiring required personnel,
      particularly technical, sales, marketing and financial personnel, it could
      materially adversely affect our business, operating results and financial
      condition.




We
      will
      need to expand our sales operations and marketing operations in order to
      increase market awareness of our products and generate revenues. New sales
      personnel and marketing personnel will require training and it will take time
      to
      achieve full productivity. Competition for such personnel is intense. We cannot
      be certain that we will successfully attract and retain additional qualified
      personnel.




***The
      use of independent sales representatives or distributors will subject us to
      certain risks.***




We
      presently generate revenue from the efforts of independent sales representatives
      and we expect to generate a substantial portion of our revenue from independent
      sales representatives or distributors. Such representatives and distributors
      may
      not be required to meet sales quotas and our ability to manage independent
      sales
      representatives or distributors to performance standards is unknown. Failure
      to
      generate revenue from these sales representatives or distributors would have
      a
      negative impact on our business.




***Our
      business may subject us to risks related to nationwide or international
      operations.***




If
      we
      offer our products and services on a national, or even international, basis,
      distribution would be subject to a variety of associated risks, any of which
      could seriously harm our business, financial condition and results of
      operations.




These
      risks include:




·
              greater
                  difficulty in collecting accounts
                  receivable;
  ·
              satisfying
                  import or export licensing and product certification
                  requirements;
  ·
              taxes,
                  tariffs, duties, price controls or other restrictions on out-of-state
                  companies, foreign currencies or trade barriers imposed by states
                  or
                  foreign countries;
  ·
              potential
                  adverse tax consequences, including restrictions on repatriation
                  of
                  earnings;


28




·
            fluctuations
                in currency exchange rates;




·
            seasonal
                reductions in business activity in some parts of the country or the
                world;




·
            unexpected
                changes in local, state, federal or international regulatory
                requirements;




·
            burdens
                of complying with a wide variety of state and foreign
                laws;




·
            difficulties
                and costs of staffing and managing national and foreign
                operations;




·
            different
                regulatory and political climates and/or political
                instability;




·
            the
                impact of economic recessions in and outside of the United States;
                and




·
            limited
                ability to enforce agreements, intellectual property and other rights
                in
                foreign territories.




***We
      are subject to substantial government regulation which may adversely affect
      the
      way we conduct our business and the costs of conducting our
      business.***




The
      healthcare industry is highly regulated and is subject to changing political,
      economic and regulatory influences. Federal and state legislatures have
      periodically considered programs to reform or amend the U.S. healthcare system
      at both the federal and state level and to change healthcare financing and
      reimbursement systems, such as the Balanced Budget Act of 1997 and the Medicare
      Modernization Act of 2003. These programs may contain proposals to increase
      governmental involvement in healthcare, lower reimbursement rates or otherwise
      change the environment in which healthcare industry participants operate.
      Current or future government regulations or healthcare reform measures may
      affect our business. Healthcare industry participants may respond by reducing
      their investments or postponing investment decisions, including investments
      in
      our products and services.




Our
      medical billing, lending and collection activities are governed by numerous
      federal and state civil and criminal laws. Federal and state regulators use
      these laws to investigate healthcare providers and companies that provide
      lending, billing and collection services. In connection with these laws, we
      may
      be subjected to federal or state government investigations and possible
      penalties may be imposed, false claims actions may have to be defended, private
      payers may file claims against us, and we may be excluded from Medicare,
      Medicaid or other government-funded healthcare programs. Some of these laws
      may
      carry strict liability provisions that impose responsibilities and liabilities
      on us without any wrongdoing or negligence on our part.




We
      may
      become the subject of false claims litigation or additional investigations
      relating to our lending, billing and collection activities, even when simply
      passing on claims originating from and edited by third parties for content.
      Any
      such proceeding or investigation could have a material adverse effect on our
      business, operating results and financial condition.




Under
      the
      Health Insurance Portability and Accountability Act of 1996, or HIPAA, final
      rules were published regarding standards for electronic transactions as well
      as
      standards for privacy and security of individually identifiable health
      information. The HIPAA rules set new or higher standards for the healthcare
      industry in handling healthcare transactions and information, with penalties
      for
      noncompliance. We have incurred and we will continue to incur costs to comply
      with these rules. Compliance with these rules may prove to be more costly than
      we currently anticipate. Failure to comply with such rules may have a material
      adverse effect on our business and may subject us to civil and criminal
      penalties as well as loss of customers.




We
      will
      rely upon third parties to provide data elements to process electronic medical
      claims in a HIPAA compliant format. While we believe we will be fully and
      properly prepared to process electronic medical claims in a HIPAA-compliant
      format, there can be no assurance that third parties, including healthcare
      providers and payers, will likewise be prepared to supply all the data elements
      required to process electronic medical claims and make electronic remittance
      under HIPAA's standards. We have made and expect to continue to make investments
      in product enhancements to support customer operations that are regulated by
      HIPAA. Responding to HIPAA's impact may require us to make investments in new
      products or charge higher prices.




29




HIPAA,
      in
      part, governs the collection, use, storage and disclosure of health information
      for the purpose of safeguarding the privacy and security of such information.
      Persons who believe health information has been misused or disclosed improperly
      may file complaints against offending parties, which may lead to investigation
      and potential civil and criminal penalties from Federal or state
      governments.




The
      passage of HIPAA is part of a wider healthcare reform initiative. We expect
      that
      the debate on healthcare reform will continue. We also expect that the federal
      government as well as state governments will pass laws and issue regulations
      addressing healthcare issues and reimbursement of healthcare providers. We
      cannot predict whether the governmental-bodies regulators will enact new
      legislation and regulations, and, if enacted, whether such new developments
      will
      have an adverse affect our business, operating results or financial
      condition.




The
      Gramm
      Leach Bliley Act may govern our lending practices as related to safeguarding
      personal customer information.




***Many
      healthcare providers who are potential clients may have existing systems that
      do
      not generate electronic files in a HIPAA-compliant format, which will limit
      the
      amount of services we can provide to and the amount of revenues that can be
      generated from such healthcare providers.***




Many
      healthcare providers have practice management systems that do not have
      electronic interfaces which produce a HIPAA compliant form. If the interface
      doesn't exist, they must purchase a new system from a third party, which may
      be
      expensive and not a desirable business proposition for such healthcare
      providers. If claims cannot be submitted electronically, the claims data must
      be
      manually entered into our system, which can be time consuming and duplicative
      of
      work already done by a healthcare provider. Manually entering the data also
      subjects claims to greater risk of human error in the data entry process. While
      we believe we can provide solutions to healthcare providers to enable them
      to
      establish electronic interfaces to submit claims electronically in a HIPAA
      compliant manner, there can be no assurance healthcare providers will be willing
      to implement the solutions that we propose. If healthcare providers can not
      supply electronic medical claims and such claims are processed manually rather
      than electronically, services that we can provide will be greatly limited and
      our ability to generate revenues from such providers will be curtailed which
      could result in a material adverse affect on our business, operating results
      or
      financial condition.




***We
      may make errors in processing information provided by our clients and, as a
      result, we may suffer losses.***




We
      will
      receive detailed information provided by clients. Even if clients provide full
      and accurate disclosure of all material information to be submitted as part
      of a
      claim for payment, such information may be misinterpreted or incorrectly
      analyzed. Mistakes by our systems or personnel may cause us to incur liability
      to our clients in connection with such mistakes.




***Solutions
      and services that we offer may subject us to product liability
      claims.***




Solutions
      that we sell may fail to perform in a variety of ways, and services that we
      provide may not meet customer expectations, including shipping a product which
      is either late, does not meet customer requirements or expectations, or is
      lost,
      damaged, stolen or corrupted, or which faces frequent Internet service
      interruptions, which take it off-line. Such problems would seriously harm our
      credibility, market acceptance of our products and the value of our brands.
      In
      addition, such problems may result in liability for damages arising out of
      product liability of our products and services. The occurrence of some of these
      types of problems may seriously harm our business, operating results and
      financial condition.




30




***Our
      systems are subject to certain security risks which can adversely affect our
      operations.***




Despite
      the implementation of security measures, our systems may be vulnerable to
      unauthorized access, computer viruses and other disruptive problems. Companies
      have experienced, and may experience, interruptions in service as a result
      of
      the accidental or intentional actions of Internet users, current and former
      employees or others. Unauthorized access could also potentially jeopardize
      the
      security of customers’ and our confidential information stored in our computer
      systems, which may result in liability to customers and also may deter potential
      customers from using our products and services. Although we intend to continue
      to implement industry-standard security measures, such measures have been
      circumvented in the past, and there can be no assurance that measures that
      we
      implement will not be circumvented in the future. Eliminating computer viruses
      and alleviating other security problems may require interruptions, delays or
      cessation of service to our customers, such interruptions, delays or cessation
      of services may result in a loss of customers or subject us to potential
      liability for actions out of such interruptions, delays or cessation of
      services.




***If
      we fail to enter into a banking relationship to offer our lending services
      it
      will limit our ability to provide funding services and it will adversely affect
      our business.***




We
      will
      need to enter into agreements with financial institutions to enable us to offer
      sufficient funds for the lending services that we plan to offer customers.
      The
      lending services that we will offer will allow customers to utilize receivables
      to receive advance funding from such financial institutions through us. To
      date,
      we do not have any such agreement with any financial institution. There can
      be
      no assurance that we will be able to enter into such an agreement with a
      financial institution. If we fail to enter into such an agreement with a
      financial institution we may not generate sufficient funds to offer our lending
      services in a meaningful fashion which could result in a material adverse effect
      on our business, operating results and financial condition.




***If
      we fail to recover the value of amounts that we lend to healthcare providers
      it
      will adversely affect our business.***




With
      respect to loans made by us to providers, we expect to experience charge-offs
      in
      the future. A charge-off occurs when all or part of the principal of a
      particular loan is no longer recoverable and will not be repaid. If we were
      to
      experience material losses on our loan portfolio, it would have a material
      adverse effect on our ability to fund our business and to the extent the losses
      exceed our provision for loan losses, it could have a material adverse effect
      on
      our revenues, net income and assets.




Other
      commercial finance companies have experienced charge offs. In addition, like
      other commercial finance companies, we may experience missed and late payments,
      failures by clients to comply with operational and financial covenants in their
      loan agreements and client performance below that which it expected when we
      originated the loan. Any of the events described in the preceding sentence
      may
      be an indication that our risk of loss with respect to a particular loan has
      materially increased.




***We
      intend to make loans to privately owned small and medium-sized companies, which
      present a greater risk of loss than larger companies.***




Our
      loan
      portfolio will consist primarily of commercial loans to small and medium-sized,
      privately owned medical practices, and to vendors and suppliers, such as
      diagnostic companies. Compared to larger, publicly owned firms, these companies
      generally have more limited access to capital and higher funding costs, may
      be
      in a weaker financial position and may need more capital to expand or compete.
      These financial challenges may make it difficult for clients to make scheduled
      payments of interest or principal on loans. Accordingly, advances made to these
      types of clients entail higher risks than advances made to companies who are
      able to access traditional credit sources.




31




Numerous
        factors may affect a client’s ability to make scheduled payments on its loan,
        including the failure to meet its business plan or a downturn in its industry.
        In part because of their smaller size, our clients may:




·
                experience
                    significant variations in operating
                    results;




·
            depend
                on the management talents and efforts of a single individual or a
                small
                group of persons for their success, the death, disability or resignation
                of whom could materially harm the client’s financial condition or
                prospects;




·
            have
                less skilled or experienced management personnel than larger companies;
                or




·
            could
                be adversely affected by policy or regulatory changes and changes
                in
                reimbursement policies of insurance
                companies.




Accordingly,
      any of these factors could impair a client’s cash flow or result in other
      events, such as bankruptcy, which could limit that client’s ability to repay its
      obligations to us, and may lead to losses in our loan portfolio and a decrease
      in our revenues, net income and assets and result in a material adverse effect
      on our business, operating results and financial condition.




***Our
      lack of operating history makes it difficult to accurately judge the credit
      performance of our loan portfolio and, as a result, increases the risk that
      the
      allowance for loan losses may prove inadequate.***




Our
      lending services depend on the creditworthiness of our clients. While we will
      conduct general due diligence and a general review of the creditworthiness
      of
      each of our clients, this review requires the application of significant
      judgment by our management, which judgment may not be correct.




We
      will
      maintain an allowance for loan losses on our consolidated financial statements
      in an amount that reflects our judgment concerning the potential for losses
      inherent in our loan portfolio. Because we have not yet recorded any loan
      charge-offs, our reserve rate was developed independent of the historical
      performance of our loan portfolio. Because our lack of operating history and
      the
      relative lack of seasoning of our loans make it difficult to judge the credit
      performance of our loan portfolio, there can be no assurance that the estimates
      and judgment with respect to the appropriateness of our allowance for loan
      losses are accurate. Our allowance may not be adequate to cover credit losses
      in
      our loan portfolio as a result of unanticipated adverse changes in the economy
      or events adversely affecting specific clients, industries or markets. If our
      allowance for loan losses is not adequate, our net income will suffer, and
      our
      financial performance and condition could be significantly
      impaired.




***We
      may not have all of the material information relating to a potential client
      at
      the time that we make a credit decision with respect to that potential client,
      or at the time we advance funds to the client which may subject us to a greater
      risk of loss on loans that we make.***




We
      may
      suffer losses on loans or make advances that we would not have made if we had
      all of the material information about clients.




There
      is
      generally no publicly available information about the privately owned companies
      to which we will typically lend. Therefore, we must rely on our clients and
      the
      due diligence efforts of our employees to obtain the information that we will
      consider when making credit decisions. To some extent, our employees depend
      and
      rely upon the management of these companies to provide full and accurate
      disclosure of material information concerning their business, financial
      condition and prospects. If our employees do not have access to all of the
      material information about a particular client’s business, financial condition
      and prospects, or if a client’s accounting records are poorly maintained or
      organized, we may not make a fully informed credit decision which may lead,
      ultimately, to a failure or inability to recover the loan in its
      entirety.




32




***We
      may make errors in evaluating accurate information reported by our clients
      and,
      as a result, we may suffer losses on loans or advances that we would not have
      made if we had properly evaluated the information.***




We
      intend
      to make loans primarily secured by claims receivable and not based on detailed
      financial information provided to us by our clients or personal creditworthiness
      or personal credit guarantees. Even if clients provide us with full and accurate
      disclosure of all material information concerning their businesses, and even
      if
      we require personal credit guarantees from our clients, we may misinterpret
      or
      incorrectly analyze credit performance related information. Mistakes by our
      staff may cause us to make loans that we otherwise would not have made, to
      fund
      advances that we otherwise would not have funded or result in losses on one
      or
      more existing loans.




***A
      client’s fraud could cause us to suffer losses.***




A
      client
      could defraud us by, among other things:




·
            directing
                the proceeds of collections of its accounts receivable to bank accounts
                other than established lockboxes or re-directing elsewhere governmental
                account sweeps that are supposed to go from client bank accounts
                to our
                lockboxes;




·
            creating
                and submitting false, inaccurate or misleading medical
                claims;




·
            failing
                to accurately record accounts receivable
                aging;




·
            overstating
                or falsifying records creating or showing accounts receivable;
                or




·
            providing
                inaccurate reporting of other financial
                information.




The
      failure of a client to accurately create and submit claims or report its
      financial position, compliance with loan covenants or eligibility for additional
      borrowings could result in the loss of some or the entire principal of a
      particular loan or loans including, in the case of revolving loans, amounts
      we
      may not have advanced had we possessed complete and accurate
      information.




***Our
      concentration of loans to a limited number of borrowers within a particular
      industry, such as the healthcare industry, could impair our revenues, if the
      industry were to experience economic difficulties.***




Defaults
      by our clients may be correlated with economic conditions affecting particular
      industries. As a result, if the healthcare industry were to experience economic
      difficulties, the overall timing and amount of collections on our loans to
      clients may differ from what we expected and result in material harm to our
      revenues, net income and assets.




The
      dependence by our clients on reimbursement revenues could cause us to suffer
      losses in several instances:




·
            If
                clients fail to comply with operational covenants and other regulations
                imposed by these programs, they may lose their eligibility to continue
                to
                receive reimbursements under the program or incur monetary penalties,
                either of which could result in the client’s inability to make scheduled
                payments.




·
            If
                reimbursement rates do not keep pace with increasing costs of services
                to
                eligible recipients, or funding levels decrease as a result of increasing
                pressures from carriers to control healthcare costs, clients may
                not be
                able to generate adequate revenues to satisfy their
                obligations.




·
            If
                a healthcare client were to default on its loan, we may be unable
                to
                invoke our rights to pledged receivables directly as the law prohibits
                the
                initial payment of amounts owed to healthcare providers under the
                Medicare
                and Medicaid programs to be directed to any entity other than the
                actual
                providers. Consequently, a court order would be needed to enforce
                collection directly against these governmental payers or re-direction
                of
                accounts, set-offs or other disposition of payments received by providers
                on government claims that have not been forwarded to the lockbox.
                There is
                no assurance that we would be successful in obtaining this type of
                court
                order.




33




***We
      may be unable to recognize or act upon an operational or financial problem
      with
      a client in a timely fashion so as to prevent a loss of our loan to that client.***




Our
      clients may experience operational or financial problems that, if not timely
      addressed by us, could result in a substantial impairment or loss of the value
      of the loan to the client. We may fail to identify problems, because our client
      did not report them in a timely manner or, even if the client did report the
      problem, we may fail to address it quickly enough, adequately enough or at
      all.
      As a result, we could suffer loan losses, which could have a material adverse
      effect on our revenues, net income and results of operations.




The
      collateral securing a loan may not be sufficient to protect us from a partial
      or
      complete loss if the loan becomes non-performing, and we are required to
      foreclose.




While
      most of our loans will be secured by a lien on specified collateral of the
      client, there is no assurance that the collateral securing any particular loan
      will protect us from suffering a partial or complete loss if the loan becomes
      non-performing and we move to foreclose on the collateral. The collateral
      securing our loans is subject to inherent risks that may limit our ability
      to
      recover the principal of a non-performing loan. Risks that may affect the value
      of accounts receivable in which we may take a security interest include, among
      other things, the following:




·
            problems
                with the client’s underlying agreements with insurance carriers, which
                result in greater than anticipated, disputed
                accounts;




·
            unrecorded
                liabilities;




·
            the
                disruption or bankruptcy of key obligor who is responsible for material
                amounts of the accounts receivable;




·
            the
                client misrepresents, or does not keep adequate records of, claims
                or
                important information concerning the amounts and aging of its accounts
                receivable; or




·
            the
                client’s government claims that are being sent to a client controlled
                account and then ‘‘swept’’ (directed) to a lockbox are stopped by client
                from being swept or are re-directed by client, which may require
                judicial
                action or relief.




Any
      one
      or more of the preceding factors could materially impair our ability to recover
      principal in a foreclosure on the related loan.




***Our
      advance funding loans are not fully covered by the value of tangible assets
      or
      collateral of the client and, consequently, if any of these loans becomes
      non-performing, we could suffer a loss of some or all of our value in the loan.***




The
      risks
      inherent in advance lending based upon receivables include, among other things,
      the following:




·
            reduced
                use of or demand for the client’s services and, thus, reduced cash flow of
                the client to service the loan as well as reduced value of the client
                as a
                going concern;




·
            poor
                accounting systems of the client, which adversely affect the ability
                to
                accurately predict the client’s cash
                flows;




34




·
            economic
                downturns, political events, regulatory changes, litigation or acts
                of
                terrorism that affect the client’s business, financial condition and
                prospects; and




·
            poor
                management performance.




***Errors
      by or dishonesty of our employees could result in loan losses.***




We
      will
      rely heavily on the performance and integrity of our employees in making initial
      credit decisions with respect to loans and in servicing the loans after they
      have closed. Because there is generally little or no publicly available
      information about the clients to whom we will lend, we cannot independently
      confirm or verify the information employees provide for use in making credit
      and
      funding decisions. Errors by employees in assembling, analyzing or recording
      information concerning clients could cause us to originate loans or fund
      subsequent advances that we would not otherwise originate or fund. This could
      result in losses. Losses could also arise if any employees were dishonest.
      A
      dishonest employee could collude with clients to misrepresent the
      creditworthiness of a prospective client or to provide inaccurate reports
      regarding the client’s compliance with the covenants in its loan agreement. If,
      based on an employee’s dishonesty, we made a loan to a client that was not
      creditworthy or failed to exercise our rights under a loan agreement against
      a
      client that was not in compliance with covenants in the agreement, we could
      lose
      some or the entire principal of the loan. Further, if we determine to pursue
      remedies against a dishonest employee, the costs of pursuing such remedies
      could
      be substantial and there can be no assurance that we will be able to obtain
      an
      adequate remedy against a dishonest employee to offset losses caused by such
      employee.




***If
      interest rates rise, some of our existing clients may be unable to service
      interest on their loans.***




Virtually
      all of our loans will bear interest at floating interest rates. To the extent
      interest rates increase, monthly interest obligations owed by clients will
      also
      increase. Some clients may not be able to make the increased interest payments,
      resulting in defaults on their loans.




***Loans
      could be subject to equitable subordination by a court and thereby increase
      the
      risk of loss with respect to such loans.***




Courts
      have, in some cases, applied the doctrine of equitable subordination to
      subordinate the claim of a lending institution against a borrower to claims
      of
      other creditors of the borrower, when the lending institution is found to have
      engaged in unfair, inequitable or fraudulent conduct. The courts have also
      applied the doctrine of equitable subordination when a lending institution
      or
      its affiliates are found to have exerted inappropriate control over a client,
      including control resulting from the ownership of equity interests in a client.
      Payments on one or more of our loans, particularly a loan to a client in which
      we also hold equity interests, may be subject to claims of equitable
      subordination. If, when challenged, these factors were deemed to give us the
      ability to control or otherwise exercise influence over the business and affairs
      of one or more of its clients, this control or influence could constitute
      grounds for equitable subordination. This means that a court may treat one
      or
      more of our loans as if it were common equity in the client. In that case,
      if
      the client were to liquidate, we would be entitled to repayment of its loan
      on
      an equal basis with other holders of the client’s common equity only after all
      of the client’s obligations relating to its debt and preferred securities had
      been satisfied. One or more successful claims of equitable subordination against
      us could have a material adverse effect on our business, operating results
      and
      financial condition.




***We
      may incur lender liability as a result of our lending activities.***




In
      recent
      years, a number of judicial decisions have upheld the right of borrowers to
      sue
      lending institutions on the basis of various evolving legal theories,
      collectively termed ‘‘lender liability.’’ Generally, lender liability is founded
      on the premise that a lender has either violated a duty, whether implied or
      contractual, of good faith and fair dealing owed to the borrower or has assumed
      a degree of control over the borrower resulting in the creation of a fiduciary
      duty owed to the borrower or its other creditors or shareholders. We may be
      subject to allegations of lender liability. There can be no assurance that
      these
      claims will not arise or that we will not be subject to significant liability
      if
      a claim of this type did arise. Such liability could result in a material
      adverse effect on our business, operating results and financial
      condition.




35




***Our
      lending activities, as well as our claims management solutions, are subject
      to
      additional governmental regulations and future regulations may make it more
      difficult for us to operate on a profitable basis.***




Our
      healthcare advance lending business, as well as our claims management solutions,
      is subject to numerous federal and state laws and regulations, which, among
      other things, may (i) require us to obtain and maintain certain licenses and
      qualifications, (ii) limit the interest rates, fees and other charges that
      we
      are permitted to collect, (iii) limit or prescribe certain other terms of our
      financed receivables arrangements with clients, and (iv) subject us to certain
      claims, defenses and rights of offset, or (v) change the way we process, send,
      secure, format, receive or otherwise use or interact with claims information
      or
      data. Although we believe that our current business plan is in compliance with
      statutes and regulations applicable to our business, there can be no assurance
      that we will be able to maintain such compliance without incurring significant
      expense. The failure to comply with such statutes and regulations could have
      a
      material adverse effect upon us. Furthermore, the adoption of additional
      statutes and regulations, changes in the interpretation and enforcement of
      current statutes and regulations, or the expansion of the business into
      jurisdictions that have adopted more stringent regulatory requirements than
      those in which we currently conduct business could have a material adverse
      effect upon our business, operating results and financial
      condition.




There
      can
      be no assurance that currently proposed or future healthcare legislation or
      other changes in the administration or interpretation of governmental provider
      payment programs (‘‘Government Programs’’) will not have an adverse effect on us
      or that payments under Government Programs will remain at levels comparable
      to
      present levels or will be sufficient to cover the costs allocable to patients
      eligible for reimbursement pursuant to such programs. Concern about the
      potential effects of the proposed reform measures has contributed to the
      volatility of prices of securities of companies in healthcare and related
      industries, and may similarly affect the price of our securities in the
      future.




In
      addition, certain private reform efforts have been instituted throughout the
      healthcare industry, including the capitation of certain healthcare
      expenditures. Capitation is the pre-payment of certain healthcare costs by
      third-party payers (typically health maintenance organizations and other managed
      healthcare concerns), based upon a predetermined monthly fee for the aggregate
      patient lives under any given healthcare provider's care. The healthcare
      provider then provides healthcare to such patients when and as needed, and
      assumes the risk that its prepayments will cover its costs and provide a profit
      for all of such services rendered. Since capitation essentially reduces or
      eliminates clients' need for claims management solutions and/or accounts
      receivable that are the primary source of payment for our financed receivables,
      capitation could materially adversely affect our business, operating results
      and
      financial condition.




***We
      have not paid dividends and do not expect to do so in the future.***




We
      have
      not paid any cash dividends on our common stock. For the foreseeable future,
      it
      is anticipated that earnings, if any, which may be generated from operations
      will be used to finance our growth and that dividends will not be paid to
      holders of common stock.




***Our
      certificate of incorporation, bylaws and state law contains provisions that
      preserve current management.***




Provisions
      of state law, our articles of incorporation and by-laws may discourage, delay
      or
      prevent a change in our management team that stockholders may consider
      favorable. These provisions include:




·
            authorizing
                the issuance of ‘‘blank check’’ preferred stock without any need for
                action by stockholders;




36




·
            eliminating
                the ability of stockholders to call special meetings of
                stockholders;




·
            permitting
                stockholder action by written consent;
                and




·
            establishing
                advance notice requirements for nominations for election to the board
                of
                directors or for proposing matters that can be acted on by stockholders
                at
                stockholder meetings.




These
      provisions could allow our Board of Directors to affect the investor’s rights as
      a stockholder since the Board of Directors can make it more difficult for
      preferred stockholders or common stockholders to replace members of the Board.
      Because the Board of Directors is responsible for appointing the members of
      the
      management team, these provisions could in turn affect any attempt to replace
      the current or future management team.




***Our
      Common Stock is considered ‘‘penny stock’’ and may be difficult to
      trade.***




The
      SEC
      has adopted regulations that generally define ‘‘penny stock’’ to be an equity
      security that has a market or exercise price of less than $5.00 per share,
      subject to specific exemptions. The market price of our common stock is less
      than $5.00 per share and, therefore, subject to ‘‘penny stock’’ rules pursuant
      to Section 15(g) of the Exchange Act. This designation requires any broker
      or
      dealer selling these securities to disclose certain information concerning
      the
      transaction, obtain a written agreement from the purchaser and determine that
      the purchaser is reasonably suitable to purchase the securities. These rules
      may
      restrict the ability of brokers or dealers to sell our common stock and may
      affect the ability of investors to sell their shares. In addition, since our
      common stock is currently only quoted on the OTCBB, investors may find it
      difficult to obtain accurate quotations of our common stock and may experience
      a
      lack of buyers to purchase such stock or a lack of market makers to support
      the
      stock price.




***A
      significant number of our shares are eligible for sale, and their sale could
      depress the market price of our stock.***




Sales
      of
      a significant number of shares of our common stock in the public market pursuant
      to our registration statement which became effective on December 7, 2006, could
      harm the market price of our common stock. As additional shares of common stock
      may be sold in the public market, the supply of common stock will increase,
      which could decrease its price. Additionally, some or all of our shares of
      common stock may be offered from time to time in the open market pursuant to
      Rule 144, and these sales may have a depressive effect on the market for shares
      of common stock. In general, a person who has held restricted shares for a
      period of one year may, upon filing with the SEC a notification on Form 144,
      sell into the market common stock in an amount equal to the greater of 1% of
      the
      outstanding shares or the average weekly number of shares sold in the last
      four
      weeks prior to such sale. Such sales may be repeated once each three months,
      and
      any amount of the restricted shares may be sold by a non-affiliate after they
      have been held two years.




***There
      is no public market for our Common Stock other than
      OTCBB.***




There
      is
      no public market for our common stock other than the market that exists in
      the
      common stock of the Company on the over-the-counter bulletin board market
      (‘‘OTCBB’’). There can be no assurance that any other trading market will
      develop in the common stock of the Company, or that the OTCBB market trading
      will be sustained.




37




***Until
      November, 2005 we were a public shell company. There are certain risks
      associated with transactions with public shell companies generally, including
      increased SEC scrutiny and regulation and lack of analyst coverage of the
      Company.***




In
      November 2005, we succeeded to the business of MDwerks Global Holdings, Inc.
      and
      the Xeni Companies pursuant to a merger of a wholly owned subsidiary of ours
      into MDwerks Global Holdings, Inc. (the ‘‘Merger’’). As a result of the Merger,
      MDwerks Global Holdings, Inc. became our wholly owned subsidiary and we began
      to
      operate its business and the businesses of the Xeni Companies as our sole line
      of business. Until such time, the Company was and had been effectively a public
      shell company with no material assets or operations whose only value was that
      it
      maintained current filings with the SEC and a class of securities that was
      offered for sale pursuant to the OTCBB. The Merger provided an immediate benefit
      for the then existing stockholders of the Company that might not have been
      readily available, or available at all, to other stockholders who either
      acquired their shares of stock in connection with the purchase of Units in
      this
      Offering or otherwise.




Substantial
      additional risks are associated with a public shell merger transaction such
      as
      absence of accurate or adequate public information concerning the public shell;
      undisclosed liabilities; improper accounting; claims or litigation from former
      officers, directors, employees or stockholders; contractual obligations;
      regulatory requirements and others. Although management performed due diligence
      on the Company, there can be no assurance that such risks do not occur. The
      occurrence of any such risk could materially adversely affect the Company’s
      results of operations, financial condition and stock price. In addition, the
      cost of operations of the Company has increased as a result of the Merger due
      to
      legal, regulatory, and accounting requirements imposed upon a company with
      a
      class of registered securities and based upon the acquisition by the Company
      of
      an operating company.




Additional
      risks may exist since the Merger involved a ‘‘reverse merger’’ or ‘‘reverse
      public offering.’’ Security analysts of major brokerage firms may not provide
      coverage of the Company since there is no incentive to brokerage firms to
      recommend the purchase of the common stock. No assurance can be given that
      brokerage firms will want to conduct any secondary public offerings on behalf
      of
      the Company in the future.




***There
      has been a limited active public market for the Common Stock, and prospective
      investors may not be able to resell their shares at or above the price at which
      they purchase shares, if at all.***




Shares
      of
      our common are traded on the Over the Counter Bulletin Board (‘‘OTCBB’’). We
      plan on seeking to retain the OTCBB status of the Company so that the registered
      securities of the Company will have the benefit of a trading market, but will
      likely be traded only in the OTCBB market for the foreseeable future, although
      listing on a national exchange such as the AMEX, or NASDAQ Small Cap market
      may
      be sought, but is not assured. There is no guarantee that if such listing is
      pursued the Company will meet the listing requirements or that such efforts
      to
      list the Company’s common stock on any national or regional exchange or the
      NASDAQ Small Cap market will be successful, or if successful, will be
      maintained, including but not limited to requirements associated with
      maintenance of a minimum net worth, minimum stock price and ability to establish
      a sufficient number of market makers. As a result, the reported prices for
      the
      Company’s securities may be: (i) arbitrarily determined, as a result of the
      valuation ascribed to the shares in transactions by the Company and adopted
      for
      purposes of securities offerings; and (ii) the result of market forces, and
      as
      such reported prices may not necessarily indicate the value of the traded shares
      or of the Company. Furthermore, there has been a limited to no public market
      for
      our common stock. An active public market for our common stock may not develop
      or be sustained.




The
      market price of our securities may fluctuate significantly in response to
      factors, some of which will be beyond our control, such as the announcement
      of
      new products or product enhancements by the Company or its competitors;
      developments concerning intellectual property rights and regulatory approvals;
      quarterly variations in our competitors’ results of operations; changes in
      earnings estimates or recommendations by securities analysts; developments
      in
      our industry; and general market conditions and other factors, including factors
      unrelated to our operations.




38




The
      stock
      market in general may experience extreme price and volume fluctuations. In
      particular, market prices of securities of technology companies have experienced
      fluctuations that often have been unrelated or disproportionate to the operating
      results of these companies. Market fluctuations could result in extreme
      volatility in the price of the common stock, which could cause a decline in
      the
      value of the common stock. Prospective investors should also be aware that
      price
      volatility might be exacerbated if the trading volume of the common stock is
      low.




***There
      are additional costs of being a public company and those costs may be
      significant.***




We
      are a
      publicly traded company, and, accordingly, subject to the information and
      reporting requirements of the U.S. securities laws. The U.S. securities laws
      require, among other things, review, audit and public reporting of the Company’s
      financial results, business activities and other matters. The public company
      costs of preparing and filing annual and quarterly reports, proxy statements
      and
      other information with the SEC and furnishing audited reports to stockholders,
      which we estimate will be approximately $250,000 per year, will cause our
      expenses to be higher than they would be if we were privately-held. In addition,
      the Company incurred estimated expenses of approximately $100,000 in connection
      with the preparation of the registration statement and related documents with
      respect to the registration of the common stock required to be registered
      pursuant to the Company’s undertaking to file a registration statement as
      described herein. These increased costs may be material and may include the
      hiring of additional employees and/or the retention of additional consultants
      and professionals. Failure by the Company to comply with the federal or state
      securities laws could result in private or governmental legal action against
      the
      Company and/or its officers and directors, which could have a detrimental effect
      on the business and finances of the Company, the value of the Company’s stock
      and the ability of stockholders to resell their stock.




39




**CAUTIONARY
      LANGUAGE REGARDING FORWARD-LOOKING**


**STATEMENTS
      AND INDUSTRY DATA**




This
      Annual Report on Form 10-KSB contains ‘‘forward-looking statements’’ that
      involve risks and uncertainties, many of which are beyond our control. Our
      actual results could differ materially and adversely from those anticipated
      in
      such forward-looking statements as a result of certain factors, including those
      set forth below and elsewhere in this Annual Report on Form 10-KSB.
      Important factors that may cause actual results to differ from projections
      include, but are not limited to, for example:




·
            adverse
                economic conditions;




·
            inability
                to raise sufficient additional capital to implement our business
                plan;




·
            intense
                competition, from providers of services similar to those offered
                by
                us;




·
            unexpected
                costs and operating deficits, and lower than expected sales and
                revenues;




·
            adverse
                results of any legal proceedings;




·
            inability
                to satisfy government and commercial customers using our
                technology;




·
            the
                volatility of our operating results and financial
                condition;




·
            inability
                to attract or retain qualified senior management personnel, including
                sales and marketing, and technology personnel;
                and




·
            other
                specific risks that may be alluded to in this Annual Report on Form
                10-KSB.




All
      statements, other than statements of historical facts, included in this Annual
      Report on Form 10-KSB regarding our strategy, future operations, financial
      position, estimated revenue or losses, projected costs, prospects and plans
      and
      objectives of management are forward-looking statements. When used in this
      Annual Report on Form 10-KSB, the words ‘‘will,’’ ‘‘may,’’ ‘‘believe,’’
‘‘anticipate,’’ ‘‘intend,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘project,’’ ‘‘plan’’ and
      similar expressions are intended to identify forward-looking statements,
      although not all forward-looking statements contain such identifying words.
      All
      forward-looking statements speak only as of the date of this Annual Report
      on
      Form 10-KSB. We do not undertake any obligation to update any forward-looking
      statements or other information contained herein. Potential investors should
      not
      place undue reliance on these forward-looking statements. Although we believe
      that our plans, intentions and expectations reflected in or suggested by the
      forward-looking statements in this Annual Report on Form 10-KSB are reasonable,
      no one can assure investors that these plans, intentions or expectations will
      be
      achieved. Important factors that could cause actual results to differ materially
      from expectations expressed herein are described under ‘‘Risk Factors’’ and
      elsewhere in this Annual Report on Form 10-KSB. These cautionary statements
      and
      risk factors qualify all forward-looking statements attributable to information
      provided in this Annual Report on Form 10-KSB and on behalf of us or persons
      acting on our behalf.




Information
      regarding market and industry statistics contained in this Annual Report on
      Form
      10-KSB is included based on information available to us that we believe is
      accurate. It is generally based on academic and other publications that are
      not
      produced for purposes of securities offerings or economic analysis. Forecasts
      and other forward-looking information obtained from these sources are subject
      to
      the same qualifications and the additional uncertainties accompanying any
      estimates of future market size, revenue and market acceptance of products
      and
      services. We have no obligation to update forward-looking information to reflect
      actual results or changes in assumptions or other factors that could affect
      those statements. See ‘‘Risk Factors’’ for a more detailed discussion of
      uncertainties and risks that may have an impact on future results.




40




**ITEM
                2.**
              **PROPERTY**




The
      Company sub-leased its facility, on a month-to-month basis, under a master
      lease
      expiring July 2008. Rent expense for the year ended December 31, 2007 was
      $83,772. On February 1, 2008, the Company was assigned the master lease and
      a
      5-year lease option was exercised which extends the master lease until June
      2013.




**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**




We
      are
      not a party to any material pending legal proceedings.




**ITEM
                4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS**




No
      matters were submitted to a vote of security holders, through the solicitation
      of proxies or otherwise.




41


**PART
      II**




**ITEM
                  5.**
                **MARKET
                    FOR OUR COMMON STOCK AND RELATED STOCKHOLDER
                    MATTERS**




Our
      Common Stock has been quoted on the OTC Bulletin Board since November 16,
      2005 under the symbol MDWK.OB. Prior to that date, there was no active market
      for our Common Stock. As of March 24, 2008, there were approximately 332 holders
      of record of our Common Stock.




The
      following table sets forth the high and low sales prices for our Common Stock
      for the periods indicated as reported by the OTC Bulletin Board.




**High**
            
            **Low****Fiscal
                Year 2006**First
                Quarter
            
            $
            4.25
            
            $
            2.40Second
                Quarter
            
            
            5.00
            
            
            2.45Third
                Quarter
            
            
            4.25
            
            
            2.60Fourth
                Quarter
            
            
            3.60
            
            
            1.16**Fiscal
                Year 2007**First
                Quarter
            
            $
            1.50
            
            $
            0.47Second
                Quarter
            
            
            1.30
            
            
            0.35Third
                Quarter
            
            
            1.55
            
            
            0.60Fourth
                Quarter
            
            
            0.74
            
            
            0.35**Fiscal
                Year 2008**First
                Quarter (through March 24, 2008)
            
            $
            1.20
            
            $
            0.38




The
      prices reported on the OTC Bulletin Board as high and low sales prices vary
      from
      inter-dealer bids which state inter-dealer quotations. Such inter-dealer bids
      (and reported high and low sales prices) do not include retail mark-ups,
      mark-downs or commissions. Such prices do not necessarily represent actual
      transactions.




We
      have
      not declared or paid any dividends on our Common Stock and do not anticipate
      declaring or paying any cash dividends in the foreseeable future. We currently
      expect to retain future earnings, if any, to finance the growth and development
      of our business. The holders of our Common Stock are entitled to dividends
      when
      and if declared by our Board from legally available funds.




42




**Sales
        of Unregistered Securities**
  The
        securities issued by the Company upon the consummation of the Merger discussed
        in the ‘‘BUSINESS - History of the Company’’ section of this Annual Report on
        Form 10-KSB were not registered under the Securities Act of 1933, as amended.
        At
        the effective time of the Merger, each outstanding share of common stock
        of
        MDwerks Global Holdings, Inc. was converted into the right to receive 0.158074
        shares of the Company’s common stock. At the effective time of the Merger,
        approximately 59,162,000 shares of MDwerks Global Holdings, Inc. shares of
        common stock were outstanding and no options or warrants to purchase shares
        of
        MDwerks Global Holdings, Inc. common stock were outstanding. As a result
        of the
        Merger, the approximately 59,162,000 shares of common stock of MDwerks Global
        Holdings, Inc. that were outstanding were exchanged for approximately 9,352,000
        shares of common stock of the Company. Set forth below is a list of shareholders
        who received shares of common stock in connection with such merger and the
        number of shares they received:




**Name**
            
            **Number
                of**
              **Shares
                Received**Peter
                Dunne
            
            
            39,519Rosemarie
                Manchio
            
            
            19,715Steven
                Brandenburg IRA
            
            
            11,903Thomas
                Stephens
            
            
            35,077Ronald
                & Lydia Hankins JTWROS
            
            
            13,478Bernard
                O’Neil
            
            
            17,319Robert
                Bouvier
            
            
            1,628Arthur
                J. Ballinger
            
            
            11,959Roger
                Hermes
            
            
            36,452F.
                Bradford Wilson
            
            
            19,805John
                & Jeanie Garell JTWROS
            
            
            62,236Jai
                Gaur
            
            
            988Phil
                Dean
            
            
            39,233Joseph
                Morgillo
            
            
            21,435Solon
                Kandel & Vivian Kandel TEN ENT
            
            
            1,018,31073142
                Corp.
            
            
            113,813Arrowhead
                Consultants, Inc.
            
            
            294,308Glenwood
                Capital, Inc.
            
            
            294,308Steven
                Brandenburg
            
            
            9,726Kay
                Garell Trust
            
            
            28,041Wesley
                Neal
            
            
            11,856Sol
                Bandiero
            
            
            83,679Stephen
                Katz
            
            
            176,152Gerard
                Maresca
            
            
            71,713Tonia
                Pfannenstiel
            
            
            23,350Stephen
                Weiss
            
            
            65,809Phil
                Margetts
            
            
            33,483Ronald
                Hankins
            
            
            13,609John
                Garell
            
            
            16,666Todd
                Adler
            
            
            131,751Leanne
                Kennedy
            
            
            56,501Jon
                Zimmerman
            
            
            54,251Howard
                Katz and Denise Katz TEN ENT
            
            
            1,084,001Harley
                Kane
            
            
            102,334Lauren
                Kluger
            
            
            24,542MedWerks,
                LLC
            
            
            5,115,912Larry
                Biggs
            
            
            59,968Peter
                Chung
            
            
            38,750Sparta
                Road, Ltd.
            
            
            38,750Todd
                Snyder
            
            
            20,000Frank
                Essner Trust
            
            
            20,000Jason
                Clark
            
            
            20,000




43




These
      shares of our common stock issued in connection with the Merger qualified for
      exemption under Section 4(2) of the Securities Act of 1933 since the issuance
      shares by us did not involve a public offering. The offering was not a ‘‘public
      offering’’ as defined in Section 4(2) due to the insubstantial number of persons
      involved in the deal, size of the offering, manner of the offering and number
      of
      shares offered. We did not undertake an offering in which we sold a high number
      of shares to a high number of investors. In addition, the shareholders listed
      above had the necessary investment intent as required by Section 4(2) since
      they
      agreed to and received a share certificate bearing a legend stating that such
      shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This
      restriction ensures that these shares would not be immediately redistributed
      into the market and therefore not be part of a ‘‘public offering.’’ Based on an
      analysis of the above factors, we have met the requirements to qualify for
      exemption under Section 4(2) of the Securities Act of 1933 for this transaction.
      Furthermore, each of the shareholders listed above is an ‘‘accredited investor’’
as defined in Regulation D of the Securities Act of 1933.




In
      connection with the Merger, we completed the closing of a private offering
      of
      our securities in which, through December 31, 2005, we sold an aggregate of
      approximately 64 Units to accredited investors, pursuant to the terms of a
      Confidential Private Placement Memorandum dated June 13, 2005, as supplemented.
      Each Unit consists of 10,000 shares of common stock and a warrant to purchase
      10,000 shares of common stock. Each warrant entitles the holder to purchase
      10,000 shares of common stock for $2.50 per share. The Units were offered by
      Brookshire Securities Corporation, as placement agent, pursuant to a placement
      agent agreement under which the placement agent, in addition to a percentage
      of
      gross proceeds of the Private Placement, received 96,000 shares of common stock
      and a warrant to purchase up to an aggregate of 64,000 shares of common stock.
      We realized gross proceeds from the Private Placement of $1,600,000, before
      payment of commissions and expenses. The private placement was made solely
      to
‘‘accredited investors,’’ as that term is defined in Regulation D under the
      Securities Act of 1933. The shares of common stock and warrants to purchase
      common stock were not registered under the Securities Act of 1933, or the
      securities laws of any state, and were offered and sold in reliance on the
      exemption from registration afforded by Section 4(2) and Regulation D (Rule
      506)
      under the Securities Act of 1933 and corresponding provisions of state
      securities laws. Set forth below is a list of the purchasers in the Private
      Placement and the number of Units purchased:




**Name**
            
            **Amount
                Paid**
              **for
                Units**
            
            **Number
                of Units**
              **Purchased**Arrowhead
                Consultants, Inc.
            
            $
            149,500
            
            
            5.98Constantine
                G. Barbounis
            
            $
            50,000
            
            
            2Brookshire
                Securities Corp.
            
            $
            17,000
            
            
            0.68Daniel
                R. Brown
            
            $
            25,000
            
            
            1Jason
                Clarke / Tanya Clarke (T/E)
            
            $
            25,000
            
            
            1Donia
                Hachem Revocable Trust
            
            $
            50,000
            
            
            2Ronald
                Hankins
            
            $
            22,000
            
            
            0.88Philip
                J. Hempleman
            
            $
            100,000
            
            
            4Roger
                Hermes
            
            $
            25,000
            
            
            1Domenico
                Iannucci
            
            $
            250,000
            
            
            10Carlos
                A. Jimenez
            
            $
            25,000
            
            
            1Carlos
                A. Jimenez and Jason M. Beccaris
            
            $
            25,000
            
            
            1JTP
                Holdings, LLC
            
            $
            25,000
            
            
            1Dr.
                Irving Karten
            
            $
            25,000
            
            
            1Rosemarie
                Manchio
            
            $
            25,000
            
            
            1Daniel
                J. O'Sullivan
            
            $
            100,000
            
            
            4Eric
                W. Penttinen
            
            $
            25,000
            
            
            1Jonathan
                J. Rotella
            
            $
            25,000
            
            
            1SCG
                Capital LLC
            
            $
            300,000
            
            
            12Todd
                Snyder
            
            $
            50,000
            
            
            2Thomas
                S. Stephens
            
            $
            12,500
            
            
            0.5Jamie
                Toddings
            
            $
            25,000
            
            
            1Alphonse
                Tribuiani
            
            $
            25,000
            
            
            1Roger
                Walker
            
            $
            25,000
            
            
            1Todd
                Wiseberg
            
            $
            50,000
            
            
            2Jon
                R. Zimmerman
            
            $
            50,000
            
            
            2Robert
                E. Zimmerman
            
            $
            75,000
            
            
            3




44




On
      June
      28, 2006 we completed a private placement offering of Units consisting of one
      share of Series A Convertible Preferred Stock and a three-year warrant to
      purchase up to 20,000 shares of our common stock at a purchase price of $3.00
      per share. We sold an aggregate of 28.3 Units to accredited investors pursuant
      to the terms of a confidential private placement memorandum, dated February
      1,
      2006, used in connection with this offering. As of December 31, 2007, 26.3
      shares of Series A Convertible Preferred Stock had been converted into 526,667
      shares of common stock. The Units were offered by Brookshire Securities
      Corporation as placement agent. The placement agent received $170,000 in cash
      and 170,000 shares of our common stock and, for nominal consideration, a warrant
      to purchase up to an aggregate of 56,667 shares of our common stock at a
      purchase price of $1.50 per share. We realized gross proceeds from this private
      placement of $1,700,000 before payment of commissions and expenses. The private
      placement was made solely to ‘‘accredited investors,’’ as that term is defined
      in Regulation D under the Securities Act of 1933. The shares of Series A
      Convertible Preferred Stock and warrants to purchase shares of common stock
      were
      not registered under the Securities Act of 1933, or the securities laws of
      any
      state, and were offered and sold in reliance on the exemption from registration
      offered by Section 4(2) and Regulation D (Rule 506) under the Securities Act
      of
      1933 and corresponding provisions of state securities laws. Set forth below
      is a
      list of purchasers in this private placement and the number of Units
      purchased:




**Name**
            
            **Amount
                Paid**
              **for
                Units**
            
            **Number
                of Units**
              **Purchased**RAJ
                Investments Limited Liability Partnership
            
            $
            60,000
            
            
            1Daniel
                J. O'Sullivan
            
            $
            120,000
            
            
            2Kevin
                William Walker
            
            $
            60,000
            
            
            1Frank
                V. Cappo
            
            $
            120,000
            
            
            2Rick
                A. Bennett
            
            $
            60,000
            
            
            1Rion
                Needs
            
            $
            60,000
            
            
            1J.
                Joseph Levine
            
            $
            60,000
            
            
            1Terence
                Smith
            
            $
            60,000
            
            
            1Tim
                Johnson
            
            $
            60,000
            
            
            1Joe
                Sparieino
            
            $
            60,000
            
            
            1Scott
                McNair
            
            $
            50,000
            
            
            0.8333Gerald
                F. Huepel, Jr.
            
            $
            50,000
            
            
            0.8333Louise
                E. Rehling Tr. Dated 3/9/00
            
            $
            25,000
            
            
            0.4167PH
                D Investments I, LP
            
            $
            150,000
            
            
            2.5Kevin
                & Brenda Narcomey
            
            $
            50,000
            
            
            0.8333Daniel
                Craig Sager
            
            $
            25,000
            
            
            0.4167CH
                Medical PSP
            
            $
            75,000
            
            
            1.25Joseph
                Lewin
            
            $
            60,000
            
            
            1Joe
                & Carolyn Hubbard, JTWROS
            
            $
            60,000
            
            
            1John
                R. Harrison
            
            $
            60,000
            
            
            1Melvin
                C. Sanders
            
            $
            60,000
            
            
            1Randy
                Bean Revocable Trust 2/21/05
            
            $
            30,000
            
            
            0.5C.
                Edward White, Jr./Brenda R. Fortunate, JTWROS
            
            $
            60,000
            
            
            1James
                W. Lees
            
            $
            75,000
            
            
            1.25M.
                Michael Anderson
            
            $
            60,000
            
            
            1Sharon
                Sootin
            
            $
            90,000
            
            
            1.50




**Institutional
      Financings**




On
      each
      of October 20, 2006 and November 9, 2006 we received net proceeds of $2,375,000
      for total net proceeds of $4,750,000 in the aggregate in connection with a
      financing provided by Gottbetter Capital Master, Ltd., an unaffiliated
      accredited institutional investor (”Gottbetter’’). Pursuant to the terms of a
      Securities Purchase Agreement that we entered into with Gottbetter in connection
      with the financing, we issued two senior secured convertible promissory notes
      to
      Gottbetter, each in the original principal amount of $2,500,000 (each a ‘‘Senior
      Note’’ and collectively, the ‘‘Senior Notes’’), five year Series D Warrants to
      purchase 375,000 shares of our common stock at a price of $2.25 per share
      (‘‘Series D Warrants’’) and five year Series E Warrants to purchase 375,000
      shares of our common stock at a price of $3.25 per share (‘‘Series E
      Warrants’’).




The
      following are summary descriptions of the material agreements entered into
      in
      connection with the transaction described above and such descriptions are
      qualified in their entirety by reference to the full agreements filed either
      as
      exhibits hereto or previous SEC filings.




45




*Securities
      Purchase Agreement*




The
      Gottbetter Securities Purchase Agreement provides to Gottbetter, for so long
      as
      the Senior Notes remain outstanding, a right of first refusal to purchase
      securities offered by MDwerks, Inc., except for the issuance of Excluded
      Securities (as defined in the Gottbetter Securities Purchase Agreement). The
      Gottbetter Securities Purchase Agreement also contains restrictions against
      issuing shares of our Common Stock for a price per share that is less than
      the
      price at which our Common Stock is traded on any national exchange or market.
      This restriction also covers the issuance of convertible securities with an
      exercise or conversion price that is lower than the price at which our Common
      Stock is traded on any national exchange or market.




*Senior
      Notes*




The
      Senior Notes bear interest at the rate of 8% per year, payable monthly in
      arrears, commencing December 1, 2006. Subject to certain mandatory prepayment
      provisions, and events of default, unpaid principal and interest due under
      the
      Senior Notes, as amended, will become due and payable on January 1, 2011. The
      Senior Notes require monthly principal payments until the January 1, 2011
      maturity date The Senior Notes are convertible, at the option of the holder,
      into shares of our common stock at a price of $2.25 per share (the ‘‘Conversion
      Price’’), subject to adjustment for stock splits, stock dividends, or similar
      transactions, sales of our common stock at a price per share below the
      Conversion Price or the issuance of convertible securities or options or
      warrants to purchase shares of our common stock at an exercise price or
      conversion price that is less than the Conversion Price.




The
      Senior Notes provide for optional redemption by us at a redemption price equal
      to 110% of the face amount redeemed plus accrued interest.




Events
      of
      default will result in a default rate of interest of 15% per year and the holder
      may require that the Senior Note be redeemed at the Event of Default Redemption
      Price (as defined in the Senior Notes). The Event of Default Redemption Price
      includes various premiums depending on the nature of the event of default.
      Events of default include, but are not limited to,: (i) the failure to keep
      the
      registration statement covering shares underlying the Senior Notes, the Series
      D
      Warrants and the Series E Warrants effective, as required by the Registration
      Rights Agreement that we entered into with Gottbetter; (ii) suspension from
      trading on the OTC Bulletin Board; (iii) failure to timely deliver shares in
      the
      event the Senior Notes are converted; (iv) failure to reserve adequate shares
      for conversion of the Senior Notes; (v) failure to pay principal, interest
      or
      late charges when due; (vi) any default in the payment of other indebtedness
      in
      excess of $250,000; (vii) bankruptcy events; and (viii) judgments against us
      in
      excess of $250,000.




The
      Senior Notes also provide that in the event of a Change of Control (as defined
      in the Senior Notes), the holder may require that such holder's Senior Note
      be
      redeemed at the Change of Control Redemption Price (as defined in the Senior
      Notes). The Change of Control Redemption Price includes certain premiums in
      the
      event a Senior Note is redeemed in the event of a Change of
      Control.




*Series
      D Warrants*




The
      Series D Warrants are exercisable at a price of $2.25 per share for a period
      of
      five years from the date of issuance. The Series D Warrants may be exercised
      on
      a cashless basis. The exercise price will be subject to adjustment in the event
      of subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series D Warrants, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series D Warrants, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series D Warrants.




46




*Series
      E Warrants*




The
      Series E Warrants, as amended, are exercisable at a price of $2.25 per share
      for
      a period of five years from the date of issuance. The Series E Warrants may
      be
      exercised on a cashless basis. The exercise price will be subject to adjustment
      in the event of subdivision or combination of shares of our common stock and
      similar transactions, distributions of assets, issuances of shares of common
      stock with a purchase price below the exercise price of the Series E Warrants,
      issuances of any rights, warrants or options to purchase shares of our common
      stock with an exercise price below the exercise price of the Series E Warrants,
      issuances of convertible securities with a conversion price below the exercise
      price of the Series E Warrants.




*Security
      Agreements*




We
      entered into a Security Agreement with Gottbetter. The Security Agreement,
      as
      amended, provides for a lien in favor of Gottbetter on all of our assets
      except for certain assets of our subsidiary, Xeni Financial.




*Guaranty
      Agreements*




Our
      subsidiaries entered into a Guaranty Agreement with Gottbetter, pursuant to
      which they have agreed to unconditionally guaranty our obligations under the
      Senior Notes and the documents entered into by us in connection the sale of
      the
      Senior Notes.




*Registration
      Rights Agreement*




We
      also
      entered into a Registration Rights Agreement and amendments thereto with
      Gottbetter. Pursuant to the amended Registration Rights Agreement, we included
      in our registration statement that was declared effective on December 7, 2006,
      2,777,778 shares underlying the Senior Notes. In addition to it being an event
      of default under the Senior Notes, if we fail to maintain the effectiveness
      of
      the registration statement as required by the Registration Rights Agreement,
      the
      exercise price of the Series D and the Series E Warrants will immediately be
      reduced by $0.25 per share and then reduced by an additional $0.10 per share
      for
      each thirty day period thereafter that the registration statement is not filed
      or effective, as the case may be, up to a maximum reduction of
      $0.65.




Gottbetter
      is an ‘‘accredited investor,’’ as defined in Regulation D under the Securities
      Act of 1933, as amended, or the Securities Act. None of the Senior Note, the
      Series D Warrants, the Series E Warrants or the shares of our common stock
      underlying such securities were registered under the Securities Act, or the
      securities laws of any state and were offered and sold in reliance on the
      exemption from registration afforded by Section 4(2) and Regulation D (Rule
      506)
      under the Securities Act and corresponding provisions of state securities laws,
      which exempts transactions by an issuer not involving any public offering.
      We
      made this determination based on the representations of Gottbetter, which
      included, in pertinent part, that Gottbetter is an ‘‘accredited investor’’
within the meaning of Rule 501 of Regulation D promulgated under the Securities
      Act, and that Gottbetter was acquiring the Senior Notes, the Series D Warrants
      and the Series E Warrants for investment purposes for its own account and not
      as
      nominee or agent, and not with a view to the resale or distribution, and that
      Investor understood such securities may not be sold or otherwise disposed of
      without registration under the Securities Act or an applicable exemption there
      from.




On
      August
      31, 2007 we received net proceeds of $250,000 in connection with a financing
      provided by Vicis Capital Master Fund (“Vicis”), an unaffiliated accredited
      investor. In connection with the financing, we issued a 31-day Convertible
      Note
      to Vicis in the original principal amount of $250,000 (the “Vicis Convertible
      Note”).




47




On
      September 28, 2007 we received net proceeds of $1,633,190, after repayment
      of the Vicis Convertible Note, interest and closing expenses in connection
      with
      a financing provided by Vicis. In connection with the financing, pursuant to
      the
      terms of a Securities Purchase Agreement, we issued 200 shares of Series B
      Convertible Preferred Stock (a “Series B Preferred Stock”), a seven year Series
      F Warrant to purchase 1,500,000 shares of our common stock at a price of $2.25
      per share and a seven year Series G Warrant to purchase 1,000,000 shares of
      our
      common stock at a price of $2.50 per share.




Vicis
      is
      an ‘‘accredited investor,’’ as defined in Regulation D under the Securities Act
      of 1933, as amended, or the Securities Act. None of the Senior Note, the Series
      D Warrants, the Series E Warrants or the shares of our common stock underlying
      such securities were registered under the Securities Act, or the securities
      laws
      of any state and were offered and sold in reliance on the exemption from
      registration afforded by Section 4(2) and Regulation D (Rule 506) under the
      Securities Act and corresponding provisions of state securities laws, which
      exempts transactions by an issuer not involving any public offering. We made
      this determination based on the representations of Vicis, which included, in
      pertinent part, that Vicis is an ‘‘accredited investor’’ within the meaning of
      Rule 501 of Regulation D promulgated under the Securities Act, and that Vicis
      was acquiring the Senior Notes, the Series D Warrants and the Series E Warrants
      for investment purposes for its own account and not as nominee or agent, and
      not
      with a view to the resale or distribution, and that Investor understood such
      securities may not be sold or otherwise disposed of without registration under
      the Securities Act or an applicable exemption there from.




The
      following are summary descriptions of the material agreements entered into
      in
      connection with the transaction described above and such descriptions are
      qualified in its entirety by reference to the full agreements filed either
      as
      exhibits hereto or previous SEC filings.





*Securities
      Purchase Agreement*





The
      Securities Purchase Agreement provided for the sale of (i) 200 shares of Series
      B Preferred Stock (ii) Series F Warrants to purchase an aggregate of 1,500,000
      shares of Common Stock and (iii) Series G Warrants to purchase an aggregate of
      1,000,000 shares of Common Stock. Pursuant to the Securities Purchase Agreement,
      the aggregate purchase price for the Series B Preferred Stock, the Series F
      Warrants and the Series G Warrants was $2 million. Payment was made by
      $1,691,445 in cash, the conversion of $251,555 in principal and interest of
      the
      Vicis Convertible Note and deduction of certain closing expenses.





The
      Securities Purchase Agreement provides to Vicis, for a period of eighteen months
      after the closing date, a right of first refusal with respect to subsequent
      placements of equity or equity equivalent securities by us.





The
      Securities Purchase Agreement contains certain restrictions on our ability
      to:
      (i) declare dividends; (ii) reclassify, combine or reverse split our Common
      Stock; (iii) incur liens; (iii) incur certain types of indebtedness; (iv) issue
      classes of securities senior to, or *pari
      passu* with,
      the Series B Preferred Stock; (v) liquidate or sell a substantial portion of
      our
      assets; (vi) enter into transactions that would result in a Change of Control
      (as defined in the Securities Purchase Agreement); (vi) amend our charter
      documents in a way that adversely affects the rights of Vicis; (vii) except
      through Xeni Financial, make loans to, or advances or guarantee the obligations
      of, third parties; (viii) make intercompany transfers; (ix) engage in
      transactions with officers, directors, employees or affiliates; (x) divert
      business to other business entities; (xi) make investments in securities or
      evidences of indebtedness (excluding of loans made by Xeni Financial) in excess
      of $250,000 in a calendar year; and (xii) file registration
      statements.




48




Events
      of
      default under the Securities Purchase Agreement include: (i) default in the
      payment of dividends on or the failure to redeem the Series B Preferred Stock
      when due; (ii) failure to perform the covenants contained in the Securities
      Purchase Agreement or the related transaction documents; (iii) failure to file,
      or cause to become effective, a registration statement covering the shares
      of
      Common Stock underlying the Series F Warrants, the Series G Warrants and the
      Series B Preferred Stock within the timeframes required by the Registration
      Rights Agreement or the failure to keep such registration effective as required
      by the Registration Rights Agreement; (iv) suspension from listing on the OTC
      Bulletin Board or other exchange for 10 consecutive trading days; (v) the
      failure to timely deliver shares of Common Stock upon conversion of the Series
      B
      Preferred Stock or exercise of the Series F Warrants or the Series G Warrants;
      (vi) default in the payment of indebtedness in excess of $250,000; (vii) a
      judgment entered against us in excess of $250,000; and (viii) insolvency,
      bankruptcy and similar circumstances.





The
      Securities Purchase Agreement also contains customary representations,
      warranties, covenants and indemnification provisions for transactions of the
      type entered into between the Company and Vicis.





*Series
      B Preferred Stock*





The
      Certificate of Designations, which designates the rights, preferences,
      privileges and terms of the Series B Preferred Stock (the “Certificate of
      Designations”) provides that the Series B Preferred Stock will rank senior to
      other classes of Common Stock and preferred stock that are currently outstanding
      as to distributions of assets upon liquidation, dissolution or winding up and
      as
      to payment of dividends on shares of equity securities.





Each
      share of Series B Preferred Stock is entitled to cumulative dividends at the
      annual rate of 8% of the stated value of the Series B Preferred Stock. The
      stated value of each share of Series B Preferred Stock is $10,000. Dividends
      are
      payable in cash or additional shares of Series B Preferred Stock.





Each
      share of Series B Preferred Stock is convertible, at any time, at the option
      of
      the holder, into the number of shares of Common Stock determined by dividing
      the
      stated value of the Series B Preferred Stock by the conversion price. The
      initial conversion price of the Series B Preferred Stock is $2.25 per
      share.





The
      conversion price is subject to adjustment for stock splits, dividends,
      subdivisions, distributions, reorganizations and similar transactions.
      Furthermore, the conversion price is also subject to adjustment in the event
      of
      the issuance of securities for a price below the conversion price then in effect
      or the issuance of convertible securities with an exercise or conversion price
      that is less than the then current conversion price for the shares of Series
      B
      Preferred Stock.





To
      the
      extent that any shares of Series B Preferred Stock remain outstanding on
      September 28, 2008, each holder thereof shall have the option to either require
      us to redeem such holder’s shares of Series B Preferred Stock or convert such
      holder’s shares of Series B Preferred Stock into shares of Common Stock at the
      conversion price then in effect.





Holders
      of Series B Preferred Stock have the option to require us to redeem shares
      of
      Series B Preferred Stock in the event of a Change of Control (as defined in
      the
      Certificate of Designations).




49




Holders
      of Series B Preferred Stock are entitled to vote on matters submitted to our
      stockholders as if the Series B Preferred Stock had been converted into shares
      of Common Stock pursuant to the terms of the Certificate of Designations. To
      the
      extent the holders of Series B Preferred Stock are required to vote separately,
      as a class, the affirmative vote of the holders of a majority of the outstanding
      shares of Series B Preferred Stock will be required to approve the matter to
      be
      voted upon.





*Series
      F Warrants*





The
      Series F Warrants are exercisable at a price of $2.25 per share for a period
      of
      seven years from the date of issuance. The Series F Warrants may be exercised
      on
      a cashless basis. The exercise price will be subject to adjustment in the event
      of subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series F Warrants, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series F Warrants, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series F Warrants.




*Series
      G Warrants*





The
      Series G Warrants are exercisable at a price of $2.50 per share for a period
      of
      seven years from the date of issuance, with the same provisions as the Series
      F
      warrants.





*Security
      Agreement*





We,
      along
      with our subsidiaries MDwerks, Xeni Medical, Xeni Financial, Xeni Billing,
      and
      PPS entered into Security Agreements with Vicis. The Security Agreements provide
      for liens in favor of Vicis on all of our assets, including the assets of each
      of our subsidiaries, except for the accounts receivable and certain contract
      rights of Xeni Financial Services, Corp.





*Guaranty
      Agreement*





Our
      subsidiaries, MDwerks, Xeni Medical, Xeni Financial, Xeni Billing, and
      PPS entered into Guaranty Agreements with Vicis, pursuant to which they
      have agreed to unconditionally guaranty our obligations under the Series B
      Preferred Stock and the documents entered into by us in connection with the
      sale
      of the Series B Preferred Stock.





*Registration
      Rights Agreement*





We
      entered into a Registration Rights Agreement with Vicis. The Registration Rights
      Agreement requires us to file a registration statement covering the resale
      of
      the shares underlying the Series B Preferred Stock, the Series F Warrants and
      the Series G Warrants within 365 calendar days after the closing date. We are
      required to cause such registration statement to become effective on or before
      the date which is 485 calendar days after the filing of such registration
      statement. In addition to it being an event of default under the Securities
      Purchase Agreement, if we fail to file such registration statement in the time
      frame required, fail to cause it to become effective in the time frame required,
      or fail to maintain the effectiveness of the registration statement as required
      by the Registration Rights Agreement, we will be required to pay a cash penalty
      in the amount of 2% of the aggregate stated value of the Series B Preferred
      Stock for each month, or part thereof, that the registration statement is not
      filed or effective, as the case may be. The cash penalty is limited to 15%
      of
      the aggregate stated value of the Series B Preferred Stock.




50




The
      Registration Rights Agreement also provides for piggyback registration
      rights.





*Amendment,
      Consent & Waiver Agreement*





In
      connection with the transactions described above, we entered into a Consent
      and
      Waiver Agreement with Gottbetter (the “Consent and Waiver Agreement”), whereby,
      among other things: (i) Gottbetter consented to the transactions described
      above, (ii) Gottbetter agreed to delay, until February 1, 2008, principal
      payments under the Senior Secured Convertible Note issued by the Corporation
      to
      Gottbetter on October 19, 2006 (the “October Note”) and under the Senior Secured
      Convertible Note issued by the Corporation to Gottbetter on November 9, 2006
      (the “November Note”), (iii) Gottbetter agreed that its right of first refusal
      with respect to subsequent financings will be on a *pro
      rata, pari passu* basis
      with Vicis and (v) Gottbetter released its security interest in certain
      collateral of Xeni Financial.




Also
      in
      connection with the transactions described above, the conversion price of the
      Gottbetter Series E Warrants were reduced to $2.25 per share subject to further
      adjustment, and the number of Warrant Shares for which such warrants may be
      exercised were increased to 541,666 and 2/3 shares subject to further
      adjustment.





In
      consideration of Gottbetter entering into the Consent and Waiver Agreement,
      we
      issued to Gottbetter a Series D Warrant to purchase 500,000 shares of our Common
      Stock.




*Amended
      & Restated Notes*




In
      order
      to memorialize the extension of the principal payment date to February 1, 2008
      in the October Note and the November Note, we issued to Gottbetter an amended
      and restated October Note and an amended and restated November
      Note.





On
      December 3, 2007 we received net proceeds of $575,000 in connection with a
      financing provided by Vicis. In connection with the financing, we issued a
      Convertible Note to Vicis in the original principal amount of $575,000 (the
      “Note”). The Note bears interest at the rate of 8% per year. Subject to certain
      prepayment provisions, unpaid principal and interest due under the Note will
      become due and payable on December 2, 2008.





On
      January 18, 2008, we received net proceeds of $500,000 in connection with a
      financing provided by Vicis. In connection with the financing, we and Vicis
      entered into a Securities Purchase Agreement, dated January 18, 2008 (the
“January Securities Purchase Agreement”), pursuant to which we issued 50 shares
      of Series B Preferred Stock, a seven year Series F Warrant to purchase 375,000
      shares of our common stock at a price of $2.25 per share and a seven year Series
      G Warrant to purchase 250,000 shares of our common stock at a price of $2.50
      per
      share.




The
      Securities Purchase Agreement, dated January 18, 2008, by and between Vicis
      and
      us (the “January Securities Purchase Agreement”) provides that our obligations
      to Vicis under the Series B Preferred Stock, the January Securities Purchase
      Agreement and the various transaction documents entered into in connection
      with
      the January Securities Purchase Agreement (the “January Transaction Documents”)
      are secured by a lien on all of our assets pursuant to the Security Agreement,
      dated September 28, 2007, between us and Vicis.




51




The
      January Securities Purchase Agreement further provides that our obligations
      under the Series B Preferred Stock, the January Securities Purchase Agreement
      and the January Transaction Documents are guaranteed by each of our subsidiaries
      pursuant to the terms of the Guaranty Agreements previously entered into between
      Vicis and each of our subsidiaries in September, 2007.




The
      January Securities Purchase Agreement also provides that the guaranty
      obligations of our subsidiaries in connection with the January Securities
      Purchase Agreement and the January Transaction Documents are secured by the
      liens on all of the assets of each our subsidiaries, except for the accounts
      receivable and certain contract rights of Xeni Financial Services, Corp.,
      created pursuant to the Security Agreements, previously entered into by and
      between our subsidiaries and Vicis in September, 2007.




In
      connection with the sale of the Series B Preferred Stock, we amended the
      Registration Rights Agreement, previously entered into, by and between Vicis
      and
      us in September 2007, pursuant to which we agreed, in addition to registering
      the securities previously covered by such Registration Rights Agreement, to
      register for resale, the shares of our common stock into which the Series B
      Preferred Stock sold pursuant to the January Securities Purchase Agreement
      is
      convertible and the shares of our common stock for which the Series F Warrants
      and the Series G Warrants sold pursuant to the January Securities Purchase
      Agreement are exercisable.




On
      March
      1, 2008, the Company and Gottbetter amended the Senior Notes to extend the
      maturity date of the Senior Notes to January 1, 2011 and to delay principal
      payments until March 1, 2008, if the Company is able to secure additional
      financing by March 31, 2008. If the Company is unable to secure additional
      financing by March 31, 2008, the amendment to the Senior Notes will be void
      and
      of no force and effect. In consideration of the amendment to the Senior Notes,
      if the Company is able to obtain at least $5,000,000 in additional financing,
      MDwerks, Inc. will issue to Gottbetter 2,000,000 warrants at an exercise price
      to be determined at the time of the financing. We are in discussions with Vicis
      regarding the provision of additional financing.




**Loans
      from Unaffiliated Third Parties**




On
      August
      24, 2006, we received gross proceeds of $250,000 (net proceeds of $236,566,
      after expenses) in connection with a financing provided by an unrelated party.
      These notes bore interest at 7% per year, and both interest and principal were
      paid in full on October 1, 2007.




On
      August
      24, 2006, we received gross proceeds of $110,000 (net proceeds of $100,000,
      after expenses) in connection with a financing provided equally by two unrelated
      parties. These notes bore interest at 10% per year, and both interest and
      principal were paid in full on the January 21, 2007 maturity date.




**ITEM
                6.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION**




Overview




We
      offer
      a comprehensive technology-based selection of electronic medical claims
      processing, funding and collection solutions to the healthcare provider industry
      through an Internet Web browser. Our services help doctors, hospital based
      practices, and other healthcare providers and their vendors to significantly
      improve daily insurance claims transaction administration and
      management.




52




Our
      Xeni
      Medical CLAIMwerksTM solutions can provide actual contract based, insurance
      company comparable screening and analysis of medical claims directly from a
      client’s practice management system, so that deficiencies and errors can be
      corrected before they are submitted to insurance companies for electronic
      payment. Further, the matching, settlement and posting of private insurance
      company claims payments is electronically performed for clients, minimizing
      the
      bookkeeping and investigation necessary to determine payment status and
      collection actions.




Since
      the
      system has the capability of analyzing value and risk of claims payment, clients
      may also qualify for pre-approved revolving line of credit advances on claims
      processed by our Xeni Finance FUNDwerksTM solution. FUNDwerksTM can
      electronically manage loans, loan repayments and the movement of funds through
      linked bank accounts administered by us for banks or finance companies; clients
      can receive electronic advance funding on claims they select within five
      business days on favorable terms.




Additionally,
      clients may choose to complete the claims management cycle by subscribing to
      the
      Xeni Billing’s BILLwerksTM services, which can include patient billing and
      collections and/or managing third party appeals on the provider’s
      behalf.




There
      is
      no major hardware or software investment required to use the Company’s Web-based
      systems. All transactions are designed to comply with HIPAA.




We
      offer
      our services to physician and clinical service group practices, hospitals,
      rehabilitation centers, nursing homes and certain related practice vendors,
      by
      using internal and external resources. Internal resources consist mainly of
      specialized sales executives with industry knowledge and/or a portfolio of
      contacts. External resources consist primarily of independent sales
      representatives as well as channel associates such as vendors of practice
      management systems and medical industry specific sales groups such as office
      management consultants. These sales resources can leverage an existing customer
      base and contacts. Our marketing is based on prioritizing potential subscribers
      by size, location and density, need for our products and services and
      distribution opportunities. Accordingly, we are focusing our initial marketing
      efforts in geographic areas such as California, Florida, Massachusetts, Texas,
      New York and New Jersey, which contain high concentrations of prospective
      clients.




Because
      we have had a limited operating history, it is difficult to accurately forecast
      our revenues and expenses. Additionally, our operations will continue to be
      subject to risks inherent in the establishment of a new business, including,
      among other things, efficiently deploying our capital, developing our product
      and services offerings, developing and implementing our marketing campaigns
      and
      strategies and developing awareness and acceptance of our products. Our ability
      to generate future revenues will be dependent on a number of factors, many
      of
      which are beyond our control, including the pricing of other services, overall
      demand for our products, market competition and government
      regulation.




Critical
      Accounting Policies




The
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these consolidated financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses, and related disclosure of contingent assets and
      liabilities. On an on-going basis, we evaluate our estimates based on historical
      experience and on various other assumptions that are believed to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.




53




We
        apply
        the Securities and Exchange Commission's Staff Accounting Bulletin 104 for
        revenue recognition. In general, we record revenue when persuasive evidence
        of
        an arrangement exists, services have been rendered or product delivery has
        occurred, the sales price to the customer is fixed or determinable, and
        collectability is reasonably assured. We have identified the policy below
        as
        critical to our business operations and understanding of our financial
        results:




Revenues
      derived from fees related to claims and contract management services are
      generally recognized when services are provided to the customer. We provide
      advance funding for medical claims and term loan services to unaffiliated
      healthcare providers. These arrangements typically require us to advance funds
      to these unaffiliated healthcare providers (our customers) in exchange for
      liens
      on the receivables related to invoices remitted to their clients for services
      performed. The advances are generally repaid through the remittance of payments
      of receivables by their payers directly to us. We may withhold from these
      advances interest, a fee charged in consideration of administration of advance
      funding and loans and other charges as well as the amount of receivables
      relating to prior advances that remain unpaid after a specified number of days.
      These interest charges, administrative fees and other charges are recognized
      as
      revenue when earned and are calculated on a daily basis.




Revenues
      derived from fees related to billing and collection services are generally
      recognized when the customer's accounts receivable are collected. Revenues
      from
      implementation fees are generally recognized over the term of the customer
      agreement. Revenues derived from maintenance, administrative and support fees
      are generally recognized at the time the services are provided to the
      customer.




**Results
      of Operations**




***For
      the Year Ended December 31, 2007 Versus Year Ended December 31,
      2006***




*Revenue*




For
      the
      year ended December 31, 2007, we recorded total revenue of $577,251. Of this
      total, we recorded service fee revenue of $470,149, accounting for 81.4% of
      total revenue and financing income of $107,102, accounting for 18.6% of total
      revenue. For the year ended December 31, 2006, we recorded total revenue of
      $427,778. Of this total, we recorded service fee revenue of $355,429, accounting
      for 83.1% of total revenue and financing income of $72,349, accounting for
      16.9%
      of total revenue.




*Operating
      Expenses*




Our
      operating expenses decreased for the year ended December 31, 2007 from the
      year
      ended December 31, 2006 as a result of reduced compensation and selling, general
      and administrative expenses.




For
      the
      year ended December 31, 2007, total operating expenses were $8,022,031 as
      compared to $9,036,301 for the year ended December 31, 2006, a decrease of
      $1,014,270. Included in this decrease for the year ended December 31, 2007
      are
      the following:




1.
            We
                recorded compensation expense of $5,286,985for
                the year ended December 31, 2007as
                compared to $5,732,372 for the year ended December 31, 2006. This
                $445,387
                decrease was attributable to non-cash compensation expense for stock
                option grants during 2007 in the amount of $3,196,046 as compared
                to
                $3,911,640 in 2006. We expect cash and non-cash compensation expense
                to
                increase as we hire additional administrative, sales and technical
                personnel and record the expense of both current and future stock
                option
                grants; and




2.
            Consulting
                expense amounted to $760,284 for the year ended December 31, 2007
                as
                compared to $943,500 for the year ended December 31, 2006, a decrease
                of
                $183,216, or 19.4%. This decrease resulted from a lower costs in
                2007
                associated with obtaining financing as opposed to 2006 and the
                transferring of outside business development consultant expense to
                compensation expense due to the hiring of new
                employees.




3.
            Professional
                fees amounted to $411,917 for the year ended December 31, 2007 as
                compared
                to $358,969 for the year ended December 31, 2006, an increase of
                $52,948,
                or 14.8%. This expense was attributable to an increase in our legal
                fees
                related to additional SEC filings, the Series B Preferred Stock offering,
                and other corporate matters; and




54




4.
            Selling,
                general and administrative expenses were $1,562,845 for the year
                ended
                December 31, 2007 as compared to $2,001,460 for the year ended December
                31, 2006, a decrease of $438,615, or 21.9%. This decrease resulted
                from
                the reduction of outside sales consultants, a decrease in investor
                relations costs in the current year and a loss on notes payable
                conversions in the prior year for which there is no comparable expense
                in
                2007.




For
      the
      years ended December 31, 2007 and 2006, selling, general and administrative
      expenses consisted of the following:




2007
            
            2006Sales
                commissions
            
            $
            68,849
            
            $
            201,674Advertising
                and promotion
            
            
            92,899
            
            
            196,750Employee
                benefits and payroll taxes
            
            
            385,679
            
            
            333,601Other
                selling, general and administrative
            
            
            1,015,418
            
            
            1,269,435$
            1,562,845
            
            $
            2,001,460




*Other
      Income (Expenses)*




For
      the
      year ended December 31, 2007, interest expense was $2,484,835 as compared to
      $905,374 for the year ended December 31, 2006, an increase of $1,579,461. This
      increase was due to an increase in borrowings and amortization of debt discount
      and deferred fees in connection with our notes payable. Additionally in 2006,
      in
      connection with the granting of 90,000 warrants related to certain notes
      payable, we recorded interest expense of $335,273.




During
      the year ended December 31, 2006, we recorded a loss on the revaluation of
      warrant liability of $192,914 related to the change in fair value of the
      warrants during this period.




*Net
      Loss*




As
      a
      result of these factors, we reported a net loss of $9,882,330 for the year
      ended
      December 31, 2007 as compared to a net loss of $9,675,046 for the year ended
      December 31, 2006.




*Deemed
      Dividend arising from beneficial conversion on Preferred Stock and Other
      Charges*




During
      the year ended December 31, 2006, we recorded a deemed dividend arising from
      a
      beneficial conversion feature of preferred stock of $913,777 which relates
      to
      our Series A Convertible Preferred Stock. This non-cash item is related to
      the
      beneficial conversion features on our Series A Convertible Preferred Stock.
      In
      addition, for the year ended December 31, 2006, we issued 76,000 shares of
      the
      Company's common stock to certain shareholders pursuant to agreements to offset
      the effect of dilutive financings of the Xeni Companies. The shares issued
      were
      valued at the fair market value at the date of issuance of $246,240 and were
      treated as an additional charge to the loss attributable to common
      shareholders.




*Net
      Loss Attributable to Common Shareholders*




We
      reported a net loss attributable to common shareholders of $9,882,330 for the
      year ended December 31, 2007 as compared to net loss attributable to common
      shareholders of $10,835,063 for the year ended December 31, 2006. This
      translates to an overall per share loss available to shareholders of ($.77)
      for
      the year ended December 31, 2007 as compared to a per share loss of ($.91)
      for
      the year ended December 31, 2006.




55




*Liquidity
      and Capital Resources*




We
      used
      the proceeds from the sales of preferred stock and notes and loans payable
      through December 31, 2007 for working capital purposes and for funding our
      notes
      receivables of which we have $1,652,079 owed to us at December 31, 2007. We
      will
      continue to advance funds under note agreements to providers that subscribe
      to
      our MDwerks financial services solutions.




As
      of
      December 31, 2007, we had a cash balance of $320,903. The amount of cash
      available to us at December 31, 2007, along with the $500,000 January 18, 2008
      financing, will be insufficient for us to service our current indebtedness
      and
      implement our business plan as anticipated and will require us to seek
      additional debt or equity financing in the near future, as we will be unable
      to
      generate sufficient cash flow from our operations. Our ability to continue
      to
      implement our revenue and profit growth strategy will be adversely affected
      and
      the Company will have to curtail operations if we are unable to consummate
      a
      sufficient amount of additional private placement transactions or debt
      financing, which we are currently pursuing.




We
      currently have no material commitments for capital expenditures.




Cash
      flows




At
      December 31, 2007, we had cash of $320,903.




Net
      cash
      used in operating activities was $4,967,641 for the year ended December 31,
      2007
      as compared to $3,614,120 for the year ended December 31, 2006, an increase
      of
      $1,353,521. This increase is primarily attributable to an increase in our net
      loss and:




1.
              Stock-based
                  compensation of $3,346,046 is primarily related to lower issuances
                  of
                  stock options to employees and shares of our common stock to consultants,
                  versus $4,334,140 for the year ended December 31,
                  2006;




2.
            Loss
                on valuation of warrant liability for the year ended December 31,
                2007 of
                $0 versus $192,914 through September 30, 2006 due to the revaluation
                of
                our warrant liability to fair value for the year ended December 31,
                2006;




3.
            Amortization
                of debt discount related to the Gottbetter, Grenier and Goldner Notes
                of
                $2,021,396 , deferred compensation of $266,040, Gottbetter and Vicis
                debt
                offering costs of $207,202, and Goldner and Grenier debt issuance
                costs of
                $10,954, compared to debt discount related to the Gottbetter Notes
                of
                $354,190, deferred compensation of $291,487, Gottbetter debt offering
                costs of $43,361 and Goldner and Grenier debt issuance costs of $12,480
                during the year ended December 31,
                2006;




4
            No
                settlement expense for the year ended December 31, 2007 versus $180,827
                for the conversion of $40,000 of notes payable to common stock for
                the
                year ended December 31, 2006;




5.
            No
                interest expense in connection with the grant of warrants versus
                $460,572
                for the year ended December 31,
                2006;




6.
            A
                net increase in notes receivable, accounts receivable and prepaid
                expenses
                aggregating $1,331,056 principally related to the increase in funding
                of
                notes receivable to providers that subscribe to our MDwerks financial
                services solution and other healthcare providers;.




Net
      cash
      used in investing activities was $5,209 for the year ended December 31, 2007
      as
      compared to $110,457 for the year ended December 31, 2006 and is principally
      related to the acquisition of computer and office equipment and
      furniture.




56




Net
      cash
      provided by financing activities was $2,146,912 for the year ended December
      31,
      2007 as compared to $6,104,954 for the year ended December 31, 2006. For the
      year ended December 31, 2007, we received gross proceeds from the sale of Series
      B Convertible Preferred Stock of $2,000,000 reduced by placement fees and other
      expenses paid of $116,810 and we received net proceeds from notes payable of
      $575,000 and $250,000 and a loan payable of $250,000. During 2007, we made
      notes
      payable repayments of $598,362 and loans payable repayments of $212,916. For
      the
      year ended December 31, 2006, we received gross proceeds from notes payable
      of
      $4,750,000 from Gottbetter and $360,000 from three qualified investors which
      were offset by placement fees of $263,264. We also received proceeds from the
      sale of Series A Convertible Preferred Stock of $1,700,000 reduced by placement
      fees and other expenses paid of $313,923. During 2006, we made notes payable
      repayments of $101,634 and loans payable repayments of $26,225..




**Off
      Balance Sheet Arrangements**




We
      had no
      off balance sheet arrangements as of December 31, 2007.




**ITEM
                7.**
            **FINANCIAL
                STATEMENTS**




See
      our
      Financial Statements beginning on page F-1.




**ITEM
                8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**




None


**ITEM
                  8A.**
                **CONTROLS
                    AND
                    PROCEDURES**





**(a)**
            **Disclosure
                Controls and
                Procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) under the Securities
      Exchange Act of 1934, as amended, as of the end of the period covered by this
      report (the “Evaluation Date”). Based on this evaluation, our principal
      executive officer and principal financial officer concluded as of the Evaluation
      Date that our disclosure controls and procedures were effective such that the
      information relating to MDwerks, Inc., including our consolidated subsidiaries,
      required to be disclosed in our Securities and Exchange Commission (“SEC”)
      reports (i) is recorded, processed, summarized and reported within the time
      periods specified in SEC rules and forms and (ii) is accumulated and
      communicated to MDwerks, Inc. management, including our principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.




Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      does not expect that our disclosure controls and procedures or our internal
      controls will prevent all error and all fraud. A control system, no matter
      how
      well conceived and operated, can provide only reasonable, not absolute,
      assurance that the objectives of the control system are met. Further, the design
      of a control system must reflect the fact that there are resource constraints
      and the benefits of controls must be considered relative to their costs. Due
      to
      the inherent limitations in all control systems, no evaluation of controls
      can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within MDwerks, Inc. have been detected.




**(b)**
            **Management’s
                Report on Internal Control over Financial
                Reporting**




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting (as defined in Rule 13a-15(f) under the
      Securities Exchange Act, as amended). Our management assessed the effectiveness
      of our internal control over financial reporting as of December 31, 2007. In
      making this assessment, our management used the criteria set forth by the
      Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in *Internal
      Control-Integrated Framework* .
      Our
      management has concluded that, as of December 31, 2007, our internal control
      over financial reporting is effective based on these criteria.




57






**(c)**
            **Changes
                in Internal Control over Financial
                Reporting**




Our
      management has also evaluated our internal controls over financial reporting,
      and there have been no significant changes in our internal controls or in other
      factors that could significantly affect those controls subsequent to the date
      of
      their last evaluation.





This
      annual report does not include an attestation report of our public accounting
      firm regarding internal control over financial reporting. Our management’s
      report was not subject to attestation by our registered public accounting firm
      pursuant to temporary rules of the Securities and Exchange Commission that
      permit us to provide only management’s report in this annual
      report.





There
      have been no changes in our internal control over financial reporting during
      our
      fourth fiscal quarter that has materially affected, or is reasonably likely
      to
      materially affect, our internal control over financial reporting.





On
      July
      25, 2007, the Securities and Exchange Commission unanimously approved the Public
      Company Accounting Oversight Board's (PCAOB) proposed Auditing Standard No.
      5, *An
      Audit of Internal Control Over Financial Reporting That is Integrated With
      An
      Audit of Financial Statement* .
      Auditing Standard No. 5 provides the new professional standards and related
      performance guidance for independent auditors to attest to, and report on,
      management's assessment of the effectiveness of internal control over financial
      reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX). We
      have
      engaged a qualified third-party to assist us with the preparations for
      management’s assessment of the effectiveness of internal controls over financial
      reporting required by the end of this fiscal year and with the documentation
      and
      procedures required for our external auditor attestation requirement, which
      becomes effective fiscal year ending 2009.




**ITEM
                8B.**
              **OTHER
                  INFORMATION**




Not
      applicable.




58




**PART
      III**




**ITEM
                9.**
              **DIRECTORS
                  AND EXECUTIVE OFFICERS**




The
      following table sets forth information regarding the members of our Board of
      Directors and our executive officers. The directors listed below will serve
      until the next annual meeting of our stockholders.




**Name**
            
            **Age**
            
            **Position**Howard
                Katz
            
            
            66
            
            
            Chief
                Executive Officer and DirectorSolon
                Kandel
            
            
            47
            
            
            President
                and DirectorVincent
                Colangelo
            
            
            64
            
            
            Chief
                Financial Officer and SecretaryGerard
                Maresca
            
            
            62
            
            
            Vice
                President of Business DevelopmentStephen
                M. Weiss
            
            
            54
            
            
            Chief
                Operating OfficerDavid
                M. Barnes
            
            
            65
            
            
            DirectorPeter
                Dunne
            
            
            50
            
            
            DirectorPaul
                Kushner
            
            
            61
            
            
            Director




The
      principal occupation for the past five years (and, in some instances, for prior
      years) of each of our directors and officers are as follows:




**Howard
      B. Katz** became,
      effective as of November 16, 2005, our Chief Executive Officer and a Member
      of
      our Board of Directors. Mr. Katz is also the Chief Executive Officer and a
      Director of our wholly-owned subsidiary MDwerks Global Holdings, Inc., which
      positions he has held since June, 2005. Since July, 2004, Mr. Katz has been
      a
      Director and Chief Executive Officer of Xeni Medical Systems, Inc., and Mr.
      Katz
      has been the sole Director and Chief Executive Officer of Xeni Medical Billing
      Corp. since March 2005, and has been the sole Director and Chief Executive
      Officer of Xeni Financial Services, Corporation since February 2005. From
      December, 2002 until October, 2004, Mr. Katz was Chief Executive Officer of
      ViewPoint Exams International, Inc., a company that facilitated independent
      medical examinations in connection with insurance and litigation matters. From
      August 1998 to December, 2002, Mr. Katz was the Chief Executive Officer of
      Imagine Networks, Inc., a company based in New York City that engaged in prepaid
      telecommunications and financial services. Mr. Katz served on the Board of
      Directors of American United Global, Inc., a publicly traded company from April
      1996 until August 2005. Mr. Katz has over 35 years of operating, financial
      and
      senior management experience, in both public and private companies. His
      responsibilities have included numerous progressive positions as CFO, President
      and CEO of ‘‘high tech’’, software development and other high growth businesses,
      including one involving banking transactions. Mr. Katz was President of National
      Fiber Network, Inc. which later became MetroMedia Fiber Network, Inc. and
      reached a peak public market capitalization of over $30 billion. Mr. Katz has
      been a principal in, or helped consummate, numerous public offerings and other
      successful business ventures. Mr. Katz received an MBA from New York
      University.




**Solon
      L. Kandel** became,
      effective as of November 16, 2005, our President and a member of our Board
      of
      Directors. Mr. Kandel is also the President and a Director of MDwerks Global
      Holdings, Inc., which he has held since June, 2005. Since July, 2004, Mr. Kandel
      has been a Director and President of Xeni Medical Systems, Inc., and Mr. Kandel
      has been President of Xeni Medical Billing Corp. since March 2005, and has
      been
      President of Xeni Financial Services, Corporation since February 2005. Since
      November 2000, Mr. Kandel has been the Chief Executive Officer and Managing
      Member of The Ashwood Group, L.L.C., a venture development and business
      consulting company based in Boca Raton, Florida. From April 1999 to October
      2000, Mr. Kandel was the President, Chief Executive Officer of Independent
      Wireless One, Inc., a wireless voice, data and Internet Company based in Albany,
      New York. From April 1999 to April 2002, Mr. Kandel also served as a member
      of
      the Board of Directors of Independent Wireless One, Inc. Mr. Kandel has enjoyed
      over 15 years of progressive and diverse operating and senior management
      experience, ranging from start-up to large, multi-billion dollar company
      environments. Prior to business management, Mr. Kandel performed corporate
      and
      banking transactions law for several years and was a Senior Attorney at McCaw
      Cellular Communications. Mr. Kandel received a JD from Rutgers University School
      of Law and is a Truman Scholar.




59




**Vincent
      Colangelo** became,
      effective as of November 16, 2005, our Chief Financial Officer. Since July,
      2005, until becoming our Chief Financial Officer, Mr. Colangelo provided
      consulting services to us. From March 2004 to November 2005, Mr. Colangelo
      was
      the President and Principal Consultant of Weston Business Advisors, Inc., a
      business consulting company based in Weston, Florida. From January 2003 to
      March
      2004, Mr. Colangelo was the President of Cartridge World Florida in Weston,
      Florida, a master franchisee for the State of Florida for a world wide print
      cartridge refilling organization. From September 1995 to December 2002, Mr.
      Colangelo was the President and Principal Consultant of Birchwood Associates,
      Inc., a business consulting company based in Weston, Florida. Mr. Colangelo
      has
      over 35 years of financial executive and operational management experience.
      As a
      principal of the management consulting firms, Mr. Colangelo provided interim
      CFO, COO and general financial consulting services to clients ranging from
      small
      businesses to Fortune 100 companies. Mr. Colangelo brings to us a unique
      combination of financial management skills, industry experience and familiarity
      with our product line. Mr. Colangelo was also President of a start-up
      multi-national publishing company and worked at Xerox’ world headquarters as a
      consolidations and regulatory reporting manager and as a financial planning
      manager. Mr. Colangelo received an MBA and a BBA from Iona College and is a
      New
      York State CPA.




**Stephen
      M. Weiss** became,
      effective as of May 29, 2007, our Chief Operating Officer. Prior to this Mr.
      Weiss served from November 16, 2005, as our Chief Technology Officer. Mr. Weiss
      has provided consulting services to us and served as acting Chief Technology
      Officer of MDwerks Global Holdings, Inc. since March 2005. From March 2002
      to
      March 2005, Mr. Weiss was the Chief Technology Officer and Chief Operating
      Officer of Enterprise Technology Corporation, a financial software services
      consulting company that served many Fortune 500 clients. From September 1999
      to
      November 2001, Mr. Weiss was the Chief Technology Officer at Imagine Networks,
      Inc., where he designed and managed the development of electronic payment
      systems linked to telecommunications pre-paid systems. Prior to joining Imagine
      Networks, Inc., he co-founded AstraTek, a software products and consulting
      firm
      that developed products and consulting services for financial and technology
      companies including Microsoft, IBM and Citrix. Mr. Weiss also served as Vice
      President at Bankers Trust Company for over 13 years, where he developed a
      number of advanced communication systems, including a global cryptography-based
      authentication system and links in Tokyo between the bank’s back office systems
      and the Bank of Japan’s money transfer and clearance systems. Mr. Weiss received
      a BA from Buffalo State College.




**Gerard
      Maresca** became,
      effective February 1, 2007, our Vice President of Business Development. From
      February 14, 2006 to February 1, 2007, Mr. Maresca served as our Chief Operating
      Officer. From November 16, 2005 until February 14, 2006, Mr. Maresca was our
      Vice President of Business Development. Prior to joining us, since January
      2004,
      Mr. Maresca operated a technology and business consulting company called GMAR,
      Inc. From February 2000 to October 2003, Mr. Maresca was the Executive Vice
      President and Chief Technology Officer of MEDwerks, LLC, and was responsible
      for
      development of our products. Mr. Maresca has 28 years of technology,
      engineering, and program management experience, focused on hardware and software
      development of computer based products. Mr. Maresca has served as a hardware
      and
      software system architect, with experience in Internet and web applications.
      While Product Director at Intel Corp. (‘‘Intel’’) for 9 1⁄2 years, he managed
      development of Intel's i860 program parallel microprocessor, product marketing,
      manufacturing and R&D, as well as new business development and client
      support. Mr. Maresca was also Vice President at Diagnostic Retrieval Systems,
      Inc. for 8 years until he began working with MEDwerks, LLC. Mr. Maresca received
      a BSEC from Brooklyn Polytech, and a MSCS from Columbia University. He holds
      five U.S. patents and has published.




60




**David
      M. Barnes** became,
      effective as of November 16, 2005, a member of the Board of Directors and serves
      on our Audit Committee as Chairman and is also a member of our Compensation
      Committee. Mr. Barnes has also served as Chief Financial Officer of Neah Power
      Systems, Inc., (NPWS:OTCBB), since April 2006, and was Chief Financial Officer
      of Cyber Defense Systems, Inc., (CYDF:OTCBB), from August 2005 through November
      2007. In addition, Mr. Barnes was a Director, Executive Vice President and
      Chief
      Financial Officer of American United Global, Inc., now Solar Thin Films, Inc.
      (SLTN:OTCBB), from April 1996 through July 2006. Mr. Barnes is also a member
      of
      the Board of Directors, Audit Committee and Compensation Committee of China
      Direct, Inc. (CDS:ASE),  Searchhelp,
      Inc. (SHLP:OTCBB), Medical Solutions Management Inc. (MSMI:OTCBB) and
      Thinkpath,Inc. (THPHF:OTCBB). On March 7, 2008, Thinkpath, Inc. filed a
      bankruptcy petition under Chapter 11 of the U.S. Bankruptcy Code.




**Peter
      Dunne** became,
      effective as of November 16, 2005, a member of our Board of Directors and serves
      on our Compensation Committee. Mr. Dunne has spent over 25 years in
      communications management. Currently he is President and partner of Franklin
      Communications, LLC, a full service graphic services company, a position he
      has
      held since July 2002. From March 2002 to July 2002 he was Regional General
      Manager for Kelmscott Communications, LLC overseeing Franklin Communications,
      Trade Litho, Little River Press, and Lauderdale Graphics. From September 2000
      to
      July 2002 he held the position of Regional Controller for the same companies.
      From September 1982 to September 2000 he was Vice President and Controller
      of
      Franklin Communications. Mr. Dunne’s other experiences include positions in
      Dataco, a national data entry service business, and Robertson Leasing Corp,
      an
      equipment leasing company, both formerly divisions of Robertson Financial
      Corporation. Mr. Dunne is Vice Chairman of the Board of Directors of the
      Printing Association of Florida and on the CEO Advisory Board to the Printing
      Industries of America.




**Paul
      Kushner** became,
      effective June 22, 2006, a member of our Board of Directors and serves on our
      Audit Committee. Mr. Kushner has been President and Owner of Asset Indemnity
      Brokerage Corp., an insurance brokerage firm since July 1994. Mr. Kushner
      started his career in the surety industry in 1967 and has been world regional
      bond manager for American International Group (AIG) and special representative
      to Norway for the introduction of surety bonds in the United States. In 1987,
      he
      was the New York Manager of American International Group, Domestic and
      International Operations.




**Board
      of Director Composition and Committees**




Our
      Board
      of Directors is comprised of five directors, Messrs. Katz, Kandel, Barnes,
      Dunne
      and Kushner. David M. Barnes and Peter Dunne serve as members of our
      Compensation Committee and David M. Barnes and Paul Kushner serve as members
      of
      our Audit Committee. We have independent parties serving on each of the Audit
      Committee and the Compensation Committee.




61




**Director
      Compensation**




The
      following non-management directors received compensation from MDwerks, Inc.
      in
      the amounts set forth in the chart below for the twelve months ended December
      31, 2007, December 31, 2006 and December 31, 2005. We intend to continue to
      compensate non-management directors through the issuance of stock awards
      including, without limitation, incentive stock options, restricted stock awards,
      stock grants and or stock appreciation rights. The value attributable to any
      Option Awards in the following chart is computed in accordance with FAS 123R.
      No
      other item of compensation was paid to any director of the Company other than
      reimbursement of expenses:




**DIRECTOR
      COMPENSATION**




**Name**
            
            **Year**
            
            **Fees**
              **Earned**
              **or
                Paid in**
              **Cash**
            
            **Stock**
              **Awards**
            
            **Option**
              **Awards**
            
            **Non-**
              **Equity**
              **Incentive**
              **Plan**
              **Compen-**
              **sation**
            
            **Change
                in**
              **Pension**
              **Value
                and**
              **Non-**
              **qualified**
              **Deferred**
              **Compen-**
              **sation**
              **Earnings**
            
            **All
                Other**
              **Compen-**
              **sation**
            
            **Total**David
                M. Barnes
            
            
            2007
            
            $
            20,000
            
            $
            25,000
            1
            $
            54,000
            2
            
            —
            
            
            —
            
            
            —
            
            $
            99,0002006
            
            $
            14,000
            
            $
            87,500
            3
            $
            165,750
            4
            
            —
            
            
            —
            
            
            —
            
            $
            267,2502005
            
            $
            3,500
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            3,500Peter
                Dunne
            
            
            2007
            
            $
            14,000
            
            
            —
            
            $
            12,000
            5
            
            —
            
            
            —
            
            
            —
            
            $
            26,0002006
            
            $
            14,000
            
            
            —
            
            $
            342,800
            6
            
            —
            
            
            —
            
            
            —
            
            $
            356,8002005
            
            $
            3,500
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            3,500Paul
                Kushner
            
            
            2007
            
            $
            14,000
            
            
            —
            
            $
            12,000
            5
            
            —
            
            
            —
            
            
            —
            
            $
            26,0002006
            
            $
            7,000
            
            
            —
            
            $
            360,800
            7
            
            —
            
            
            —
            
            
            —
            
            $
            367,8002005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —







1
            On
                May 29, 2007, the Company issued 50,000 shares of common stock to
                a David
                M. Barnes in consideration for services rendered. The shares were
                issued
                at the fair value at the date of the issuance of $25,000 or $0.50
                per
                share. The Company recorded stock-based consulting expense of
                $25,000.




62




2
            Consists
                of Incentive Stock Options to purchase 150,000 shares of common stock
                at a
                price of $0.38 per share granted on December 31, 2007 and vesting
                on
                December 31, 2007.




3
            On
                June 19, 2006, the Company authorized the issuance of 75,000 shares
                of
                common stock to David M. Barnes in consideration for services rendered.
                On
                June 22, 2006, the Company issued 25,000 of these authorized shares
                of
                common stock at the fair value at the date of the issuance of $87,500
                or
                $3.50 per share. The Company recorded stock-based compensation of
                $87,500.




4
            Consists
                of Incentive Stock Options to purchase 44,000 shares of common stock
                and
                Non-qualified Stock Options to purchase 31,000 shares of common stock
                both
                at a price of $2.25 per share granted on October 11, 2006 and vesting
                in 1⁄3
                increments starting on October 11, 2006 and on each of the next two
                anniversaries of the date of the
                grant.




5
            Consists
                of Incentive Stock Options to purchase 35,000 shares of common stock
                at a
                price of $0.38 per share granted on December 31, 2007 and vesting
                on
                December 31, 2007.




6
            Consists
                of Incentive Stock Options to purchase 25,000 shares of common stock
                and
                Non-qualified Stock Options to purchase 50,000 shares of common stock
                both
                at a price of $4.00 per share granted on June 19, 2006 and vesting
                in 1⁄3
                increments on each anniversary of the grant, and Non-qualified Stock
                Options to purchase 25,000 shares of common stock at a price of $2.25
                per
                share granted on October 11, 2006 and vesting in 1⁄3 increments starting on
                October 11, 2006 and on each of the next two anniversaries of the
                date of
                the grant.




7
            Consists
                of Incentive Stock Options to purchase 23,500 shares of common stock
                and
                Non-qualified Stock Options to purchase 51,500 shares of common stock
                both
                at a price of $4.25 per share granted on June 22, 2006 and vesting
                in 1⁄3
                increments on each anniversary of the grant, and Non-qualified Stock
                Options to purchase 25,000 shares of common stock at a price of $2.25
                per
                share granted on October 11, 2006 and vesting in 1⁄3 increments starting on
                October 11, 2006 and on each of the next two anniversaries of the
                date of
                the grant.




**Audit
      Committee Financial Expert**




David
      M.
      Barnes serves on our Audit Committee as the audit committee financial expert.
      Mr. Barnes is independent (as such term is used in Item 7(d) (3) (iv) of
      Schedule 14A under the Exchange Act).




**Executive
      Officer Employment Agreements**




Effective
      January 1, 2006, each of Howard B. Katz, Solon L. Kandel, Vincent Colangelo,
      and
      Stephen W. Weiss entered into an employment agreement with us. The employment
      agreement with Mr. Katz was extended on December 31, 2007 to a term expiring
      on
      December 31, 2010. The employment agreement with Mr. Colangelo extends for
      a
      term expiring on December 31, 2009. The employment agreements with Messrs.
      Kandel and Weiss expired on December 31, 2007 and are being extended on a
      month-to-month basis. Pursuant to these employment agreements, Mr. Katz has
      agreed to devote substantially all of his time, attention and ability, and
      Messrs. Kandel, Colangelo and Weiss have each agreed to devote all of their
      time, attention and ability, to our business as our Chief Executive Officer,
      President, Chief Financial Officer, Chief Operating Officer, respectively.
      The
      employment agreements provide that Messrs. Katz, Kandel, Colangelo, and Weiss
      will receive a base salary during calendar year 2007 at an annual rate of
      $225,000, $200,000, $175,000, and $165,000 for services rendered in such
      positions. Mr. Kandel agreed to defer payment on his entire 2007 annual base
      salary increase of $25,000 and Mr. Colangelo agreed to defer payment of $15,000
      of his 2007 annual base salary increase of $25,000. During calendar years 2008
      and 2009 under the employment agreements for Messrs. Katz and Colangelo, their
      annual base salaries will be increased to $300,000 and $330,000, respectively,
      for Mr. Katz, and $200,000 and $220,000, respectively, for Mr. Colangelo. During
      calendar years 2010, under the employment agreement for Mr. Katz, the annual
      base salary will be increased to $363,000. In addition, each executive may
      be
      entitled to receive, at the sole discretion of our board of directors, cash
      bonuses based on the executive meeting and exceeding performance goals. The
      cash
      bonuses range from up to 25% of the executive’s annual base salary for Mr.
      Weiss, up to 100% of the executive’s annual base salary for Messrs. Kandel and
      Colangelo, and up to 150% of the executive’s annual base salary for Mr. Katz.
      The cash bonuses for Messrs. Katz, Kandel and Colangelo include a minimum bonus
      due of 40%, 25% and 25% respectively. Messrs. Katz, Kandel, and Colangelo have
      agreed to defer payment on their 2007 bonuses, to which they were entitled.
      Each
      of our executive officers is entitled to participate in our 2005 Incentive
      Compensation Plan. We have also agreed to pay or reimburse each executive
      officer up to a specified monthly amount for the business use of his or her
      personal car and cell phone. The employment agreements provide for termination
      by us upon death or disability (defined as 90 aggregate days of incapacity
      during any 365-consecutive day period) of the executive or upon conviction
      of a
      felony or any crime involving moral turpitude, or willful and material
      malfeasance, dishonesty or habitual drug or alcohol abuse by the executive,
      related to or affecting the performance of his duties. In the event any of
      the
      employment agreements are terminated by us without cause, such executive will
      be
      entitled to compensation for the balance of the term of his employment agreement
      or, if longer, for three years in the case of Mr. Katz and two years in the
      case
      of Mr. Colangelo. Messrs. Katz, Kandel and Colangelo also have the right, if
      terminated without cause, to accelerate the vesting of any stock options or
      other awards granted under our 2005 Incentive Compensation Plan. We intend
      to
      obtain commitments for key-man life insurance policies for our benefit on the
      lives of Messrs. Katz, Kandel and Colangelo equal to three times their
      respective annual base salary. In addition to the key-man life insurance
      policies, we have agreed to maintain throughout the term of each employment
      agreement 15-year term life insurance policies on the lives of Messrs. Katz,
      Kandel and Colangelo, with benefits payable to their designated beneficiaries,
      and to pay all premiums in connection with those policies




63




In
      the
      event of a change of control of our company, Messrs. Katz and Colangelo may
      terminate their employment with us within six months after such event and will
      be entitled to continue to be paid pursuant to the terms of their respective
      employment agreements.




The
      employment agreements also contain covenants (a) restricting the executive
      from
      engaging in any activities competitive with our business during the terms of
      such employment agreements and one year thereafter, (b) prohibiting the
      executive from disclosure of confidential information regarding us at any time
      and (c) confirming that all intellectual property developed by the executive
      and
      relating to our business constitutes our sole and exclusive
      property.




The
      foregoing summaries of our employment agreements are qualified by reference
      to
      the full texts of the form of each of the Senior Executive Level Employment
      Agreement and Executive Level Employment Agreement, filed as Exhibits 10.1
      and
      10.2 to our Current Report on Form 8-K, filed with the SEC on January 5, 2006,
      respectively, as Exhibit 10.1 to our Current Report on Form 8-K, filed with
      the
      SEC on February 2, 2007, and as Exhibit 10.1 to our Current Report on Form
      8-K,
      filed with the SEC on January 4, 2008 all of which are incorporated herein
      in
      their entirety.




Currently,
      we do not have an employment agreement with Gerard Maresca and, therefore,
      his
      employment is on an ‘‘at-will’’ basis




**Indemnification
      of Directors and Officers**




As
      permitted by the provisions of the Delaware General Corporation Law (the
‘‘DGCL’’), we have the power to indemnify any person made a party to an action,
      suit or proceeding by reason of the fact that they are or were a director,
      officer, employee or agent of ours, against expenses, judgments, fines and
      amounts paid in settlement actually and reasonably incurred by them in
      connection with any such action, suit or proceeding if they acted in good faith
      and in a manner which they reasonably believed to be in, or not opposed to,
      our
      best interest and, in any criminal action or proceeding, they had no reasonable
      cause to believe their conduct was unlawful. Termination of any action, suit
      or
      proceeding by judgment, order, settlement, conviction, or upon a plea of *nolo
      contendere* or its
      equivalent, does not, of itself, create a presumption that the person did not
      act in good faith and in a manner which they reasonably believed to be in or
      not
      opposed to our best interests, and, in any criminal action or proceeding, they
      had no reasonable cause to believe their conduct was unlawful.




We
      must
      indemnify a director, officer, employee or agent who is successful, on the
      merits or otherwise, in the defense of any action, suit or proceeding, or in
      defense of any claim, issue, or matter in the proceeding, to which they are
      a
      party because they are or were a director, officer, employee or agent, against
      expenses actually and reasonably incurred by them in connection with the
      defense.




64




We
      may
      provide to pay the expenses of officers and directors incurred in defending
      a
      civil or criminal action, suit or proceeding as the expenses are incurred and
      in
      advance of the final disposition of the action, suit or proceeding, upon receipt
      of an undertaking by or on behalf of the director or officer to repay the amount
      if it is ultimately determined by a court of competent jurisdiction that they
      are not entitled to be indemnified.




The
      DGCL
      also permits a corporation to purchase and maintain liability insurance or
      make
      other financial arrangements on behalf of any person who is or was




·
            a
                director, officer, employee or agent of
                ours,




·
            or
                is or was serving at the request of the corporation as a director,
                officer, employee or agent of another corporation, partnership, joint
                venture, trust or other
                enterprises.




Such
      coverage may be for any liability asserted against them and liability and
      expenses incurred by them in their capacity as a director, officer, employee
      or
      agent, or arising out of their status as such, whether or not the corporation
      has the authority to indemnify them against such liability and
      expenses.




Insofar
      as indemnification for liabilities arising under the Securities Act, as amended,
      may be permitted to officers, directors or persons controlling our company
      pursuant to the foregoing provisions, we have been informed that in the opinion
      of the SEC such indemnification is against public policy as expressed in such
      Act and is therefore unenforceable.




**Code
      of Ethics**




We
      adopted a code of ethics that applies to our officers, directors and employees,
      including our chief executive officer and chief financial officer.




**Compliance
      with Section 16(a) of the Securities Exchange Act of 1934**




Section
      16(a) of the Securities Exchange Act of 1934, as amended, which requires
      executive officers and directors, and persons who beneficially own more than
      ten
      (10%) percent of the common stock of a company with a class of securities
      registered under the Securities Exchange Act of 1934, to file initial reports
      of
      ownership and reports of changes in ownership with the Securities and Exchange
      Commission, is not currently applicable to us.




**ITEM
              10.**
            **EXECUTIVE
                COMPENSATION**




**Incentive
      Compensation Plan**




In
      November, 2005, we approved the MDwerks, Inc. 2005 Incentive Compensation Plan
      (the ‘‘Incentive Plan’’). The Incentive Plan covers grants of stock options,
      grants of equity securities, dividend equivalents and other customary items
      covered by such plans. Persons eligible to receive awards under the Incentive
      Plan are the officers, directors, employees, consultants and other persons
      who
      provide services to us or any Related Entity (as defined in the Incentive
      Plan).




The
      Incentive Plan is administered by our Compensation Committee; however, the
      Board
      of Directors can exercise any power or authority granted to the Compensation
      Committee under the Incentive Plan, unless expressly provided otherwise in
      the
      Incentive Plan.




We
      have
      reserved 10,000,000 shares of our authorized Common Stock for issuance pursuant
      to grants under the Incentive Plan.




65




The
      following executives received grants of stock options from MDwerks, Inc. through
      December 31, 2007:




**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END**




**Option
                Awards**
            
            **Stock
                Awards****Name
                and****Principal Position**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **Exercisable**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **Unexercisable**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
            
            **Option**
              **Exercise**
              **Price**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number**
              **of**
              **Shares**
              **or
                Units**
              **of
                Stock**
              **That**
              **Have**
              **Not**
              **Vested**
            
            **Market**
              **Value
                of**
              **Shares**
              **or
                Units**
              **of
                Stock**
              **That**
              **Have**
              **Not**
              **Vested**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number
                of**
              **Unearned**
              **Shares,**
              **Units
                or**
              **Other**
              **Rights**
              **That
                Have**
              **Not
                Vested**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Market
                or**
              **Payout**
              **Value
                of**
              **Unearned**
              **Shares,**
              **Units
                or**
              **Other**
              **Rights**
              **That
                Have**
              **Not
                Vested**Howard
                Katz
            
            
            16,667
            
            
            8,333
            1
            
            —
            
            $
            3.25
            
            
            12/28/2015
            
            
            —
            
            
            —
            
            
            —
            
            
            —Chief
                Executive
            
            
            141,667
            
            
            283,333
            2
            
            —
            
            $
            3.40
            
            
            1/2/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Officer
                and
            
            
            83,333
            
            
            166,667
            3
            
            —
            
            $
            4.00
            
            
            6/18/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Director
            
            
            333,333
            
            
            166,667
            4
            
            —
            
            $
            2.25
            
            
            10/10/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —50,000
            
            
            —
            
            
            —
            
            $
            1.39
            
            
            12/26/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —263,000
            
            
            —
            
            
            —
            
            $
            0.38
            
            
            12/31/2017
            
            
            —
            
            
            —
            
            
            —
            
            
            —Vincent
                Colangelo
            
            
            16,667
            
            
            8,333
            1
            
            —
            
            $
            3.25
            
            
            12/28/2015
            
            
            —
            
            
            —
            
            
            —
            
            
            —Chief
                Financial
            
            
            41,667
            
            
            83,333
            
            
            —
            
            $
            3.40
            
            
            1/2/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Officer
                and
            
            
            25,000
            
            
            50,000
            3
            
            —
            
            $
            4.00
            
            
            6/18/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Secretary
            
            
            50,000
            
            
            25,000
            4
            
            —
            
            $
            2.25
            
            
            10/10/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —15,000
            
            
            —
            
            
            —
            
            $
            1.39
            
            
            12/26/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Solon
                Kandel
            
            
            16,667
            
            
            8,333
            1
            
            —
            
            $
            3.25
            
            
            12/28/2015
            
            
            —
            
            
            —
            
            
            —
            
            
            —President
                and
            
            
            100,000
            
            
            200,000
            2
            
            —
            
            $
            3.40
            
            
            1/2/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Director
            
            
            25,000
            
            
            50,000
            3
            
            —
            
            $
            4.00
            
            
            6/18/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —66,667
            
            
            33,333
            4
            
            —
            
            $
            2.25
            
            
            10/10/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Gerard
                Maresca
            
            
            16,667
            
            
            8,333
            1
            
            —
            
            $
            3.25
            
            
            12/28/2015
            
            
            —
            
            
            —
            
            
            —
            
            
            —Vice
                President,
            
            
            1,667
            
            
            3,333
            2
            
            —
            
            $
            3.40
            
            
            1/2/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Business
            
            
            8,333
            
            
            16,667
            3
            
            —
            
            $
            4.00
            
            
            6/18/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Development
            
            
            16,667
            
            
            8,333
            4
            
            —
            
            $
            2.25
            
            
            10/10/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Stephen
                M. Weiss
            
            
            16,667
            
            
            8,333
            1
            
            —
            
            $
            3.25
            
            
            12/28/2015
            
            
            —
            
            
            —
            
            
            —
            
            
            —Chief
                Operating
            
            
            1,667
            
            
            3,333
            2
            
            —
            
            $
            3.40
            
            
            1/2/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —Officer
            
            
            8,333
            
            
            16,667
            3
            
            —
            
            $
            4.00
            
            
            6/18/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —16,667
            
            
            8,333
            4
            
            —
            
            $
            2.25
            
            
            10/10/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —10,000
            
            
            5,000
            5
            
            —
            
            $
            1.39
            
            
            12/26/2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —







1
            Consists
                of Options vesting on December 28,
                2008.




66




2
            Consists
                of Options vesting 1⁄2 on January 2, 2008 and vesting 1⁄2 on January 2,
                2009.




3
            Consists
                of Options vesting 1⁄2 on June 18, 2008 and vesting 1⁄2 on June 18,
                2009.




4
            Consists
                of Options vesting on October 10,
                2008.




5
            Consists
                of Options vesting on December 26,
                2008.




As
      of
      March 1, 2008, the following awards have been granted to the executive officers
      named in this Annual Report on Form 10-KSB under the Incentive
      Plan:




**Name
                of Grantee**
            
            **Incentive**
              **Stock
                Options**
            
            **Non-Qualified**
              **Stock
                Options**
            
            **Percentage
                of**
              **all
                Options**
              **Granted
                to**
              **Employees**Howard
                Katz
            
            
            316,750
            1
            
            1,196,250
            2
            
            55.3
            %Solon
                Kandel
            
            
            53,750
            3
            
            446,250
            4
            
            17.7
            %Vincent
                Colangelo
            
            
            53,750
            3
            
            261,250
            5
            
            10.8
            %Gerard
                Maresca
            
            
            50,750
            6
            
            29,250
            7
            
            2.0
            %Stephen
                Weiss
            
            
            50,750
            6
            
            44,250
            8
            
            2.6
            %




67




The
      following awards have been granted to the executive officers named in this
      Annual Report on Form 10-KSB under the Incentive Plan in the last fiscal
      year:




**Name
                of Grantee**
            
            **Incentive**
              **Stock
                Options**
            
            **Non-Qualified**
              **Stock
                Options**
            
            **Percentage
                of**
              **all
                Options**
              **Granted
                to**
              **Employees**
              **in
                Last**
              **Fiscal
                Year**Howard
                Katz
            
            
            263,000
            9
            
            0
            
            
            100.0
            %Solon
                Kandel
            
            
            0
            
            
            0
            
            
            0.0
            %Vincent
                Colangelo
            
            
            0
            
            
            0
            
            
            0.0
            %Gerard
                Maresca
            
            
            0
            
            
            0
            
            
            0.0
            %Stephen
                Weiss
            
            
            0
            
            
            0
            
            
            0.0
            %







1
            Consists
                of (i) options to purchase 25,000 shares of Common Stock at a price
                of
                $3.25 per share, granted on December 29, 2005, and vesting in 1⁄3 increments
                on each anniversary date of the date of grant, (ii) options to purchase
                25,000 shares of Common Stock at a price of $3.40 per share, granted
                on
                January 3, 2006 and vesting in 1⁄3 increments on each anniversary date of
                the date of grant, (iii) options to purchase 3,750 shares of Common
                Stock
                at a price of $4.00 per share, granted on June 19, 2006 and vesting
                in 1⁄3
                increments on each anniversary date of the date of the grant and
                (iv)
                options to purchase 263,000 shares of Common Stock at a price of
                $0.38 per
                share, granted on December 31, 2007 and vesting immediately.




2
            Consists
                of (i) options to purchase 400,000 shares of Common Stock at a price
                of
                $3.40 per share, granted on January 3, 2006, and vesting in 1⁄3 increments
                on each anniversary date of the date of grant, (ii) options to purchase
                246,250 shares of Common Stock at a price of 4.00 per share, granted
                on
                June 19, 2006 and vesting in 1⁄3 increments on each anniversary date of the
                date of the grant, (iii) options to purchase 500,000 shares of Common
                Stock at a price of $2.25 per share, granted on October 11, 2006
                and
                vesting in 1⁄3 increments on October 11, 2006 and each subsequent
                anniversary date of the date of the grant , and (iv) options to purchase
                50,000 shares of Common Stock at a price of $1.39 per share, granted
                on
                December 27, 2006 and vesting on December 27, 2006. All Non-qualified
                Stock Options granted to Mr. Katz are owned with his spouse as Tenants
                in
                the Entireties.




3
            Consists
                of (i) options to purchase 25,000 shares of Common Stock at a price
                of
                $3.25 per share, granted on December 29, 2005, and vesting in 1⁄3 increments
                on each anniversary date of the date of grant, and (ii) options to
                purchase 25,000 shares of Common Stock at a price of $3.40 per share,
                granted on January 3, 2006 and vesting in 1⁄3 increments on each anniversary
                date of the date of grant. and (iii) options to purchase 3,750 shares
                of
                Common Stock at a price of $4.00 per share, granted on June 19, 2006
                and
                vesting in 1⁄3 increments on each anniversary date of the date of the grant.




4
            Consists
                of (i) options to purchase 275,000 shares of Common Stock at a price
                of
                $3.40 per share, granted on January 3, 2006, and vesting in 1⁄3 increments
                on each anniversary date of the date of grant, (ii) options to purchase
                71,250 shares of Common Stock at a price of 4.00 per share, granted
                on
                June 19, 2006 and vesting in 1⁄3 increments on each anniversary date of the
                date of the grant, and (iii) options to purchase 100,000 shares of
                Common
                Stock at a price of $2.25 per share, granted on October 11, 2006
                and
                vesting in 1⁄3 increments on October 11, 2006 and each subsequent
                anniversary date of the date of the grant. All Non-qualified Stock
                Options
                granted to Mr. Kandel are owned with his spouse as Tenants in the
                Entireties.




5
            Consists
                of (i) options to purchase 100,000 shares of Common Stock at a price
                of
                $3.40 per share, granted on January 3, 2006, and vesting in 1⁄3 increments
                on each anniversary date of the date of grant, (ii) options to purchase
                71,250 shares of Common Stock at a price of 4.00 per share, granted
                on
                June 19, 2006 and vesting in 1⁄3 increments on each anniversary date of the
                date of the grant, (iii) options to purchase 75,000 shares of Common
                Stock
                at a price of $2.25 per share, granted on October 11, 2006 and vesting
                in
                1⁄3 increments on October 11, 2006 and each subsequent anniversary date
                of
                the date of the grant, and (iv) options to purchase 15,000 shares
                of
                Common Stock at a price of $1.39 per share, granted on December 27,
                2006
                and vesting on December 27, 2006. All Non-qualified Stock Options
                granted
                to Mr. Colangelo are owned with his spouse as Tenants in the
                Entireties.




6
            Consists
                of (i) options to purchase 25,000 shares of Common Stock at a price
                of
                $3.25 per share, granted on December 29, 2005, and vesting in 1⁄3 increments
                on each anniversary date of the date of grant, (ii) options to purchase
                5,000 shares of Common Stock at a price of $3.40 per share, granted
                on
                January 3, 2006 and vesting in 1⁄3 increments on each anniversary date of
                the date of grant and (iii) options to purchase 20,750 shares of
                common
                stock at a price of 4.00 per share, granted on June 19, 2006 and
                vesting
                in 1⁄3 increments on each anniversary date of the date of the
                grant.




7
            Consists
                of (i) options to purchase 4,250 shares of Common Stock at a price
                of 4.00
                per share, granted on June 19, 2006 and vesting in 1⁄3 increments on each
                anniversary date of the date of the grant, and (ii) options to purchase
                25,000 shares of Common Stock at a price of $2.25 per share, granted
                on
                October 11, 2006 and vesting in 1⁄3 increments on October 11, 2006 and each
                subsequent anniversary date of the date of the
                grant.




68




8
            Consists
                of (i) options to purchase 4,250 shares of Common Stock at a price
                of
                $4.00 per share, granted on June 19, 2006, and vesting in 1⁄3 increments on
                each anniversary date of the date of grant, (ii) options to purchase
                25,000 shares of Common Stock at a price of $2.25 per share, granted
                on
                October 11, 2006 and vesting in 1⁄3 increments on October 11, 2006 and each
                subsequent anniversary date of the date of the grant, and (iii) options
                to
                purchase 15,000 shares of Common Stock at a price of $1.39 per share,
                granted on December 27, 2006 and vesting in 1⁄3 increments on December 27,
                2006 and each subsequent anniversary date of the date of the
                grant.




9
            Consists
                of options to purchase 263,000 shares of Common Stock at a price
                of $0.38
                per share, granted on December 31, 2007 and vesting
                immediately




**Executive
      Compensation**




The
      primary objective of our executive compensation program is to attract and retain
      qualified, energetic managers who are enthusiastic about our mission and
      culture. A further objective of our compensation program is to provide
      incentives and reward each manager for their contribution. In addition, we
      strive to promote an ownership mentality among key leadership and the Board
      of
      Directors.




Our
      Compensation Committee reviews and approves, or in some cases recommends for
      the
      approval of the full Board of Directors, the annual compensation for our
      Executive Officers. Regarding most compensation matters, including executive
      and
      director compensation, our management provides recommendations to the
      Compensation Committee; however, the Compensation Committee does not delegate
      any of its functions to others in setting compensation. Our Compensation
      Committee does not include any Executive Officers. We do not currently engage
      any consultant to advise the Company on executive and/or director compensation
      matters.




In
      measuring our Executive Officers' contributions, the Compensation Committee
      considers numerous factors including our growth, strategic business
      relationships and financial performance. Stock price performance has not been
      a
      factor in determining annual compensation because the price of our common stock
      is subject to a variety of factors outside of our control. We do not have an
      exact formula for allocating between cash and non-cash
      compensation.




Annual
      executive officer compensation generally consists of a base salary and annual
      bonus component, as well as periodic stock option grants. It is the Compensation
      Committee's intention to set total executive cash compensation sufficiently
      high
      enough to attract and retain a strong motivated leadership team, but not so
      high
      that it creates a negative perception with our stakeholders. Each of our
      executive officers receives stock option grants under our 2005 Incentive
      Compensation Plan. Each executive's current and prior compensation is considered
      in setting future compensation. In addition, we review the compensation
      practices of other companies. To some extent, our compensation plan is based
      on
      the market and the companies we compete against for executive management. The
      elements of our plan (e.g., base salary, bonus and stock options) are similar
      to
      the elements used by many companies.




Stock
      options are granted to include a long-term component to the Executive's overall
      compensation package. The Company has no pension plan, non-equity incentive
      plan
      or deferred compensation arrangement. The number of stock options granted to
      each executive officer is made on a discretionary rather than a formula basis
      by
      the Compensation Committee. The Company does not have a specific program, plan
      or practice to time stock option grants. The pricing of stock option grants
      are
      based upon the stock's opening price on the date of the grant.




Each
      of
      our executive officers, except for the VP of Business Development, Chief
      Operating Officer and President, has an employment agreement with the Company
      that outlines salary and benefit arrangements. These agreements have similar
      terms, which include, but are not limited to: base salaries; annual bonuses;
      reimbursements of certain expenses; group health, disability, and life
      insurances; and, termination provisions. These agreements have initial terms
      of
      one, two or three years.




69




The
      following executives received compensation from MDwerks, Inc.. in the amounts
      set forth in the chart below for the twelve months ended December 31, 2007,
      December 31, 2006 and December 31, 2005. The value attributable to any Option
      Awards in the following chart is computed in accordance with FAS 123R. No other
      item of compensation was paid to any officer or director of the Company other
      than reimbursement of expenses:




**SUMMARY
      COMPENSATION TABLE**




**Name
                and****Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Stock**
              **Awards**
            
            **Option**
              **Awards**
            
            **Non-**
              **Equity**
              **Incentive**
              **Plan
                Compen-**
              **sation**
            
            **Change
                in**
              **Pension**
              **Value
                and**
              **Non-**
              **qualified**
              **Deferred**
              **Compen-**
              **sation**
              **Earnings**
            
            **All
                Other**
              **Compen-**
              **sation**
            
            **Total**Howard
                Katz
            
            
            2007
            
            $
            225,000
            
            $
            103,413
            1
            
            —
            
            $
            94,680
            2
            
            —
            
            
            —
            
            $
            51,000
            3
            $
            474,093Chief
                Executive
            
            
            2006
            
            $
            195,000
            
            $
            87,778
            4
            
            —
            
            $
            3,406,150
            5
            
            —
            
            
            —
            
            $
            51,000
            3
            $
            3,739,928Officer
                and Director
            
            
            2005
            
            $
            79,231
            
            
            —
            
            
            —
            
            $
            81,250
            6
            
            —
            
            
            —
            
            $
            50,769
            7
            $
            211,250Vincent
                Colangelo
            
            
            2007
            
            $
            175,000
            8
            $
            53,596
            9
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            12,000
            10
            $
            240,596Chief
                Financial
            
            
            2006
            
            $
            150,000
            
            $
            44,100
            11
            $
            81,000
            12
            $
            848,600
            13
            
            —
            
            
            —
            
            $
            12,000
            10
            $
            1,135,700Officer
                and Secretary
            
            
            2005
            
            $
            50,385
            
            
            —
            
            
            —
            
            $
            81,250
            6
            
            —
            
            
            —
            
            $
            25,500
            14
            $
            157,135Solon
                Kandel
            
            
            2007
            
            $
            200,000
            15
            $
            52,019
            16
            
            —
            
            
            —
            
            
            
            
            
            
            
            $
            13,800
            17
            $
            265,819President
                and
            
            
            2006
            
            $
            175,000
            
            $
            50,527
            18
            
            —
            
            $
            1,407,950
            19
            
            —
            
            
            —
            
            $
            13,800
            17
            $
            1,647,277Director
            
            
            2005
            
            $
            53,846
            
            
            —
            
            
            —
            
            $
            81,250
            6
            
            —
            
            
            —
            
            $
            46,154
            20
            $
            181,250Gerard
                Maresca
            
            
            2007
            
            $
            150,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            1,968
            21
            $
            151,968Vice
                President,
            
            
            2006
            
            $
            150,000
            
            
            —
            
            
            —
            
            $
            166,090
            22
            
            —
            
            
            —
            
            $
            2,290
            23
            $
            318,380Business
              Development
            
            
            2005
            
            $
            40,296
            
            
            —
            
            
            —
            
            $
            81,250
            6
            
            —
            
            
            —
            
            $
            90,185
            24
            $
            211,731Stephen
                M. Weiss
            
            
            2007
            
            $
            160,000
            
            $
            17,885
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            4,800
            25
            $
            182,685Chief
                Operating
            
            
            2006
            
            $
            150,000
            
            $
            20,828
            
            
            —
            
            $
            186,640
            26
            
            —
            
            
            —
            
            $
            4,800
            25
            $
            362,268Officer
            
            
            2005
            
            $
            33,391
            
            
            —
            
            
            —
            
            $
            81,250
            6
            
            —
            
            
            —
            
            $
            67,000
            27
            $
            181,641







1
              Consists
                  of $5,170 bonus paid during 2007 and $98,243 accrued as a Company
                  obligation.
  2
              Consists
                  of Incentive Stock Options to purchase 263,000 shares of Common
                  Stock at a
                  price of $0.38 per share, granted on December 31, 2007 and vesting
                  on
                  December 31, 2007.
  3
              Consists
                  of an auto allowance of $18,000, a business use of home allowance
                  of
                  $30,000 and a contribution of $3,000 towards the Company's medical
                  Flexible Spending account.
  4
              Consists
                  of $51,389 bonus paid during 2006 and $36,389 bonus paid during
                  2007.
  5
              Consists
                  of Incentive Stock Options to purchase: (i) 25,000 shares of Common
                  Stock
                  at a price of $3.40 per share, granted on January 3, 2006 and vesting
                  in 1⁄3
                  increments on each anniversary date of the date of grant; and,
                  (ii) 3,750
                  shares of Common Stock at a price of $4.00 per share, granted on
                  June 19,
                  2006 and vesting in 1⁄3 increments on each anniversary date of the date of
                  the grant and Non-qualified Stock Options to purchase: (i) 400,000
                  shares
                  of Common Stock at a price of $3.40 per share, granted on January
                  3, 2006,
                  and vesting in 1⁄3 increments on each anniversary date of the date of grant,
                  (ii) 246,250 shares of Common Stock at a price of $4.00 per share,
                  granted
                  on June 19, 2006 and vesting in 1⁄3 increments on each anniversary date of
                  the date of the grant, (iii) 500,000 shares of Common Stock at
                  a price of
                  $2.25 per share, granted on October 11, 2006 and vesting in 1⁄3 increments
                  on October 11, 2006 and each subsequent anniversary date of the
                  date of
                  the grant, and (iv) 50,000 shares of Common Stock at a price of
                  $1.39 per
                  share, granted on December 27, 2006 and vesting on December 27,
                  2006. All
                  Non-qualified Stock Options granted to Mr. Katz are owned with
                  his spouse
                  as Tenants in the Entireties.
  6
              Consists
                  of Incentive stock options to purchase 25,000 shares of Common
                  Stock at a
                  price of $3.25 per share, granted on December 29, 2005, exercisable
                  at a
                  price of $3.25 per share, and vesting in 1⁄3 increments on each anniversary
                  date of the date of grant.
  7
              Prior
                  to becoming an employee of the Company on September 26, 2005, Mr.
                  Katz was
                  compensated for his services to the Company in his capacity as
                  a
                  consultant. $18,333 was paid to Mr. Katz and $32,436 was paid to
                  Greater
                  Condor Evaluations, Inc., an entity owned and controlled by Mr.
                  Katz for
                  such services.




70


8
              Consists
                  of $160,000 salary paid and $15,000 accrued as a Company
                  obligation.
  9
              Consists
                  of $738 bonus paid during 2007 and $52,858 accrued as a Company
                  obligation.
  10
              Consists
                  of an auto allowance of $9,000 and a contribution of $3,000 towards
                  the
                  Company's medical Flexible Spending
                  account.
  11
              Consists
                  of a $26,377 bonus paid during 2006 and $17,723 bonus paid in
                  2007.
  12
              Consists
                  of $81,000 for services rendered to the Company, paid as 25,000
                  shares of
                  Common Stock issued on February 28,
                  2006.
  13
              Consists
                  of Incentive Stock Options to purchase: (i) 25,000 shares of Common
                  Stock
                  at a price of $3.40 per share, granted on January 3, 2006 and vesting
                  in 1⁄3
                  increments on each anniversary date of the date of grant; and,
                  (ii) 3,750
                  shares of Common Stock at a price of $4.00 per share, granted on
                  June 19,
                  2006 and vesting in 1⁄3 increments on each anniversary date of the date of
                  the grant and Non-qualified Stock Options to purchase: (i) 100,000
                  shares
                  of Common Stock at a price of $3.40 per share, granted on January
                  3, 2006,
                  and vesting in 1⁄3 increments on each anniversary date of the date of grant,
                  (ii) 71,250 shares of Common Stock at a price of $4.00 per share,
                  granted
                  on June 19, 2006 and vesting in 1⁄3 increments on each anniversary date of
                  the date of the grant, (iii) 75,000 shares of Common Stock at a
                  price of
                  $2.25 per share, granted on October 11, 2006 and vesting in 1⁄3 increments
                  on October 11, 2006 and each subsequent anniversary date of the
                  date of
                  the grant , and (iv) 15,000 shares of Common Stock at a price of
                  $1.39 per
                  share, granted on December 27, 2006 and vesting on December 27,
                  2006. All
                  Non-qualified Stock Options granted to Mr. Colangelo are owned
                  with his
                  spouse as Tenants in the
                  Entireties.
  14
              Prior
                  to becoming an employee of the Company on September 26, 2005, Mr.
                  Colangelo was compensated for his services to the Company in his
                  capacity
                  as a consultant. $25,500 was paid to Weston Business Advisors,
                  Inc., a
                  corporation owned and controlled by Mr. Colangelo for such
                  services.
  15
              Consists
                  of $175,000 salary paid and $25,000 accrued as a Company
                  obligation.
  16
              Consists
                  of a $14,714 bonus paid during 2007 and $37,305 accrued as a Company
                  obligation.
  17
              Consists
                  of an auto allowance of $10,800 and a contribution of $3,000 towards
                  the
                  Company's medical Flexible Spending
                  account.
  18
              Consists
                  of a $29,302 bonus paid during 2006 and $21,225 bonus paid in
                  2007.
  19
              Consists
                  of Incentive Stock Options to purchase: (i) 25,000 shares of Common
                  Stock
                  at a price of $3.40 per share, granted on January 3, 2006 and vesting
                  in 1⁄3
                  increments on each anniversary date of the date of grant: and (ii)
                  3,750
                  shares of Common Stock at a price of $4.00 per share, granted on
                  June 19,
                  2006 and vesting in 1⁄3 increments on each anniversary date of the date of
                  the grant and Non-qualified Stock Options to purchase: (i) 275,000
                  shares
                  of Common Stock at a price of $3.40 per share, granted on January
                  3, 2006,
                  and vesting in 1⁄3 increments on each anniversary date of the date of grant;
                  (ii) 71,250 shares of Common Stock at a price of $4.00 per share,
                  granted
                  on June 19, 2006 and vesting in 1⁄3 increments on each anniversary date of
                  the date of the grant; and, (iii) 100,000 shares of Common Stock
                  at a
                  price of $2.25 per share, granted on October 11, 2006 and vesting
                  in 1⁄3
                  increments on October 11, 2006 and each subsequent anniversary
                  date of the
                  date of the grant. All Non-qualified Stock Options granted to Mr.
                  Kandel
                  are owned with his spouse as Tenants in the
                  Entireties.
  20
              Prior
                  to becoming an employee of the Company on September 26, 2005, Mr.
                  Kandel
                  was compensated for his services to the Company in his capacity
                  as a
                  consultant. $33,333 was paid to Mr. Kandel as consulting fees and
                  $12,821
                  was paid to The Ashwood Group, LLC, an entity owned and controlled
                  by Mr.
                  Kandel for such services.
  21
              Consists
                  of an auto allowance of $1,800 and a contribution of $168 towards
                  the
                  Company's medical Flexible Spending
                  account.
  22
              Consists
                  of Incentive Stock Options to purchase: (i) 5,000 shares of Common
                  Stock
                  at a price of $3.40 per share, granted on January 3, 2006 and vesting
                  in 1⁄3
                  increments on each anniversary date of the date of grant; and,
                  (ii) 20,750
                  shares of Common Stock at a price of $4.00 per share, granted on
                  June 19,
                  2006 and vesting in 1⁄3 increments on each anniversary date of the date of
                  the grant and Non-qualified Stock Options to purchase: (i) 4,250
                  shares of
                  Common Stock at a price of $4.00 per share, granted on June 19,
                  2006 and
                  vesting in 1⁄3 increments on each anniversary date of the date of the grant;
                  and, (ii) 25,000 shares of Common Stock at a price of $2.25 per
                  share,
                  granted on October 11, 2006 and vesting in 1⁄3 increments on October 11,
                  2006 and each subsequent anniversary date of the date of the
                  grant
  23
              Consists
                  of an auto allowance of $1,800 and a contribution of $490 towards
                  the
                  Company's medical Flexible Spending
                  account.
  24
              Prior
                  to becoming an employee of the Company on September 26, 2005, Mr.
                  Maresca
                  was compensated for his services to the Company in his capacity
                  as a
                  consultant. $90,185 was paid to GMAR, Inc., a corporation owned
                  and
                  controlled by Mr. Maresca for such
                  services.
  25
              Consists
                  of an auto allowance of $1,800 and a contribution of $3,000 towards
                  the
                  Company's medical Flexible Spending
                  account.
  26
              Consists
                  of Incentive Stock Options to purchase: (i) 5,000 shares of Common
                  Stock
                  at a price of $3.40 per share, granted on January 3, 2006 and vesting
                  in 1⁄3
                  increments on each anniversary date of the date of grant; and,
                  (ii) 20,750
                  shares of Common Stock at a price of $4.00 per share, granted on
                  June 19,
                  2006 and vesting in 1⁄3 increments on each anniversary date of the date of
                  the grant and Non-qualified Stock Options to purchase: (i) 4,250
                  shares of
                  Common Stock at a price of $4.00 per share, granted on June 19,
                  2006 and
                  vesting in 1⁄3 increments on each anniversary date of the date of the grant;
                  and, (ii) 25,000 shares of Common Stock at a price of $2.25 per
                  share,
                  granted on October 11, 2006 and vesting in 1⁄3 increments on October 11,
                  2006 and each subsequent anniversary date of the date of the grant;
                  and
                  (iii) options to purchase 15,000 shares of Common Stock at a price
                  of
                  $1.39 per share, granted on December 27, 2006 and vesting in 1⁄3 increments
                  on December 27, 2006 and each subsequent anniversary date of the
                  date of
                  the grant.
  27
              Prior
                  to becoming an employee of the Company on September 26, 2005, Mr.
                  Weiss
                  was compensated for his services to the Company in his capacity
                  as a
                  consultant. $67,000 was paid to Argent Consulting Services, Inc.,
                  a
                  corporation owned and controlled by Mr. Weiss for such
                  services.




71




**ITEM
                11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT**




The
      following table sets forth information regarding the number of shares of Common
      Stock beneficially owned on March 17, 2008, by each person who is known by
      the
      Company to beneficially own 5% or more of the Company’s Common Stock, each of
      the Company’s directors and executive officers, and all of the Company’s
      directors and executive officers, as a group:




**Name
                of Beneficial Owner**
            
            **Common**
              **Shares**
              **Owned**
            
            **Presently**
              **Exercisable**
              **Options
                or**
              **Options**
              **Exercisable**
              **Within
                60 Days**
            
            **Shares**
              **Beneficially**
              **Owned**
            
            **Percentage**
              **of
                Class**Howard
                B. Katz
            
            
            1,141,814
            1
            
            1,029,667
            
            
            2,171,481
            2
            
            15.5
            %Solon
                Kandel
            
            
            922,781
            
            
            308,333
            
            
            1,231,114
            2
            
            9.3
            %Vincent
                Colangelo
            
            
            25,000
            
            
            190,000
            
            
            215,000
            2
            
            1.6
            %Stephen
                Weiss
            
            
            65,809
            
            
            55,001
            
            
            120,810
            2
            
            0.9
            %Gerard
                Maresca
            
            
            136,849
            
            
            45,000
            
            
            181,849
            2
            
            1.4
            %David
                M. Barnes
            
            
            75,000
            
            
            200,000
            
            
            275,000
            2
            
            2.1
            %Peter
                Dunne
            
            
            53,430
            
            
            76,667
            
            
            130,097
            2
            
            1.0
            %Paul
                Kushner
            
            
            141,290
            
            
            51,667
            
            
            192,957
            2
            
            1.5
            %Directors
                and officers as a group (8 persons):
            
            
            2,561,973
            
            
            1,956,333
            
            
            4,518,306
            
            
            30.4
            %Persons
                known to beneficially own more than 5% of the outstanding Common
                Stock:MEDwerks.com
                Corp3
            
            
            2,139,316
            
            
            0
            
            
            2,139,316
            
            
            16.5
            %AJKN
                Partnership3
            
            
            853,481
            
            
            0
            
            
            853,481
            
            
            6.6
            %AJLN
                Partnership3
            
            
            853,481
            
            
            0
            
            
            853,481
            
            
            6.6
            %AJMN
                Partnership3
            
            
            853,481
            
            
            0
            
            
            853,481
            
            
            6.6
            %




1
                Includes
                    113,813 shares of common stock owned by 73142 Corp., an entity
                    controlled
                    by Howard Katz as the sole officer and director. Mr. Katz is not a
                    shareholder of 73142 Corp.
  2
                Includes
                    presently exercisable options, as disclosed under Director Compensation
                    and Executive Compensation; there are no options exercisable
                    within 60
                    days of March 14, 2008.
  3
                Dr.
                    Jacob Nudel, MDwerks' former chairman, exercises investment and
                    voting
                    control of the shares beneficially owned by Medwerks.com Corp.
                    Dr. Nudel
                    is General Partner of and exercises dispositive voting control
                    of the
                    shares beneficially owned by AJKN Limited Partnership, AJLN Limited
                    Partnership and AJMN Limited Partnership, but is only a 1% limited
                    partner
                    of each of these
                    entities.




72




**ITEM
              12.**
            **CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS**




Stephen
      Katz, the son of Howard Katz, the Company’s Chief Executive Officer, is a
      partner at Peckar & Abramson, P.C., which is the Company’s outside legal
      counsel. The Company is charged Peckar & Abramson’s standard billing rates
      for legal services rendered. Stephen Katz owns: 174,000 restricted shares of
      the
      Common Stock of the Company; Incentive Stock Options to purchase 44,000 shares
      of Common Stock at a price of $2.25 per share granted on October 11, 2006 and
      vesting in 1⁄3 increments starting on October 11, 2006 and on each of the next two
      anniversaries of the date of the grant; and, Non-Qualified Stock Options to
      purchase 131,000 shares of Common Stock at a price of $2.25 per share granted
      on
      October 11, 2006 and vesting in 1⁄3 increments starting on October 11, 2006 and on
      each of the next two anniversaries of the date of the grant.




73




**ITEM
              13.**
            **EXHIBITS**




**EXHIBITS**




**Exhibit
                No.**
            
            **Exhibits**3.1
            
            Company
                Certificate of Incorporation13.2
            
            Amendment
                to Company’ Certificate of Incorporation changing name to MDwerks, Inc.
                and amending terms of Blank Check Preferred Stock23.3
            
            Certificate
                of Designations Designating Series A Convertible Preferred
                Stock.33.4
            
            Amended
                and Restated Certificate of Designations Designating Series B Convertible
                Preferred Stock43.5
            
            Bylaws
                of the Company.54.1
            
            MDwerks,
                Inc. 2005 Incentive Compensation Plan.64.2
            
            Form
                of Warrants to purchase shares of Common Stock at a price of $2.50
                per
                share.74.3
            
            Form
                of Warrants issued to Placement Agent (and sub-agents) to purchase
                shares
                of Common Stock at a price of $1.25 per share.84.4
            
            Form
                of Series A Warrants to purchase shares of Common Stock at a price
                of
                $3.00 per share.94.5
            
            Form
                of Series A Warrants issued to Placement Agent and sub-agents to
                purchase
                shares of Common Stock at a price of $1.50 per share.104.6
            
            Class
                C Warrant to purchase shares of Common Stock at a price of $2.25
                per
                share114.7
            
            Securities
                Purchase Agreement by and between Gottbetter and MDwerks, Inc.124.8
            
            Form
                of Series D Warrant to purchase shares of Common Stock at a price
                of $2.25
                per share134.9
            
            Form
                of Series E Warrant to purchase shares of Common Stock at a price
                of $3.25
                per share144.10
            
            Forms
                of Amended and Restated Senior Secured Convertible Notes154.11
            
            Amendment
                No. 1 dated March 1, 2008, to Amended and Restated Senior Secured
                Convertible Note164.12
            
            Amendment
                No. 1 dated March 1, 2008, to Amended and Restated Senior Secured
                Convertible Note174.13
            
            Amendment,
                Consent and Waiver Agreement by and among MDwerks, Inc., Xeni Financial
                and Gottbetter184.14
            
            Registration
                Rights Agreement between MDwerks, Inc. and Gottbetter194.15
            
            Securities
                Purchase Agreement dated September 28, 2007, by and between MDwerks,
                Inc.
                and Vicis204.16
            
            Securities
                Purchase Agreement dated January 18, 2008, by and between MDwerks,
                Inc.
                and Vicis214.17
            
            Form
                of Series F Warrant to purchase shares of Common Stock at a price
                of $2.25
                per share224.18
            
            Form
                of Series G Warrant to purchase shares of Common Stock at a price
                of $2.50
                per share234.19
            
            Registration
                Rights Agreement between MDwerks, Inc. and Vicis24




74




**Exhibit
                No.**
            
            **Exhibits**10.1
            
            Agreement
                of Merger and Plan of Reorganization among Western Exploration, Inc.,
                MDwerks Acquisition Corp. and MDwerks Global Holdings, Inc.2510.2
            
            Placement
                Agent Agreement by and among the Company, MDwerks and Brookshire
                Securities Corporation.2610.3
            
            Form
                of Lock Up Agreement between the Company and executive officers and
                certain stockholders.2710.4
            
            Form
                of Private Placement Subscription Agreement.2810.5
            
            Form
                of Senior Executive Level Employment Agreement between MDwerks, Inc.
                and
                each of Howard B. Katz, Solon L. Kandel and Vincent Colangelo.2910.6
            
            Form
                of Executive Level Employment Agreement between MDwerks, Inc. and
                Stephen
                Weiss.3010.7
            
            Guaranty
                issued to Gottbetter by Xeni Financial Services, Corp., Xeni Medical
                Billing, Corp., MDwerks Global Holdings, Inc. and Xeni Medical Systems,
                Inc.3110.8
            
            Security
                Agreement by and among Gottbetter, MDwerks, Inc., Xeni Financial
                Services,
                Corp., Xeni Medical Corp., Xeni Medical Billing, Corp., MDwerks Global
                Holdings, Inc. and Xeni Medical Systems, Inc.3210.9
            
            Closing
                Agreement by and between Gottbetter and MDwerks, Inc. Modifying and
                Waiving Registration Rights Provisions3310.10
            
            Guaranty
                issued to Vicis by Xeni Financial Services, Corp.3410.11
            
            Guaranty
                issued to Vicis by Xeni Medical Billing, Corp.3510.12
            
            Guaranty
                issued to Vicis by MDwerks Global Holdings, Inc.3610.13
            
            Guaranty
                issued to Vicis by Xeni Medical Systems, Inc.3710.14
            
            Guaranty
                issued to Vicis by Patient Payment Solutions, Inc.3810.15
            
            Security
                Agreement entered into by and between Vicis and MDwerks, Inc.3910.16
            
            Security
                Agreement entered into by and between Vicis and Xeni Medical Billing,
                Corp.4010.17
            
            Security
                Agreement entered into by and between Vicis and MDwerks Global Holdings,
                Inc.4110.18
            
            Security
                Agreement entered into by and between Vicis and Xeni Medical Systems,
                Inc.4210.19
            
            Security
                Agreement entered into by and between Vicis and Xeni Financial Services,
                Corp.4310.20
            
            Security
                Agreement entered into by and between Vicis and Patient Payment Solutions,
                Inc.4414.1
            
            Code
                of Ethics4522.1
            
            Subsidiaries4623.1
            
            Consent
                of Sherb & Co., LLP4731.1
            
            Section
                302 Certification of Chief Executive Officer4731.2
            
            Section
                302 Certification of Chief Financial Officer4732.1
            
            Section
                906 Certification of Chief Executive Officer47




75




**Exhibit
                No.**
            
            **Exhibits**32.2
            
            Section
                906 Certification of Chief Financial Officer4799.1
            
            Audit
                Committee Charter4899.2
            
            Compensation
                Committee Charter49







1
              Incorporated
                  by reference to our Registration Statement on Form SB-2 filed with
                  the SEC
                  on August 12, 2004.
  2
              Incorporated
                  by reference to Exhibit 3.1 included with our Current Report on
                  Form 8-K
                  filed with the SEC on November 18,
                  2005.
  3
              Incorporated
                  by reference to Exhibit 3.3 to our Registration Statement on Form
                  SB-2
                  originally filed with the SEC on March 9, 2006, as amended and
                  supplemented.
  4
              Incorporated
                  by reference to Exhibit 3.1 included with our Current Report on
                  Form 8-K
                  filed with the SEC on January 23,
                  2008.
  5
              Incorporated
                  by reference to our Registration Statement on Form SB-2, filed
                  with the
                  SEC on August 12, 2004.
  6
              Incorporated
                  by reference to Exhibit 4.1 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on November 18,
                  2005.
  7
              Incorporated
                  by reference to Exhibit 4.2 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on November 18,
                  2005.
  8
              Incorporated
                  by reference to Exhibit 4.3 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on November 18,
                  2005.
  9
              Incorporated
                  by reference to Exhibit 4.4 to our Registration Statement on Form
                  SB-2
                  originally filed with the Commission on March 9, 2006, as amended
                  and
                  supplemented.
  10
              Incorporated
                  by reference to Exhibit 4.5 to our Registration Statement on Form
                  SB-2
                  originally filed with the Commission on March 9, 2006, as amended
                  and
                  supplemented.
  11
              Incorporated
                  by reference to Exhibit 4.2 included with our Current Report on
                  Form 8-K
                  filed with the SEC on August 23,
                  2006.
  12
              Incorporated
                  by reference to Exhibit 4.1 included with our Current Report on
                  Form 8-K
                  filed with the SEC on October 23,
                  2006.
  13
              Incorporated
                  by reference to Exhibit 4.2 included with our Current Report on
                  Form 8-K
                  filed with the SEC on October 23,
                  2006.
  14
              Incorporated
                  by reference to Exhibit 4.3 included with our Current Report on
                  Form 8-K
                  filed with the SEC on October 23,
                  2006.
  15
              Incorporated
                  by reference to Exhibits 10.13 and 10.14 included with our Current
                  Report
                  on Form 8-K filed with the SEC on October 2,
                  2007.
  16
              Filed
                  herewith
  17
              Filed
                  herewith
  18
              Incorporated
                  by reference to Exhibit 10.12 included with our Current Report
                  on Form 8-K
                  filed with the SEC on October 2,
                  2007.
  19
              Incorporated
                  by reference to Exhibit 4.5 included with our Current Report on
                  Form 8-K
                  filed with the SEC on October 23,
                  2006.
  20
              Incorporated
                  by reference to Exhibit 4.1 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on October 2,
                  2007.
  21
              Incorporated
                  by reference to Exhibit 4.1 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on January 23,
                  2008.
  22
              Incorporated
                  by reference to Exhibit 4.2 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on October 2,
                  2007.
  23
              Incorporated
                  by reference to Exhibit 4.3 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on October 2,
                  2007.
  24
              Incorporated
                  by reference to Exhibit 4.4 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on October 2,
                  2007.
  25
              Incorporated
                  by reference to Exhibit 10.1 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on October 13,
                  2005.
  26
              Incorporated
                  by reference to Exhibit 10.2 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on November 18,
                  2005.
  27
              Incorporated
                  by reference to Exhibit 10.3 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on November 18,
                  2005.


28
              Incorporated
                  by reference to Exhibit 10.4 included with our Current Report on
                  Form 8-K,
                  filed with the SEC on November 18,
                  2005.




76




29
                Incorporated
                    by reference to Exhibit 10.5 to our Registration Statement on
                    Form SB-2,
                    originally filed with the SEC on March 9, 2006, as amended and
                    supplemented.
  30
                Incorporated
                    by reference to Exhibit 10.6 to our Registration Statement on
                    Form SB-2,
                    originally filed with the SEC on March 9, 2006, as amended and
                    supplemented.
  31
                Incorporated
                    by reference to Exhibit 10.1 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 23,
                    2006.
  32
                Incorporated
                    by reference to Exhibit 10.2 included with our Current Report
                    on Form 8-K
                    filed with the SEC on October 23,
                    2006.
  33
                Incorporated
                    by reference to Exhibit 10.13 to our Registration Statement on
                    Form SB-2,
                    originally filed with the SEC on March 9, 2006 as amended and
                    supplemented.
  34
                Incorporated
                    by reference to Exhibit 10.1 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  35
                Incorporated
                    by reference to Exhibit 10.2 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  36
                Incorporated
                    by reference to Exhibit 10.3 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  37
                Incorporated
                    by reference to Exhibit 10.4 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  38
                Incorporated
                    by reference to Exhibit 10.5 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  39
                Incorporated
                    by reference to Exhibit 10.6 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  40
                Incorporated
                    by reference to Exhibit 10.7 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  41
                Incorporated
                    by reference to Exhibit 10.8 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  42
                Incorporated
                    by reference to Exhibit 10.9 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on October 2,
                    2007.
  43
                Incorporated
                    by reference to Exhibit 10.10 included with our Current Report
                    on Form
                    8-K, filed with the SEC on October 2,
                    2007.
  44
                Incorporated
                    by reference to Exhibit 10.11 included with our Current Report
                    on Form
                    8-K, filed with the SEC on October 2,
                    2007.
  45
                Incorporated
                    by reference to Exhibit 14.1 included with our Current Report
                    on Form 8-K
                    filed with the SEC on November 18,
                    2005.
  46
                Incorporated
                    by reference to our Registration Statement on Form SB-2, originally
                    filed
                    with the SEC on March 9, 2006, as amended and
                    supplemented.
  47
                Filed
                    herewith.
  48
                Incorporated
                    by reference to Exhibit 99.2 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on November 18,
                    2005.
  49
                Incorporated
                    by reference to Exhibit 99.3 included with our Current Report
                    on Form 8-K,
                    filed with the SEC on November 18,
                    2005.
  77




**ITEM
              14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**




The
      following table sets forth the fees billed by our principal independent
      accountants for each of our last two fiscal years for the categories of services
      indicated.




**Year
                Ended December 31,****Category**
            
            **2007**
            
            **2006**Audit
                Fees1
            
            $
            40,000
            
            $
            32,500Audit
                Related Fees2
            
            
            15,000
            
            
            27,000Tax
                Fees3
            
            
            12,000
            
            
            27,205All
                Other Fees4
            
            
            6,532
            
            
            13,877







1
            Consists
                of fees billed for the audit of our annual financial statements,
                review of
                our Form 10-KSB and services that are normally provided by the accountant
                in connection with year end statutory and regulatory filings or
                engagements.




2
            Consists
                of fees billed for the review of our quarterly financial statements,
                review of our forms 10-QSB and 8-K and services that are normally
                provided
                by the accountant in connection with non year end statutory and regulatory
                filings on engagements.




3
            Consists
                of professional services rendered by a company aligned with our principal
                accountant for tax compliance, tax advice and tax
                planning.




4
            The
                services provided by our accountants within this category consisted
                of
                advice and other services relating to SEC matters, registration statement
                review, accounting issues and client
                conferences.






**Audit
      Committee Pre-Approval Policy**




In
      addition to retaining Sherb & Co., LLP to audit our consolidated financial
      statements for the years ended December 31, 2007 and December 31, 2006, we
      retained Sherb & Co., LLP to provide other professional services to us in
      our 2006 and 2007 fiscal years. We understand the need for Sherb & Co., LLP
      to maintain objectivity and independence in its audit of our financial
      statements. To minimize relationships that could appear to impair the
      objectivity of Sherb & Co., LLP, our audit committee has restricted the
      non-audit services that Sherb & Co., LLP may provide to us primarily to tax
      services.




The
      audit
      committee also has adopted policies and procedures for pre-approving all
      non-audit work performed by Sherb & Co., LLP.




78




**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


**MDwerks,
                Inc.**By:
            /s/
                Howard B. KatzName:
                Howard B. Katz
              Title:
                Chief Executive Officer
              Date:
                March 27, 2008




In
      accordance with the Exchange Act, this Report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.


**Signature**
              
              **Title**
              
              **Date**/s/
                  Howard B. Katz
              
              Chief
                  Executive Officer and
              
              March
                  27, 2008Howard
                  B. Katz
              
              Director
                  (Principal Executive Officer)/s/
                  Vincent Colangelo
              
              Chief
                  Financial Officer and
              
              March
                  27, 2008Vincent
                  Colangelo
              
              Secretary
                  (Principal Accountingand
                  Financial
                  Officer)/s/
                  Solon Kandel
              
              President
                  and Director
              
              March
                  27, 2008Solon
                  Kandel/s/
                  Adam Friedman
              
              Controller
              
              March
                  27, 2008Adam
                  Friedman/s/
                  David M. Barnes
              
              Director
              
              March
                  27, 2008David
                  M. Barnes/s/
                  Peter Dunne
              
              Director
              
              March
                  27, 2008Peter
                  Dunne/s/
                  Paul Kushner
              
              Director
              
              March
                  27, 2008Paul
                  Kushner




79




MDWERKS,
      INC. AND SUBSIDIARIES


INDEX
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2007




INDEX




PagesReport
                of Independent Registered Public Accounting Firm
            
            
            F-2Consolidated
                Balance Sheet as of December 31, 2007
            
            
            F-3Consolidated
                Statements of Operations for the Years Ended December 31, 2007 and
                2006
            
            
            F-4Consolidated
                Statement of Changes in Stockholders’ Equity (Deficiency) for the Years
                Ended December 31, 2007 and 2006
            
            
            F-5Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2007 and
                2006
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7
                to F-29




F-1




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the
      Audit Committee


MDwerks,
      Inc.




We
      have
      audited the accompanying consolidated balance sheet of MDwerks, Inc. and
      Subsidiaries as of December 31, 2007 and the related consolidated
      statements of operations, changes in stockholders’ equity (deficiency) and cash
      flows for the years ended December 31, 2007 and 2006. These consolidated
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. An audit includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements. An audit
      also includes assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of MDwerks, Inc. and
      Subsidiaries as of December 31, 2007 and the results of their operations
      and their cash flows for the years ended December 31, 2007 and 2006 in
      conformity with accounting principles generally accepted in the United States
      of
      America.




The
      accompanying consolidated 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 recurring losses from operations
      that raises substantial doubt about its ability to continue as a going concern.
      Management’s plan in regard to these matters is also described in Note 1. The
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.




/s/
                SHERB & CO., LLPCertified
                Public Accountants




Boca
      Raton, Florida


March
      17,
      2008




F-2




MDWERKS,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


December
      31, 2007




ASSETS




Current
                assets:Cash
            
            $
            320,903Notes
                receivable
            
            
            1,652,079Accounts
                receivable
            
            
            66,985Prepaid
                expenses and other
            
            
            215,073Total
                current assets
            
            
            2,255,040Property
                and equipment, net of accumulated depreciation of $92,995
            
            
            115,902Debt
                issuance and offering costs, net of accumulated amortization of
                $273,997
            
            
            400,246Total
                assets
            
            $
            2,771,188




LIABILITIES
      AND STOCKHOLDERS' DEFICIENCY




Current
                liabilities:Notes
                payable, net of discount of $2,566,395, less long-term
                portion
            
            $
            2,942,842Mandatory
                redeemable convertible Series B preferred stock, $.001 par value,
                250
                shares authorized; 200 shares issued and outstanding
            
            
            1,346,326Loans
                payable
            
            
            109,559Accounts
                payable
            
            
            351,482Accrued
                expenses
            
            
            686,917Deferred
                revenue
            
            
            11,296Total
                current liabilities
            
            
            5,448,422Long-term
                liabilities:Notes
                payable, net of discount of $2,566,395, less current
                portion
            
            
            65,763Deferred
                revenue, less current portion
            
            
            1,613Total
                liabilities
            
            
            5,515,798Stockholders'
                deficiency:Preferred
                stock, Series A convertible preferred stock, $0.001 par value, 10,000,000
                shares authorized, 2 shares issued and outstanding
            
            
            —Common
                stock, $.001 par value, 100,000,000 shares authorized; 12,940,065
                shares
                issued and outstanding
            
            
            12,940Additional
                paid-in capital
            
            
            33,732,690Accumulated
                deficit
            
            
            (36,490,240
            )Total
                stockholders' deficiency
            
            
            (2,744,610
            )Total
                liabilities and stockholders' deficiency
            
            $
            2,771,188




The
        accompanying notes should be read in conjunction with the consolidated financial
        statements




F-3




MDWERKS,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS




For
                the Years Ended
              December
                31,2007
            
            2006Revenue:Service
                fees
            
            $
            470,149
            
            $
            355,429Financing
                income
            
            
            107,102
            
            
            72,349Total
                revenue
            
            
            577,251
            
            
            427,778Operating
                expenses:Compensation
            
            
            5,286,985
            
            
            5,732,372Consulting
                expenses
            
            
            760,284
            
            
            943,500Professional
                fees
            
            
            411,917
            
            
            358,969Selling,
                general and administrative
            
            
            1,562,845
            
            
            2,001,460Total
                operating expenses
            
            
            8,022,031
            
            
            9,036,301Loss
                from operations
            
            
            (7,444,780
            )
            
            (8,608,523
            )Other
                income (expense):Interest
                income
            
            
            46,978
            
            
            33,701Interest
                expense
            
            
            (2,484,835
            )
            
            (905,374
            )Loss
                on revaluation of warrant liability
            
            
            —
            
            
            (192,914
            )Other
                income, (expense), net
            
            
            307
            
            
            (1,936
            )Total
                other income (expense)
            
            
            (2,437,550
            )
            
            (1,066,523
            )Net
                loss
            
            
            (9,882,330
            )
            
            (9,675,046
            )Deemed
                preferred stock dividend
            
            
            —
            
            
            (913,777
            )Common
                stock issued in connection with anti-dilutive
                recalculation
            
            
            —
            
            
            (246,240
            )Net
                loss attributable to common shareholders
            
            $
            (9,882,330
            )
            $
            (10,835,063
            )NET
                LOSS PER COMMON SHARE - basic and diluted
            
            $
            (0.77
            )
            $
            (0.91
            )WEIGHTED-AVERAGE
                COMMON SHARES OUTSTANDING
              -
                basic and diluted
            
            
            12,780,503
            
            
            11,899,272




The
        accompanying notes should be read in conjunction with the consolidated financial
        statements




F-4




MDWERKS,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)


For
      the
      Years Ended December 31, 2007 and 2006




Series
                A
              Preferred
                Stock
              $.001
                 Par Value
            
            
            Common
                Stock
              $.001 Par
                Value
            
            
            
            
            
            
            
            
            TotalNumberofShares
            
            
            Amount
            
            
            NumberofShares
            
            
            Amount
            
            
            Additional Paid-in
                        Capital
            
            
            Accumulated
                Deficit
            
            
            Stockholders’
                Equity(Deficiency)Balance,
                December 31, 2005
            
            
            —
            
            $
            —
            
            
            11,538,730
            
            $
            11,539
            
            $
            15,480,037
            
            $
            (16,558,228
            )
            $
            (1,066,652
            )Common
                stock issued in connection with anti-dilutive
                recalculation
            
            
            —
            
            
            —
            
            
            76,000
            
            
            76
            
            
            246,164
            
            
            (246,240
            )
            
            —Deemed
                preferred stock dividend
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (913,777
            )
            
            (913,777
            )FAS
                123R Stock Option Compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            3,911,640
            
            
            —
            
            
            3,911,640Amortization
                of deferred compensation — consultants
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            291,487
            
            
            —
            
            
            291,487Cumulative
                effect of warrant liability adjustment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,911,520
            
            
            785,381
            
            
            2,696,901Issuance
                of warrants in connection with notes payable
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            460,572
            
            
            —
            
            
            460,572Common
                stock issued for notes payable
            
            
            —
            
            
            —
            
            
            92,685
            
            
            92
            
            
            226,985
            
            
            —
            
            
            227,077Issuance
                of warrants in connection with offering
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            145,026
            
            
            —
            
            
            145,026Debt
                discounts in connection with notes payable
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            4,091,402
            
            
            —
            
            
            4,091,402Sales
                of preferred stock, net of placement fees
            
            
            28
            
            
            —
            
            
            170,000
            
            
            170
            
            
            1,386,077
            
            
            —
            
            
            1,386,247Conversion
                of Series A convertible preferred stock
            
            
            (23
            )
            
            —
            
            
            466,667
            
            
            467
            
            
            (467
            )
            
            —
            
            
            —Common
                stock issued in connection with notes payable
            
            
            —
            
            
            —
            
            
            110,000
            
            
            110
            
            
            333,690
            
            
            —
            
            
            333,800Common
                stock issued for services
            
            
            —
            
            
            —
            
            
            125,983
            
            
            126
            
            
            422,375
            
            
            —
            
            
            422,501Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (9,675,046
            )
            
            (9,675,046
            )Balance,
                December 31, 2006
            
            
            5
            
            
            —
            
            
            12,580,065
            
            
            12,580
            
            
            28,906,508
            
            
            (26,607,910
            )
            
            2,311,178FAS
                123R Stock Option Compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            3,196,044
            
            
            —
            
            
            3,196,044Amortization
                of deferred compensation — consultants
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            266,040
            
            
            —
            
            
            266,040Conversion
                of Series A convertible preferred stock
            
            
            (3
            )
            
            —
            
            
            60,000
            
            
            60
            
            
            (60
            )
            
            —
            
            
            —Issuance
                of warrants in connection with notes payable
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,214,458
            
            
            —
            
            
            1,214,458Common
                stock issued for services
            
            
            —
            
            
            —
            
            
            300,000
            
            
            300
            
            
            149,700
            
            
            —
            
            
            150,000Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (9,882,330
            )
            
            (9,882,330
            )Balance,
                December 31, 2007
            
            
            2
            
            $
            —
            
            
            12,940,065
            
            $
            12,940
            
            $
            33,732,690
            
            $
            (36,490,240
            )
            
            ($2,744,610
            )




The
        accompanying notes should be read in conjunction with the consolidated financial
        statements




F-5




MDWERKS,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS




For
                the Years Ended
              December
                31,2007
            
            2006Cash
                flows from operating activities:Net
                loss
            
            $
            (9,882,330
            )
            $
            (9,675,046
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            45,439
            
            
            34,716Amortization
                of debt issuance costs
            
            
            10,954
            
            
            12,480Amortization
                of debt discount
            
            
            2,021,396
            
            
            354,190Amortization
                of deferred offering costs
            
            
            207,202
            
            
            43,361Amortization
                of deferred compensation
            
            
            266,040
            
            
            291,487Stock-based
                compensation
            
            
            3,196,046
            
            
            3,911,640Settlement
                expense related to debt conversion
            
            
            —
            
            
            180,827Loss
                on revaluation of warrant liability
            
            
            —
            
            
            192,914Common
                stock issued for services
            
            
            150,000
            
            
            422,500Interest
                expense in connection with grant of warrants
            
            
            —
            
            
            460,572Changes
                in assets and liabilities:Notes
                receivable
            
            
            (1,178,386
            )
            
            (109,848
            )Accounts
                receivable
            
            
            (11,394
            )
            
            (45,176
            )Prepaid
                expenses and other
            
            
            (141,276
            )
            
            (4,981
            )Accounts
                payable
            
            
            83,560
            
            
            56,405Accrued
                expenses
            
            
            308,158
            
            
            212,627Deferred
                revenue
            
            
            (43,050
            )
            
            47,212Total
                adjustments
            
            
            4,914,689
            
            
            6,060,926Net
                cash used in operating activities
            
            
            (4,967,641
            )
            
            (3,614,120
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (5,209
            )
            
            (110,457
            )Net
                cash used in investing activities
            
            
            (5,209
            )
            
            (110,457
            )Cash
                flows from financing activities:Proceeds
                from notes payable
            
            
            825,000
            
            
            5,110,000Proceeds
                from loan payable
            
            
            250,000
            
            
            —Placement
                fees in connection with notes payable
            
            
            —
            
            
            (263,264
            )Repayment
                of notes payable
            
            
            (598,362
            )
            
            (101,634
            )Repayment
                of loan payable
            
            
            (212,916
            )
            
            (26,225
            )Proceeds
                from mandatory redeemable Series B preferred stock
            
            
            2,000,000
            
            
            —Proceeds
                from sale of Series A preferred stock
            
            
            —
            
            
            1,700,000Placement
                fees and other expenses paid
            
            
            (116,810
            )
            
            (313,923
            )Net
                cash provided by financing activities
            
            
            2,146,912
            
            
            6,104,954Net
                (decrease) increase in cash
            
            
            (2,825,938
            )
            
            2,380,377Cash
                - beginning of year
            
            
            3,146,841
            
            
            766,464Cash
                - end of year
            
            $
            320,903
            
            $
            3,146,841Supplemental
                disclosure of cash flow information:Cash
                paid for:Taxes
            
            $
            —
            
            $
            —Interest
            
            $
            351,939
            
            $
            77,355Non-cash
                investing and financing activities:Common
                stock issued for debt and accrued interest
            
            $
            1,214,458
            
            $
            5,208,358Common
                stock issued in connection with notes payable
            
            $
            —
            
            $
            333,800




The
        accompanying notes should be read in conjunction with the consolidated financial
        statements




F-6




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




NOTE
      1 — ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Organization




On
      November 16, 2005, a wholly-owned subsidiary of MDwerks, Inc. (f/k/a Western
      Exploration, Inc., and hereinafter referred to as the ‘‘Company’’) was merged
      with and into MDwerks Global Holdings, Inc., a Florida corporation
      (‘‘MDwerks’’), with MDwerks surviving. The Company acquired all of the
      outstanding capital stock of MDwerks in exchange for issuing 9,246,339 shares
      of
      the Company’s common stock, par value $0.001 per share to MDwerks’ stockholders,
      which at closing of the Merger Agreement represented approximately 87.4% of
      the
      issued and outstanding shares of the Company’s common stock. In connection with
      the Merger, the Company changed its corporate name to MDwerks, Inc.




The
      Company has four operating subsidiaries. Xeni Medical Systems, Inc. ("Xeni
      Medical") was incorporated under the laws of the state of Delaware on July
      21,
      2004.  Xeni Medical provides a Web-based package of electronic claims
      solutions to the healthcare provider industry through Internet access to it’s
‘‘MDwerks’’ suite of proprietary products and services so that healthcare
      providers can improve daily insurance claims transaction processing,
      administration and management. Xeni Financial Services, Corp. ("Xeni Financial")
      was incorporated under the laws of the state of Florida on February 3, 2005.
      Xeni Financial offers financing and advances to health care providers secured
      by
      claims processed through the MDwerks system. Xeni Medical Billing, Corp. ("Xeni
      Billing") was incorporated under the laws of the state of Florida on March
      2,
      2005. Xeni Billing offers health care providers billing services facilitated
      through the MDwerks system. Patient Payment Solutions, Inc. (“PPS”) was
      incorporated under the laws of the state of Florida on May 30, 2007.




Going
      concern




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. The Company has suffered losses
      that raise substantial doubt about its ability to continue as a going concern.
      While the Company is attempting to attain revenue growth and profitability,
      the
      growth has not been significant enough to support the Company’s daily
      operations. Management intends to attempt to raise additional funds by way
      of a
      public or private offering and make strategic acquisitions. While the Company
      believes in the viability of its strategy to improve sales volume and in its
      ability to raise additional funds, there can be no assurances to that effect.
      The ability of the Company to continue as a going concern is dependent on the
      Company’s ability to further implement its business plan and generate revenue.
      The financial statements do not include any adjustments that might be necessary
      if the Company is unable to continue as a going concern. Management believes
      that the actions presently being taken to further implement its business plan
      and generate revenue, including additional institutional financing similar
      to
      financing described in Note 4, provide the opportunity for the Company to
      continue as a going concern.




As
      reflected in the accompanying consolidated financial statements, the Company
      has
      a stockholders’ deficiency of $2,744,610 and a working capital deficiency of
      $3,193,382 at December 31, 2007.




Basis
      of presentation




The
      consolidated statements include the accounts of the Company and its wholly
      owned
      subsidiaries, Xeni Medical, Xeni Financial, Xeni Billing and PPS. All
      significant intercompany balances and transactions have been eliminated.





Certain
      amounts previously reported for in 2006 have been reclassified to conform to
      the
      classifications used in 2007. Such reclassifications have no effect on the
      reported net loss.




F-7




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**




NOTE
          1 — ORGANIZATION
          AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Use
        of
        estimates




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.




Fair
      value of financial instruments




Statement
      of Financial Accounting Standards No. 107, ‘‘Disclosures about Fair Value of
      Financial Instruments,’’ requires disclosures of information about the fair
      value of certain financial instruments for which it is practicable to estimate
      the value. For purpose of this disclosure, the fair value of a financial
      instrument is the amount at which the instrument could be exchanged in a current
      transaction between willing parties, other than in a forced sale or
      liquidation.




The
      carrying amounts reported in the consolidated balance sheet for cash, notes
      receivable, accounts payable and accrued expenses, notes payable, loans payable
      approximate their fair market value based on the short-term maturity of these
      instruments.




Cash
      and cash equivalents




For
      purposes of the consolidated statements of cash flows, the Company considers
      all
      highly liquid instruments purchased with a maturity of three months or less
      and
      money market accounts to be cash equivalents.




At
      various times, the Company has deposits in excess of the Federal Deposit
      Insurance Corporation limit. At December 31, 2007, the Company was $3,000 in
      excess of the $100,000 limit on one account. The Company has not experienced
      any
      losses on these accounts.




Advertising




The
      Company expenses advertising costs as incurred. Advertising costs charged to
      operations were approximately $28,000 and $103,000 for the years ended December
      31, 2007 and 2006, respectively.




Property
      and equipment




Property
      and equipment are stated at cost. Depreciation and amortization are provided
      using the straight-line method over the estimated useful life.




Revenue
      recognition




The
      Company follows the guidance of the Securities and Exchange Commission’s
      (‘‘SEC’’) Staff Accounting Bulletin 104 for revenue recognition. In
      general, the Company records revenue when persuasive evidence of an arrangement
      exists, services have been rendered or product delivery has occurred, the sales
      price to the customer is fixed or determinable, and collectability is reasonably
      assured. The following policies reflect specific criteria for the various
      revenues streams of the Company.




Revenue
      derived from fees related to claims and contract management services are
      generally recognized when services are provided to the customer.




The
      Company, through its subsidiaries, provides advance funding for medical claims
      and term loan services to unaffiliated healthcare providers that are customers
      of the Company. The customer advances are typically collateralized by Security
      Agreements granting first position liens on the medical claims submitted by
      its
      Customers to third party payers (the ‘‘Payers’’). The advances are repaid
      through the remittance of payments
      of Customer medical claims, by Payers, directly to the Company. The Company
      can
      withhold from these advances interest, an administrative fee and other charges
      as well as any amount for prior advances that remain unpaid after a specified
      number of days. These interest charges, administrative fees and other charges
      are recognized as revenue when earned. There is no right of cancellation or
      refund provisions in these arrangements and the Company has no further
      obligations once the services are rendered.




F-8




**MDWERKS,
            INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2007**
  NOTE
            1 — ORGANIZATION
            AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)




Revenue
      recognition (continued)




Revenue
      derived from fees related to billing and collection services are generally
      recognized when the customer’s accounts receivable are collected.




Revenue
      from implementation fees are generally recognized over the term of the
      customer’s agreement. Revenue derived from maintenance, administrative and
      support fees are generally recognized at the time the services are provided
      to
      the customer.




Income
      taxes




Income
      taxes are accounted for under the asset and liability method of Statement of
      Financial Accounting Standards No. 109, ‘‘Accounting for Income Taxes’’ (‘‘SFAS
      109’’). Under SFAS 109, deferred tax assets and liabilities are recognized for
      the future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases.




Deferred
      tax assets and liabilities are measured using enacted tax rates expected to
      apply to taxable income in the years in which those temporary differences are
      expected to be recovered or settled. Under SFAS 109, the effect on deferred
      tax
      assets and liabilities of a change in tax rates is recognized in income in
      the
      period that includes the enactment date.




Loss
      per common share




Basic
      loss per share is computed by dividing net loss by the weighted average number
      of shares of common stock outstanding during the period. Diluted loss per share
      is computed by dividing net loss by the weighted average number of shares of
      common stock, potential common stock and potentially dilutive securities
      outstanding during each period. For the years ended December 31, 2007 and 2006,
      the Company had outstanding options to purchase an aggregate of 3,514,250 and
      2,876,250 shares of common stock, respectively, warrants to purchase an
      aggregate of 5,733,012 and 2,566,345 shares of common stock, respectively,
      40,000 and 100,000 shares of common stock, respectively, issuable upon
      conversion of Series A preferred stock and 888,888 and 0 shares of common stock,
      respectively, issuable upon conversion of Series B preferred stock which could
      potentially dilute future earnings per share. Diluted loss per common share
      has
      not been presented for the years ended December 31, 2007 and 2006 since the
      impact of the stock options and warrants would be antidilutive.




Stock-based
      compensation




In
      January 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), Share Based Payment (‘‘SFAS No. 123R’’)
      utilizing the modified prospective method. SFAS No. 123R establishes the
      financial accounting and reporting standards for stock-based compensation plans.
      As required by SFAS No. 123R, the Company recognizes the cost resulting
      from all stock-based payment transactions including shares issued under its
      stock option plans in the consolidated financial statements.




F-9




**MDWERKS,
            INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2007**
  NOTE
            1 — ORGANIZATION
            AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)




Recent
      accounting pronouncements




In
      February 2007, the FASB issued SFAS No. 159 *The
      Fair Value Option for Financial Assets and Financial Liabilities - including
      an
      Amendment of SFAS No. 115* ,
      (‘‘SFAS 159’’), which permits an entity to measure many financial assets and
      financial liabilities at fair value that are not currently required to be
      measured at fair value. Entities that elect the fair value option will report
      unrealized gains and losses in earnings at each subsequent reporting date.
      The
      fair value option may be elected on an instrument-by-instrument basis, with
      few
      exceptions. SFAS 159 amends previous guidance to extend the use of the fair
      value option to available-for-sale and held-to-maturity securities. The
      Statement also establishes presentation and disclosure requirements to help
      financial statement users understand the effect of the election. SFAS No. 159
      is
      effective as of the beginning of the first fiscal year beginning after November
      15, 2007. The Company is currently evaluating the impact of adopting SFAS
      159.




In
      December 2007, the FASB issued two new pronouncements, SFAS No. 160,
      Noncontrolling Interests in Consolidated Financial Statements- an amendment
      of
      ARB N0. 51 and SFAS No. 141 (revised 2007) Business Combinations. Both
      pronouncements call for prospective reporting only and would not effect any
      current (or currently contemplated) transactions by the Company.




The
      Company does not believe that any other recently issued, but not yet effective
      accounting standards will have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.




NOTE
      2 — ACCOUNTS
      AND NOTES RECEIVABLE




Accounts
      receivable are recorded when revenue has been recognized but not yet collected.
      The Company has $66,985 of accounts receivable from implementation, processing,
      collection, other fees, and disbursements not yet collected as of December
      31,
      2007.




At
      December 31, 2007, the Company advanced five healthcare providers under lines
      of
      credit and note agreements, respectively, aggregating $1,652,079. Advances
      under
      the lines of credit are due to be repaid out of providers’ claims collections,
      as defined in the agreement. The notes receivable under note agreements are
      payable as the provider collects certain receivables. The Company charged the
      health care providers interest and other charges as defined in the agreements.
      At December 31, 2007, no amounts were past due.




Accounts
      and notes receivable are reported at their outstanding unpaid principal balances
      reduced by an allowance for doubtful accounts. The Company estimates doubtful
      accounts based on historical bad debts, factors related to specific customers’
ability to pay and current economic trends. The Company writes off receivables
      against the allowance when a balance is determined to be uncollectible. At
      December 31, 2007 the Company has no allowance for doubtful
      accounts.




NOTE
      3 — PROPERTY
      AND EQUIPMENT




At
      December 31, 2007, property and equipment consisted of the
      following:




Estimated
                LifeOffice
                furniture and equipment
            
            
            5-7
                Years
            
            $
            27,077Computer
                equipment and software
            
            
            3-5
                Years
            
            
            181,820Total
            
            
            
            
            
            208,897Less:
                accumulated depreciation
            
            
            
            
            
            (92,995
            )Property
                and equipment, net
            
            
            
            
            $
            115,902




F-10


**MDWERKS,
            INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2007**
  NOTE
          4 — NOTES
          PAYABLE




On
      August
      24, 2006, we received gross proceeds of $250,000 (net proceeds of $236,566,
      after expenses) in connection with a financing provided by an unrelated party.
      These notes bore interest at 7% per year, and both interest and principal were
      paid in full on October 1, 2007.




On
      August
      24, 2006, we received gross proceeds of $110,000 (net proceeds of $100,000,
      after expenses) in connection with a financing provided equally by two unrelated
      parties. These notes bore interest at 10% per year, and both interest and
      principal were paid in full on the January 21, 2007 maturity date.




On
      each
      of October 20, 2006 and November 9, 2006 we received gross proceeds of
      $2,500,000 ($2,375,000 net proceeds) for a total of $5,000,000 in the aggregate
      ($4,750,000 in the aggregate) in connection with a financing provided by
      Gottbetter Capital Master, Ltd., an unaffiliated accredited institutional
      investor (”Gottbetter’’). Pursuant to the terms of a Securities Purchase
      Agreement that we entered into with Gottbetter in connection with the financing,
      we issued two senior secured convertible promissory notes to Gottbetter, each
      in
      the original principal amount of $2,500,000 (each a ‘‘Senior Note’’ and
      collectively, the ‘‘Senior Notes’’), five year Series D Warrants to purchase
      375,000 shares of our common stock at a price of $2.25 per share (‘‘Series D
      Warrants’’) and five year Series E Warrants to purchase 375,000 shares of our
      common stock at a price of $3.25 per share (‘‘Series E Warrants’’).




The
      Senior Notes bear interest at the rate of 8% per year, payable monthly in
      arrears, commencing December 1, 2006. Subject to certain mandatory prepayment
      provisions, and events of default, unpaid principal and interest due under
      the
      Senior Notes, as amended, will become due and payable on January 1, 2011. The
      Senior Notes require monthly principal payments until the January 1, 2011
      maturity date. The Senior Notes are convertible, at the option of the holder,
      into shares of our common stock at a price of $2.25 per share (the ‘‘Conversion
      Price’’), subject to adjustment for stock splits, stock dividends, or similar
      transactions, sales of our common stock at a price per share below the
      Conversion Price or the issuance of convertible securities or options or
      warrants to purchase shares of our common stock at an exercise price or
      conversion price that is less than the Conversion Price.




The
      Senior Notes provide for optional redemption by us at a redemption price equal
      to 110% of the face amount redeemed plus accrued interest.




Events
      of
      default will result in a default rate of interest of 15% per year and the holder
      may require that the Senior Note be redeemed at the Event of Default Redemption
      Price (as defined in the Senior Notes). The Event of Default Redemption Price
      includes various premiums depending on the nature of the event of default.
      Events of default include, but are not limited to,: (i) the failure to keep
      the
      registration statement covering shares underlying the Senior Notes, the Series
      D
      Warrants and the Series E Warrants effective, as required by the Registration
      Rights Agreement that we entered into with Gottbetter; (ii) suspension from
      trading on the OTC Bulletin Board; (iii) failure to timely deliver shares in
      the
      event the Senior Notes are converted; (iv) failure to reserve adequate shares
      for conversion of the Senior Notes; (v) failure to pay principal, interest
      or
      late charges when due; (vi) any default in the payment of other indebtedness
      in
      excess of $250,000; (vii) bankruptcy events; and (viii) judgments against us
      in
      excess of $250,000.




The
      Senior Notes also provide that in the event of a Change of Control (as defined
      in the Senior Notes), the holder may require that such holder's Senior Note
      be
      redeemed at the Change of Control Redemption Price (as defined in the Senior
      Notes). The Change of Control Redemption Price includes certain premiums in
      the
      event a Senior Note is redeemed in the event of a Change of
      Control.




F-11




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        4 — NOTES
        PAYABLE (continued)




The
      Series D Warrants are exercisable at a price of $2.25 per share for a period
      of
      five years from the date of issuance. The Series D Warrants may be exercised
      on
      a cashless basis. The exercise price will be subject to adjustment in the event
      of subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series D Warrants, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series D Warrants, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series D Warrants.




The
      Series E Warrants are exercisable at a price of $2.25 per share for a period
      of
      five years from the date of issuance, with the same provisions as the Series
      D
      Warrants.




We
      entered into a Security Agreement with Gottbetter. The Security Agreement,
      as
      amended, provides for a lien in favor of Gottbetter on all of our assets
      except for certain assets of our subsidiary, Xeni Financial.




Our
      subsidiaries entered into a Guaranty Agreement with Gottbetter, pursuant to
      which they have agreed to unconditionally guaranty our obligations under the
      Senior Notes and the documents entered into by us in connection the sale of
      the
      Senior Notes.




We
      also
      entered into a Registration Rights Agreement and amendments thereto with
      Gottbetter. Pursuant to the amended Registration Rights Agreement, we included
      in our registration statement that was declared effective on December 7, 2006,
      2,777,778 shares underlying the Senior Notes. In addition to it being an event
      of default under the Senior Notes, if we fail to maintain the effectiveness
      of
      the registration statement as required by the Registration Rights Agreement,
      the
      exercise price of the Series D and the Series E Warrants will immediately be
      reduced by $0.25 per share and then reduced by an additional $0.10 per share
      for
      each thirty day period thereafter that the registration statement is not filed
      or effective, as the case may be, up to a maximum reduction of
      $0.65.




On
      August
      31, 2007 we received proceeds of $250,000 in connection with a financing
      provided by Vicis Capital Master Fund (“Vicis”), an unaffiliated accredited
      investor. In connection with the financing, we issued a 31-day Convertible
      Note
      to Vicis in the original principal amount of $250,000 (the “Vicis Convertible
      Note”).




On
      September 28, 2007 we received net proceeds of $1,633,190 in connection
      with a financing provided by Vicis. The total deferred offering costs incurred
      with this financing were $116,810 and are being amortized over twelve months.
      In
      connection with the financing, pursuant to the terms of a Securities Purchase
      Agreement, we issued 200 shares of Series B Convertible Preferred Stock (a
      “Series B Preferred Stock”), a seven year Series F Warrant to purchase 1,500,000
      shares of our common stock at a price of $2.25 per share and a seven year Series
      G Warrant to purchase 1,000,000 shares of our common stock at a price of $2.50
      per share.





Our
      subsidiaries, MDwerks, Xeni Medical, Xeni Financial, Xeni Billing and
      PPS are also parties to Guaranty Agreements, pursuant to which they have
      agreed to unconditionally guaranty our obligations under the Series B Preferred
      Stock and the documents entered into by us in connection the sale of the Series
      B Preferred Stock.





In
      connection with the sale of the Series B Preferred Stock, we entered into a
      Registration Rights Agreement, pursuant to which we agreed to register for
      resale, the shares of our common stock into which the Series B Preferred Stock
      is convertible and the shares of our common stock for which the Series F
      Warrants and the Series G Warrants are exercisable.




F-12




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        4 — NOTES
        PAYABLE (continued)
 In
          connection with the Sale of the Series B Preferred Stock the Company entered
          into an Amendment, Consent and Waiver agreement with Gottbetter (the “Consent
          and Waiver Agreement”).
  *Securities
        Purchase Agreement*





The
      Securities Purchase Agreement provided for the sale of (i) 200 shares of Series
      B Preferred Stock (ii) Series F Warrants to purchase an aggregate of 1,500,000
      shares of Common Stock and (iii) Series G Warrants to purchase an aggregate
      of
      1,000,000 shares of Common Stock. Pursuant to the Securities Purchase Agreement,
      the aggregate purchase price for the Series Preferred Stock, the Series F
      Warrants and the Series G Warrants was $2,000,000. Payment was made by
      $1,691,445 in cash, the conversion of $251,555 in principal and interest of
      the
      Vicis Convertible Note and deduction of certain closing expenses.




The
      Convertible Series B Preferred Stock is as follows at December 31,
      2007:




Mandatory
                Redeemable Convertible Series B Preferred Stock
            
            $
            2,000,000Less:
                unamortized discount on Preferred Stock
            
            
            (653,674
            )Series
                B Preferred Stock, net of discount of $653,674
            
            $
            1,346,326




The
      Securities Purchase Agreement provides to Vicis, for a period of eighteen months
      after the closing date, a right of first refusal with respect to subsequent
      placements of equity or equity equivalent securities by us.





The
      Securities Purchase Agreement contains certain restrictions on our ability
      to:
      (i) declare dividends; (ii) reclassify, combine or reverse split our Common
      Stock; (iii) incur liens; (iii) incur certain types of indebtedness; (iv) issue
      classes of securities senior to, or *pari
      passu* with,
      the Series B Preferred Stock; (v) liquidate or sell a substantial portion of
      our
      assets; (vi) enter into transactions that would result in a Change of Control
      (as defined in the Securities Purchase Agreement); (vi) amend our charter
      documents in a way that adversely affects the rights of Vicis; (vii) except
      through Xeni Financial, make loans to, or advances or guarantee the obligations
      of, third parties; (viii) make intercompany transfers; (ix) engage in
      transactions with officers, directors, employees or affiliates; (x) divert
      business to other business entities; (xi) make investments in securities or
      evidences of indebtedness (excluding of loans made by Xeni Financial) in excess
      of $250,000 in a calendar year; and (xii) file registration
      statements.





Events
      of
      default under the Securities Purchase Agreement include: (i) default in the
      payment of dividends on or the failure to redeem the Series B Preferred Stock
      when due; (ii) failure to perform the covenants contained in the Securities
      Purchase Agreement or the related transaction documents; (iii) failure to file,
      or cause to become effective, a registration statement covering the shares
      of
      Common Stock underlying the Series F Warrants, the Series G Warrants and the
      Series B Preferred Stock within the timeframes required by the Registration
      Rights Agreement or the failure to keep such registration effective as required
      by the Registration Rights Agreement; (iv) suspension from listing on the OTC
      Bulletin Board or other exchange for 10 consecutive trading days; (v) the
      failure to timely deliver shares of Common Stock upon conversion of the Series
      B
      Preferred Stock or exercise of the Series F Warrants or the Series G Warrants;
      (vi) default in the payment of indebtedness in excess of $250,000; (vii) a
      judgment entered against us in excess of $250,000; and (viii) insolvency,
      bankruptcy and similar circumstances.




F-13




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        4 — NOTES
        PAYABLE (continued)


The
      Securities Purchase Agreement also contains customary representations,
      warranties, covenants and indemnification provisions for transactions of the
      type entered into between the Company and Vicis.




*Series
      B Preferred Stock*





The
      Certificate of Designations, which designates the rights, preferences,
      privileges and terms of the Series B Preferred Stock (the “Certificate of
      Designations”) provides that the Series B Preferred Stock will rank senior to
      other classes of Common Stock and preferred stock that are currently outstanding
      as to distributions of assets upon liquidation, dissolution or winding up and
      as
      to payment of dividends on shares of equity securities.





Each
      share of Series B Preferred Stock is entitled to cumulative dividends at the
      annual rate of 8% of the stated value of the Series B Preferred Stock. The
      stated value of each share of Series B Preferred Stock is $10,000. Dividends
      are
      payable in cash or additional shares of Series B Preferred Stock.





Each
      share of Series B Preferred Stock is convertible, at any time, at the option
      of
      the holder, into the number of shares of Common Stock determined by dividing
      the
      stated value of the Series B Preferred Stock by the conversion price. The
      initial conversion price of the Series B Preferred Stock is $2.25 per
      share.





The
      conversion price is subject to adjustment for stock splits, dividends,
      subdivisions, distributions, reorganizations and similar transactions.
      Furthermore, the conversion price is also subject to adjustment in the event
      of
      the issuance of securities for a price below the conversion price then in effect
      or the issuance of convertible securities with an exercise or conversion price
      that is less than the then current conversion price for the shares of Series
      B
      Preferred Stock.





To
      the
      extent that any shares of Series B Preferred Stock remain outstanding on
      September 28, 2008, each holder thereof shall have the option to either require
      us to redeem such holder’s shares of Series B Preferred Stock or convert such
      holder’s shares of Series B Preferred Stock into shares of Common Stock at the
      conversion price then in effect.





Holders
      of Series B Preferred Stock have the option to require us to redeem shares
      of
      Series B Preferred Stock in the event of a Change of Control (as defined in
      the
      Certificate of Designations).





Holders
      of Series B Preferred Stock are entitled to vote on matters submitted to our
      stockholders as if the Series B Preferred Stock had been converted into shares
      of Common Stock pursuant to the terms of the Certificate of Designations. To
      the
      extent the holders of Series B Preferred Stock are required to vote separately,
      as a class, the affirmative vote of the holders of a majority of the outstanding
      shares of Series B Preferred Stock will be required to approve the matter to
      be
      voted upon.




*Series
      F Warrants*





The
      Series F Warrants are exercisable at a price of $2.25 per share for a period
      of
      seven years from the date of issuance. The Series F Warrants may be exercised
      on
      a cashless basis. The exercise price will be subject to adjustment in the event
      of subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series F Warrants, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series F Warrants, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series F Warrants.




F-14




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        4 — NOTES
        PAYABLE (continued)




*Series
      G Warrants*





The
      Series G Warrants are exercisable at a price of $2.50 per share for a period
      of
      seven years from the date of issuance, with the same provisions as the Series
      F
      warrants.




*Security
      Agreement*





We,
      along
      with our subsidiaries, MDwerks, Xeni Medical, Xeni Financial, Xeni Billing,
      and
      PPS entered into Security Agreements with Vicis. The Security Agreements provide
      for liens in favor of Vicis on all of our assets, including the assets of each
      of our subsidiaries, except for the accounts receivable and certain contract
      rights of Xeni Financial.





*Guaranty
      Agreement*





Our
      subsidiaries, MDwerks, Xeni Medical, Xeni Financial, Xeni Billing, and
      PPS entered into Guaranty Agreements with Vicis, pursuant to which they
      have agreed to unconditionally guaranty our obligations under the Series B
      Preferred Stock and the documents entered into by us in connection with the
      sale
      of the Series B Preferred Stock.





*Registration
      Rights Agreement*





We
      entered into a Registration Rights Agreement with Vicis. The Registration Rights
      Agreement requires us to file a registration statement covering the resale
      of
      the shares underlying the Series B Preferred Stock, the Series F Warrants and
      the Series G Warrants within 365 calendar days after the closing date. If we
      fail to maintain the effectiveness of the registration statement as required
      by
      the Registration Rights Agreement, we will be required to pay a cash penalty
      in
      the amount of 2% of the aggregate stated value of the Series B Preferred Stock
      for each month, or part thereof, that the registration statement is not filed
      or
      effective, as the case may be. The cash penalty is limited to 15% of the
      aggregate stated value of the Series B Preferred Stock.





The
      Registration Rights Agreement also provides for piggyback registration
      rights.




*Amendment,
      Consent & Waiver Agreement*





In
      connection with the transactions described above, we entered into the Consent
      and Waiver Agreement (the “Consent and Waiver Agreement”) with Gottbetter,
      whereby, among other things: (i) Gottbetter consented to the transactions
      described above, (ii) Gottbetter agreed to delay, until February 1, 2008,
      principal payments under the Senior Secured Convertible Note issued by the
      Corporation to Gottbetter on October 19, 2006 (the “October Note”) and under the
      Senior Secured Convertible Note issued by the Corporation to Gottbetter on
      November 9, 2006 (the “November Note”), (iii) Gottbetter agreed that its right
      of first refusal with respect to subsequent financings will be on a *pro
      rata, pari passu* basis
      with Vicis and (v) Gottbetter released its security interest in certain
      collateral of Xeni Financial.




F-15




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        4 — NOTES
        PAYABLE (continued)


Also
      in
      connection with the transactions described above, the conversion price of the
      Gottbetter Series E Warrants were reduced to $2.25 per share subject to further
      adjustment, and the number of Warrant Shares for which such warrants may be
      exercised were increased to 541,666 and 2/3 shares subject to further
      adjustment. The additional warrants were recorded as $84,117 of debt discount
      and are being amortized over four months through January 2008.





In
      consideration of Gottbetter entering into the Consent and Waiver Agreement,
      we
      issued to Gottbetter a Series D Warrant to purchase 500,000 shares of our Common
      Stock at a price of $2.25 per share.




*Amended
      & Restated Notes*




In
      order
      to memorialize the extension of the principal payment date to February 1, 2008
      in the October Note and the November Note, we issued to Gottbetter an amended
      and restated October Note and an amended and restated November
      Note.




On
      December 3, 2007 we received gross proceeds of $575,000 in connection with
      a
      financing provided by Vicis. In connection with the financing, we issued a
      Convertible Note to Vicis in the original principal amount of $575,000 (the
      “Note”). The Note bears interest at the rate of 8% per year. Subject to certain
      prepayment provisions, unpaid principal and interest due under the Note will
      become due and payable on December 2, 2008.




The
      promissory notes are as follows at December 31, 2007:




Notes
                payable
            
            $
            5,575,000Less:
                unamortized discount on notes payable
            
            
            (2,566,395
            )Notes
                payable, net
            
            
            3,008,605Less
                current portion
            
            
            (2,942,842
            )Notes
                payable, net of discount of $2,566,395, less current
                portion
            
            $
            65,763




NOTE
      5 — LOAN
      PAYABLE




The
      Company has a loan payable to an unrelated individual in the amount of $69,559.
      The loan bears interest at 8% per annum and is payable on a monthly basis.
      The
      loan shall be repaid proportionally upon repayment of certain of the Company’s
      notes receivable.




The
      Company also has a loan payable to a customer of the Company in the amount
      of
      $250,000. This customer provided this non-interest bearing loan to assist with
      interim financing and to fund equipment purchases incurred on behalf of the
      customer. A repayment of $210,000 was made to the customer in October of 2007
      and the net balance due at December 31, 2007 is $40,000.




F-16


**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**


NOTE
        6 — STOCKHOLDERS’
        EQUITY (DEFICIENCY)




Preferred
      stock




The
      Company is authorized to issue 10,000,000 shares of preferred stock, $.001
      par
      value, with such designations, rights and preferences as may be determined
      from
      time to time by the Board of Directors.




On
      February 1, 2006, the Board of Directors of the Company authorized the creation
      of 1,000 shares of $.001 par value Series A Convertible Preferred Stock with
      a
      liquidation value of $60,000 per share (subject to adjustment in the event
      of
      stock splits, combinations or similar events). The Series A Convertible
      Preferred Stock shall not be entitled to receive dividends or other
      distributions from the Company. Each holder of record of shares of the Series
      A
      Convertible Preferred Stock shall have the right at such holder’s option, at any
      time and from time to time, to convert any of such shares of Series A
      convertible preferred stock into fully paid shares of common stock. Each share
      of Series A Convertible Preferred Stock shall initially be convertible into
      20,000 shares of common stock (the ‘‘Conversion Rate’’), subject to adjustment
      due to consolidation, merger or sale or common stock dividends. The holders
      of
      shares of Series A Convertible Preferred Stock shall be entitled to vote on
      all
      matters submitted to a vote of the stockholders of the Company and shall have
      such number of votes equal to the number of shares of the Company’s common stock
      into which such holders’ shares of Series A Convertible Preferred Stock are
      convertible.




Between
      February 1, 2006 and June 30, 2006, the Company conducted a series of closings
      under private placement offering of Units consisting of one share of Series
      A
      Convertible Preferred Stock and a three-year warrant to purchase up to 20,000
      shares of the Company’s Common Stock at a purchase price of $3.00 per share. The
      Company sold an aggregate of 28.3 Units to accredited investors pursuant to
      the
      terms of a confidential private placement memorandum, dated February 1, 2006,
      used in connection with this offering. The Company realized net proceeds from
      this private placement of $1,386,077 after payment of commissions and expenses.
      Between August 11, 2006 and December 31, 2006, 23.3 shares of Series A
      Convertible Preferred Stock were converted into 466,667 shares of common stock.
      In 2007, 3 shares of Series A Convertible Preferred Stock were converted into
      60,000 shares of common stock leaving 2 Series A Convertible Preferred Shares
      outstanding as of December 31, 2007.




In
      accordance with Emerging Issues Task Force (‘‘EITF’’) 98-5 and EITF 00-27, the
      Series A Convertible Preferred Stock was considered to have an embedded
      beneficial conversion feature (ECF) because the conversion price was less than
      the fair value of the Company’s common stock. This Series A Convertible
      Preferred Stock was fully convertible at the issuance date, therefore a portion
      of proceeds allocated to the Series A Convertible Preferred Stock was determined
      to be the value of the beneficial conversion feature and was recorded as a
      deemed dividend.




In
      accordance with SFAS No. 133 and Emerging Issues Task Force Issue 00-19 (‘‘EITF
      00-19’’), ‘‘Accounting for Derivative Financial Instruments Indexed To, and
      Potentially Settled in, a Company's Own Stock’’, the Company is required to
      record the fair value of the ECF and warrants as a liability since the Company
      has to use its ‘‘best efforts’’ to file a registration statement and maintain
      its effectiveness for a period of two years from the effective date. In
      connection with the initial sales of the Series A Preferred Stock, the initial
      estimated fair values allocated to the ECF were $913,777 which was recorded
      as a
      deemed dividend. The initial fair value allocated to the warrants of $768,751
      was allocated to warrant liability. For the year ended December 31, 2006, the
      Company revalued these warrants resulting in a loss on valuation of warrant
      liability of $192,914.




F-17




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        6 — STOCKHOLDERS’
        EQUITY (DEFICIENCY) (continued)




Preferred
      stock (continued)




The
      assumptions used valuing the warrants include:




Risk
                free interest rate (annual)
            
            
            4.70%
                and 4.75
            %Expected
                volatility
            
            
            147%
                and 154
            %Expected
                life
            
            
            5
                YearsAssumed
                dividends
            
            
            none




Brookshire
      Securities Corporation (‘‘Brookshire’’) served as the lead placement agent in
      connection with the private placement. Brookshire received a cash fee in the
      aggregate of $170,000, 170,000 shares of the Company’s common stock, and
      five-year warrants to purchase 56,667 shares of the Company’s common stock at an
      exercise price of $1.50 per share on terms which are identical to those warrants
      included in the units except that they contain a cashless exercise provision.
      In
      addition, the warrants have registration rights that are the same as those
      afforded to investors in the private placement.




The
      Company is authorized to issue 250 shares of Series B Convertible Preferred
      stock, $0.001 par value with such designations, rights and preferences as may
      be
      determined from time to time by the Board of Directors. On September 28, 2007,
      200 shares of Series B preferred stock were issued in connection with the
      Securities Purchase Agreement. As of December 31, 2007, there are 200 Series
      B
      Convertible Preferred Stock shares issued and outstanding.




Common
      stock




On
      January 1, 2006, the Company issued 76,000 shares of the Company’s common stock
      to certain stockholders pursuant to agreements to offset the effect of dilutive
      financing of the Xeni Companies. The shares issued were valued at the fair
      value
      at the date of issuance of $246,240 and were charged to expense.




On
      February 13, 2006, $45,000 of notes payable plus accrued interest of $1,342
      was
      converted into 92,685 shares of the Company’s common stock in full satisfaction
      of the notes payable. The common shares were valued at a fair market value
      of
      $2.45 per share for an aggregate fair market value of $227,077 based on recent
      trading price of the stock. Accordingly, in connection with the issuance of
      these shares, the Company reduced notes payable by $45,000, reduced interest
      payable by $1,342, and recorded settlement expenses related to the debt
      conversion of $180,827.




On
      February 28, 2006, the Company issued 25,000 shares of the common stock to
      the
      Chief Financial Officer of the Company in consideration for services rendered.
      The shares were issued at the fair value at the date of the issuance of $81,000
      or $3.24 per share. For the year ended December 31 2006, in connection with
      these shares, the Company recorded stock-based compensation of
      $81,000.




On
      June
      19, 2006, the Company authorized the issuance of 75,000 shares of common stock
      to a Director of the Company in consideration for services
      rendered.  On June 22, 2006, the Company issued 25,000 of these
      authorized shares of common stock at the fair value at the date of the issuance
      of $87,500 or $3.50 per share. For the year ended December 31, 2006, in
      connection with these shares, the Company recorded stock-based compensation
      of
      $87,500 for the Director.




On
      June
      29, 2006, the Company issued 3,483 shares of the common stock to consultants
      in
      consideration for services rendered. The shares were issued at the fair value
      at
      the date of the issuance of $14,000 or $4.02 per share. For the year ended
      December 31 2006, in connection with these shares, the Company recorded
      stock-based consulting fees of $14,000.




F-18




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**
  NOTE
        6 — STOCKHOLDERS’
        EQUITY (DEFICIENCY) (continued)




Common
      stock (continued)




On
      August
      9, 2006, the Company issued 22,500 shares of the common stock to consultants
      in
      consideration for services rendered. The shares were issued at the fair value
      at
      the date of the issuance of $90,000 or $4.00 per share. For the year ended
      December 31 2006, in connection with these shares, the Company recorded
      stock-based consulting fees of $90,000.




On
      August
      24, 2006, the Company issued 10,000 shares of common stock in connection with
      a
      notes payable financing. The shares were valued at fair market value at date
      of
      issuance of $39,800 or $3.98 per share and recorded as a discount on notes
      payable to be amortized over the term of the note (see note 4).




On
      October 18, 2006 the Company issued 170,000 shares in connection with the
      private placement.




On
      October 18, 2006, the Company issued 50,000 shares of common stock to
      consultants for services rendered. The shares were issued at the fair value
      at
      the date of the issuance of $150,000 or $3.00 per share. For the year ended
      December 31 2006, in connection with these shares, the Company recorded
      stock-based consulting fees of $150,000.




On
      October 20, 2006, and November 9, 2006, the Company issued a total of 100,000
      shares of common stock for consulting services rendered in connection with
      the
      financing provided by the unaffiliated accredited institutional investor. The
      shares were issued at the fair value at the date of issuance of $240,000, or
      $3.00 per share for 80,000 shares issued on October 20, 2006 and $49,000, or
      $2.45 per share for 20,000 shares issued on November 9, 2006. For the year
      ended
      December 31, 2006, in connection with these shares, the Company recorded
      deferred offering costs of $289,000.




Between
      August 11, 2006 and December 31, 2006, 23.3 shares of Series A Convertible
      Preferred Stock were converted into 466,667 shares of common stock.




On
      May
      29, 2007, the Company issued 150,000 shares of common stock to consultants
      for
      services rendered. The shares were issued at the fair value at the date of
      the
      issuance of $75,000 or $0.50 per share. For the year ended December 31, 2007,
      in
      connection with these shares, the Company recorded stock-based consulting
      expense of $75,000.




On
      May
      29, 2007, the Company issued 50,000 shares of common stock to a Director of
      the
      Company in consideration for services rendered. The shares were issued at the
      fair value at the date of the issuance of $25,000 or $0.50 per share. For the
      year ended December 31, 2007, in connection with these shares, the Company
      recorded stock-based consulting expense of $25,000.




On
      May
      29, 2007, the Company issued 100,000 shares of common stock to consultants
      for
      services rendered. The shares were issued at the fair value at the date of
      the
      issuance of $50,000 or $0.50 per share. For the year ended December 31, 2007,
      in
      connection with these shares, the Company recorded investor relation expenses
      of
      $50,000.




In
      2007,
      3 shares of Series A Convertible Preferred Stock were converted into 60,000
      shares of common stock.




F-19




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
          6 — STOCKHOLDERS’
          EQUITY (DEFICIENCY) (continued)




Common
      stock options




In
      November 2005, the Company and its stockholders approved the MDwerks, Inc.
      2005
      Incentive Compensation Plan (the ‘‘Incentive Plan’’). The Incentive Plan covers
      grants of stock options, grants of equity securities, dividend equivalents
      and
      other customary items covered by such plans. Persons eligible to receive awards
      under the Incentive Plan are the officers, directors, employees, consultants
      and
      other persons who provide services to the Company or any related entity (as
      defined in the Incentive Plan). The Incentive Plan will be administered by
      the
      Company’s Compensation Committee; however, the Board of Directors can exercise
      any power or authority granted to the Compensation Committee under the Incentive
      Plan, unless expressly provided otherwise in the Incentive Plan. The Company
      reserved 10,000,000 shares of its authorized common stock for issuance pursuant
      to grants under the Incentive Plan.




On
      December 29, 2005, the Company granted options to purchase 200,000 shares of
      common stock to employees of the Company under the Incentive Plan. The options
      are exercisable at $3.25 per share. The options vest over a three-year term
      and
      expire on December 29, 2015. The fair value of these options was approximately
      $598,000 using the Black-Scholes pricing model. The assumptions used were:
      interest free rate of 3.75%, 105% volatility, 10-year term and no expected
      dividends.




On
      January 3, 2006, the Company granted options to purchase 860,000 shares of
      common stock to employees of the Company under the Incentive Plan. The options
      are exercisable at $3.40 per share. The options vest as to 33.33% of such shares
      on each of the first and second anniversaries of the date of grant and as to
      33.34% of such shares on the third anniversary of the date of grant, and expire
      on January 3, 2016 or earlier due to employment termination. As of January
      1,
      2006, the Company accounts for stock options issued to employees in accordance
      with the provisions of SFAS 123(R) and related interpretations. The fair
      value of this option grant was estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions: dividend yield of 0%; expected volatility of 105%; risk-free
      interest rate of 3.75%; and, a term of 8 years. In connection with these
      options, the Company valued these options at a fair market value of
      approximately $2,578,445 and will record stock-based compensation expense over
      the vesting period.




On
      June
      19, 2006, the Company granted options to purchase 606,250 shares of common
      stock
      to employees and a Director of the Company under the Incentive Plan. The options
      are exercisable at $4.00 per share. The options vest over a three-year term
      and
      expire on June 19, 2016. The fair value of these options was approximately
      $2,324,363 using the Black-Scholes pricing model. The assumptions used were:
      interest free rate of 4.83%, 142% volatility, 10-year term and no expected
      dividends.




On
      October 11, 2006, the Company granted options to purchase 1,025,000 shares
      of
      common stock to employees and Directors of the Company under the Incentive
      Plan.
      The options are exercisable at $2.25 per share. The options vest 1/3 immediately
      and 1/3 each year over the next two years and expire on October 11, 2016. The
      fair value of these options was approximately $2,265,250 using the Black-Scholes
      pricing model. The assumptions used were: interest free rate of 4.75%, 147%
      volatility, 10-year term and no expected dividends.




On
      December 27, 2006, the Company granted options to purchase 125,000 shares of
      common stock to employees of the Company under the Incentive Plan. The options
      are exercisable at $1.39 per share. The options either vest immediately or
      vest
      1/3 immediately and 1/3 each year over the next two years and expire on December
      29, 2016. The fair value of these options was approximately $171,250 using
      the
      Black-Scholes pricing model. The assumptions used were: interest free rate
      of
      4.70%, 154% volatility, 10-year term and no expected dividends.




F-20




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
          6 — STOCKHOLDERS’
          EQUITY (DEFICIENCY) (continued)




Common
      stock options (continued)




On
      September 27, 2007, the Company granted options to purchase 175,000 shares
      of
      common stock of the Company under the Incentive Plan. The options are
      exercisable at $0.67 per share. The options either vest 1/3 immediately and
      1/3
      each year over the next two years or vest over the next three years and expire
      on September 27, 2017. The fair value of these options was approximately
      $119,000 using the Black-Scholes pricing model. The assumptions used were:
      interest free rate of 4.23%, 116% volatility, 10-year term and no expected
      dividends.




On
      December 31, 2007, the Company granted options to purchase 483,000 shares of
      common stock to Directors of the Company under the Incentive Plan. The options
      are exercisable at $0.38 per share. The options vest immediately and expire
      on
      December 31, 2017. The fair value of these options was approximately $173,880
      using the Black-Scholes pricing model. The assumptions used were: interest
      free
      rate of 3.52%, 114% volatility, 10-year term and no expected
      dividends.




A
      summary
      of the status of the Company's outstanding stock options as of December 31,
      2007
      and changes during the period ending on that date is as follows:




Shares
            
            Weighted
                Average
              Exercise
                Price
            
            Aggregate
              Intrinsic
                ValueOutstanding
                at December 31, 2005
            
            
            200,000
            
            $
            3.25Granted
            
            
            2,691,250
            
            $
            3.03Exercised
            
            
            —
            
            $
            —Forfeited
            
            
            (15,000
            )
            $
            3.50Outstanding
                at December 31, 2006
            
            
            2,876,250
            
            $
            3.04Granted
            
            
            658,000
            
            $
            0.46Exercised
            
            
            —
            
            $
            —Forfeited
            
            
            (20,000
            )
            $
            1.39Outstanding
                at December 31, 2007
            
            
            3,514,250
            
            $
            2.57
            
            $
            0Options
                exercisable at end of period
            
            
            1,933,417
            
            $
            2.71Weighted-average
                fair value of options granted during the period
            
            $
            0.46




F-21




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
          6 — STOCKHOLDERS’
          EQUITY (DEFICIENCY) (continued)




Common
      stock options (continued)




The
      following information applies to options outstanding at December 31,
      2007:




Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise Prices
            
            Shares
            
            Weighted
                Average
              Remaining
                Contractual
              Life
                (Years)
            
            Weighted
                Average
              Exercise
                Price
            
            Shares
            
            Weighted
                Average
              Exercise
                Price$0.38
            
            
            483,000
            
            
            10.00
            
            $
            0.38
            
            
            483,000
            
            $
            0.38$0.67
            
            
            175,000
            
            
            9.75
            
            $
            0.67
            
            
            33,333
            
            $
            0.67$1.39
            
            
            105,000
            
            
            9.00
            
            $
            1.39
            
            
            95,000
            
            $
            1.39$2.25
            
            
            1,025,000
            
            
            8.75
            
            $
            2.25
            
            
            683,333
            
            $
            2.25$3.25
            
            
            190,000
            
            
            8.00
            
            $
            3.25
            
            
            126,667
            
            $
            3.25$3.40
            
            
            860,000
            
            
            8.00
            
            $
            3.40
            
            
            286,667
            
            $
            3.40$4.00
                - $4.25
            
            
            676,250
            
            
            8.50
            
            $
            4.03
            
            
            225,417
            
            $
            4.033,514,250
            
            
            
            
            $
            2.57
            
            
            1,933,417
            
            $
            2.71




In
      connection with granted stock options, the Company recognized stock-based
      compensation expense of $3,196,046 for the year ended December 31, 2007 and
      $3,911,640 for the year ended December 31, 2006. The stock based compensation
      for 2007 includes $173,880 for new options granted and $3,022,166 related to
      2005 and 2006 options. As of December 31, 2007, the total future compensation
      expense related to non-vested options not yet recognized in the consolidated
      statement of operations is approximately $1,311,181, which will be recognized
      through September 2010.




Common
      stock warrants




Between
      February 1, 2006 and June 30, 2006, the Company conducted a private placement
      to
      accredited investors pursuant to the terms of a Confidential Private Placement
      Memorandum, dated February 1, 2006, and private placement subscription
      agreements executed and delivered by each investor. Each unit consists of one
      share of the Company’s Series A Convertible Preferred Stock, par value $.001 per
      share, and a detachable, transferable warrant to purchase 20,000 shares of
      the
      Company’s common stock, at a purchase price of $3.00 per share. Pursuant to the
      Private Placement, the Company sold an aggregate of 28.33 units and issued
      to
      investors three-year warrants to purchase an aggregate of 566,667 shares of
      its
      common stock at an exercise price of $3.00 per share, which expire from March
      22, 2009 to June 29, 2009. Brookshire Securities Corporation (‘‘Brookshire’’)
      served as the lead placement agent in connection with the private placement.
      Brookshire received five-year warrants to purchase 56,667 shares of the
      Company’s common stock at an exercise price of $1.50 per share on terms which
      are identical to those warrants included in the units except that they contain
      a
      cashless exercise provision. In addition, the warrants have registration rights
      that are the same as those afforded to investors in the private
      placement.




In
      connection with a 7% secured promissory note, the Company granted warrants
      to
      purchase 111,111 shares of its common stock at an exercise price of $2.25 per
      share which warrants expire on August 24, 2009. These warrants were treated
      as a
      discount on the secured promissory note and were valued at $250,000 to be
      amortized over the 12-month note terms. The fair market value of each stock
      warrants were estimated on the date of grant using the Black-Scholes
      option-pricing model in accordance with SFAS No. 123R using the following
      weighted-average assumptions: expected dividend yield 0%; risk-free interest
      rate of 4.80%; volatility of 142% and an expected term of 3 years (see note
      4).




F-22




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
            6 — STOCKHOLDERS’
            EQUITY (DEFICIENCY) (continued)


Common
      stock warrants (continued)




On
      July
      5, 2006, in connection with terms of certain notes payable (see note 4), the
      Company granted to note holders four-year warrants to purchase an aggregate
      of
      90,000 shares of the Company’s common stock at $1.25 per share. The fair market
      value of these stock warrants were estimated on the date of grant using the
      Black-Scholes option-pricing model in accordance with SFAS No. 123R using the
      following weighted-average assumptions: expected dividend yield 0%; risk-free
      interest rate of 4.83%; volatility of 142% and an expected term of 4 years.
      In
      connection with these warrants, the Company recorded interest expense of
      $335,273.




In
      connection with Gottbetter notes payable (see note 4), the Company granted
      to
      note holders Series D Warrants which are exercisable at a price of $2.25 per
      share for a period of five years from the date of issuance. The Series D
      Warrants may be exercised on a cashless basis. The exercise price will be
      subject to adjustment in the event of subdivision or combination of shares
      of
      the Company’s common stock and similar transactions, distributions of assets,
      issuances of shares of common stock with a purchase price below the exercise
      price of the Series D Warrants, issuances of any rights, warrants or options
      to
      purchase shares of the Company’s common stock with an exercise price below the
      exercise price of the Series D Warrants, issuances of convertible securities
      with a conversion price below the exercise price of the Series D
      Warrants.




Also
      in
      connection with the issuance of the Senior Notes (see note 4), the Company
      granted to note holders of the Senior Notes Series E Warrants which are
      exercisable at a price of $3.25 per share for a period of five years from the
      date of issuance. The Series E Warrants may be exercised on a cashless basis.
      The exercise price will be subject to adjustment in the event of subdivision
      or
      combination of shares of the Company’s common stock and similar transactions,
      distributions of assets, issuances of shares of common stock with a purchase
      price below the exercise price of the Series E Warrants, issuances of any
      rights, warrants or options to purchase shares of the Company’s common stock
      with an exercise price below the exercise price of the Series E Warrants,
      issuances of convertible securities with a conversion price below the exercise
      price of the Series E Warrants.




On
      October 18, 2006, the Company granted 225,000 Warrants to consultants which
      are
      exercisable at a price of $3.76 per share for a period of three years. On
      October 18, 2006, the Company granted 62,500 Warrants to brokers which are
      exercisable at prices between $1.25 and $4.00 per share for a period of three
      years.




On
      September 28, 2007 we received net proceeds of $1,633,190  in connection
      with a financing provided by Vicis. In connection with the financing, pursuant
      to the terms of a Securities Purchase Agreement, we issued 200 shares of Series
      B Convertible Preferred Stock (a “Series B Preferred Stock”), a seven year
      Series F Warrant to purchase 1,500,000 shares of our common stock at a price
      of
      $2.25 per share and a seven year Series G Warrant to purchase 1,000,000 shares
      of our common stock at a price of $2.50 per share. These warrants were treated
      as a discount on the preferred stock and were valued at $877,980 to be amortized
      over the 12-month term. The fair market value of each stock warrant was
      estimated on the date of grant using the Black-Scholes option-pricing model
      in
      accordance with SFAS No. 123R using the following weighted-average assumptions:
      expected dividend yield 0%; risk-free interest rate of 4.23%; volatility of
      116%
      and an expected term of 7 years.




F-23




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
          6 — STOCKHOLDERS’
          EQUITY (DEFICIENCY) (continued)




Common
      stock warrants (continued)




In
      consideration of Gottbetter entering into the Consent and Waiver Agreement,
      we
      issued to Gottbetter a Series D Warrant to purchase 500,000 shares of our Common
      Stock. The Series D Warrant is exercisable at a price of $2.25 per share for
      a
      period of five years from the date of issuance. These warrants were treated
      as a
      discount on the secured promissory note and were valued at $252,361 to be
      amortized over the 4-month note extension term. The fair market value of each
      stock warrant was estimated on the date of grant using the Black-Scholes
      option-pricing model in accordance with SFAS No. 123R using the following
      weighted-average assumptions: expected dividend yield 0%; risk-free interest
      rate of 4.23%; volatility of 116% and an expected term of 5 years.




In
      connection with the September 28, 2007 transactions described in Note 4, the
      conversion price of the Gottbetter Series E Warrants were reduced to $2.25
      per
      share subject to further adjustment, and the number of Warrant Shares for which
      such warrants may be exercised were increased to 541,666 and 2/3 shares subject
      to further adjustment. The additional warrants were treated as a discount on
      the
      secured promissory note and were valued at $84,117 to be amortized over the
      4-month note extension term. The fair market value of each stock warrant was
      estimated on the date of grant using the Black-Scholes option-pricing model
      in
      accordance with SFAS No. 123R using the following weighted-average assumptions:
      expected dividend yield 0%; risk-free interest rate of 4.23%; volatility of
      116%
      and an expected term of 5 years.




A
      summary
      of the status of the Company's outstanding stock warrants granted as of December
      31, 2007 and changes during the period is as follows:




Shares
            
            Weighted-Average
              Exercise
                PriceOutstanding
                at December 31, 2005
            
            
            704,400
            
            $
            2.39Granted
            
            
            1,861,945
            
            $
            2.78Exercised
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —Outstanding
                at December 31, 2006
            
            
            2,566,345
            
            $
            2.67Granted
            
            
            3,166,667
            
            $
            2.21Exercised
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —Outstanding
                at December 31, 2007
            
            
            5,733,012
            
            $
            2.42Common
                stock issuable upon exercise of warrants
            
            
            5,733,012
            
            $
            2.42




F-24




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
          6 — STOCKHOLDERS’
          EQUITY (DEFICIENCY) (continued)




Common
      stock warrants (continued)




Common
                Stock issuable upon exercise of warrants outstanding
            
            Common
                Stock issuable upon
              Warrants
                ExercisableRange
                of Exercise Price
            
            Number
              Outstanding
                at
              December
                31,
              2007
            
            Weighted
                Average
              Remaining
                Contractual
              Life
                (Years)
            
            Weighted
                Average
              Exercise
                Price
            
            Number
              Exercisable
                at
              December
                31,
              2007
            
            Weighted
                Average
              Exercise
                Price$1.25
            
            
            199,000
            
            
            2.50
            
            $
            1.25
            
            
            199,000
            
            $
            1.25$1.50
            
            
            56,667
            
            
            3.50
            
            $
            1.50
            
            
            56,667
            
            $
            1.50$2.25
            
            
            3,027,778
            
            
            5.50
            
            $
            2.25
            
            
            3,027,778
            
            $
            2.25$2.50
            
            
            1,640,400
            
            
            4.50
            
            $
            2.50
            
            
            1,640,400
            
            $
            2.50$3.00
            
            
            579,167
            
            
            1.40
            
            $
            3.00
            
            
            579,167
            
            $
            3.00$3.76
            
            
            225,000
            
            
            1.80
            
            $
            3.76
            
            
            225,000
            
            $
            3.76$4.00
            
            
            5,000
            
            
            1.80
            
            $
            4.00
            
            
            5,000
            
            $
            4.005,733,012
            
            
            
            
            $
            2.42
            
            
            5,733,012
            
            $
            2.42




Registration
      rights




The
      Company has filed a ‘‘resale’’ registration statement with the SEC covering all
      shares of common stock and shares of common stock underlying the warrants
      (including shares of common stock and underlying warrants issued to the
      Placement Agent) issued in connection with the June 13, 2005 Private Placement.
      The Company has agreed that it will maintain the effectiveness of the ‘‘resale’’
registration statement from the effective date through and until the earlier
      of
      two years and the time at which exempt sales pursuant to Rule 144(k) may be
      permitted. The Company will use its best efforts to respond to any SEC comments
      to the ‘‘resale’’ registration statement on or prior to the date which is 20
      business days from the date such comments are received, but in any event not
      later than 30 business days from the date such comments are received. The
‘‘resale’’ registration statement became effective on December 7,
      2006.




In
      the
      event the ‘‘resale’’ registration statement had not been not filed with the SEC
      on or prior to the date which is 180 days after the last closing date of the
      Private Placement, each investor in the Private Placement would have received
      as
      liquidating damages an additional number of shares of common stock equal to
      2%
      of the total number of shares of common stock purchased by the investor in
      the
      Private Placement for each month (or portion thereof) that the Registration
      Statement was not filed, provided that the aggregate increase in such shares
      of
      common stock as a result of the delinquent filing would in no event exceed
      20%
      of the original number of shares of common stock purchased in the Private
      Placement.




In
      the
      event that the Company fails to respond to SEC comments to the Registration
      Statement within 30 business days, each investor in the Private Placement will
      receive an additional number of shares of common stock equal to 2% of the total
      number of shares of common stock purchased by the investor in the Private
      Placement for each month (or portion thereof) that a response to the comments
      to
      the Registration Statement has not been submitted to the SEC, provided that
      the
      aggregate increase in such shares shall in no event exceed 20% of the original
      number of shares of common stock purchased in the Private
      Placement.




F-25




**MDWERKS,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2007**
  NOTE
          6 — STOCKHOLDERS’
          EQUITY (DEFICIENCY) (continued)




Registration
      rights (continued)




Pursuant
      to the February 1, 2006 Series A Convertible Preferred Private Placement
      Subscription documents, we agreed to file a registration statement with the
      Securities and Exchange Commission to register the shares and warrants held
      by
      the selling security holders for resale. That registration statement was
      declared effective on December 7, 2006. We have agreed to maintain the
      effectiveness of the registration statement from the effective date through
      and
      until the earlier of two years following December 31, 2005 (which was the
      termination date of the first private placement described above) or the earlier
      of two years following June 28, 2006 (which was the effective date of the
      termination of the second private placement described above) and such time
      as
      exempt sales pursuant to Rule144(k) under the Securities Act of 1933 (‘‘Rule
      144(k)’’) may be permitted for purchasers of Units.




We
      also
      entered into a Registration Rights Agreement and amendment thereto with
      Gottbetter. The amended Registration Rights Agreement required us to file a
      registration statement covering the resale of 2,777,778 shares of common stock
      underlying the Senior Notes. The registration statement covering the resale
      of
      the shares of common stock underlying the Senior Notes became effective on
      December 7, 2006. In addition to it being an event of default under the Senior
      Notes, if we fail to maintain the effectiveness of the registration statement
      as
      required by the Registration Rights Agreement, the exercise price of the Series
      D and the Series E Warrants will immediately be reduced by $0.25 per share
      and
      then reduced by an additional $0.10 per share for each thirty day period
      thereafter that the registration statement is not filed or effective, as the
      case may be, up to a maximum reduction of $0.65.




NOTE
      7 —
INCOME TAXES




The
      Company accounts for income taxes under Statement of Financial Accounting
      Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
      the recognition of deferred tax assets and liabilities for both the expected
      impact of differences between the financial statements and the tax basis of
      assets and liabilities, and for the expected future tax benefit to be derived
      from tax losses and tax credit carryforwards. SFAS 109 additionally requires
      the
      establishment of a valuation allowance to reflect the likelihood of realization
      of deferred tax assets. Realization of deferred tax assets, including those
      related to net operating loss carryforwards, are dependent upon future earnings,
      if any, of which the timing and amount are uncertain. Accordingly, the net
      deferred tax assets have been fully offset by a valuation
      allowance.




The
      Company has net operating loss carryforwards for tax purposes totaling
      approximately $9,457,000 at December 31, 2007, expiring through the year 2027
      subject to the Internal Revenue Code Section 382, which places a limitation
      on
      the amount of net operating losses that can offset by taxable income after
      a
      change in control (generally greater than a 50% change in
      ownership).




The
      table
      below summarizes the differences between the Company's effective tax rate and
      the statutory federal rate as follows for fiscal 2007 and 2006:




2007
            
            2006Computed
                "expected" tax benefit
            
            
            (34.0
            )%
            
            (34.0
            )%State
                income taxes
            
            
            (4.0
            )%
            
            (4.0
            )%Other
                permanent differences
            
            
            21.7
            %
            
            9.5
            %Change
                in valuation allowance
            
            
            16.3
            %
            
            28.5
            %Effective
                tax rate
            
            
            0.0
            %
            
            0.0
            %




F-26




**MDWERKS,
            INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2007**
  NOTE
            7 — INCOME
            TAXES (continued)


Deferred
      tax assets and liabilities are provided for significant income and expense
      items
      recognized in different years for tax and financial reporting purposes.
      Temporary differences, which give rise to a net deferred tax asset is as
      follows:




2007Tax
                benefit of net operating loss carryforward
            
            $
            3,594,000Non-qualified
                stock options
            
            
            934,0004,528,000Valuation
                allowance
            
            
            (4,528,000
            )Net
                deferred tax asset
            
            $
            —




After
      consideration of all the evidence, both positive and negative, management has
      recorded a valuation allowance at December 31, 2007, due to the uncertainty
      of
      realizing the deferred income tax assets. The valuation allowance was increased
      by $878,000 from the prior year.




NOTE
      8 — COMMITMENTS




Lease
      agreements




The
      Company sub-leased its facility, on a month-to-month basis, under a master
      lease
      expiring July 2008. Rent expense for the year ended December 31, 2007 was
      $83,772. On February 1, 2008, the Company was assigned the master lease and
      a
      5-year lease option was exercised which extends the master lease until June
      2013.




Employment
      agreements




Effective
      January 1, 2006, each of Howard B. Katz, Solon L. Kandel, Vincent Colangelo,
      and
      Stephen W. Weiss entered into an employment agreement with us. The employment
      agreement with Mr. Katz was extended on December 31, 2007 to a term expiring
      on
      December 31, 2010. The employment agreement with Mr. Colangelo extends for
      a
      term expiring on December 31, 2009. The employment agreements with Messrs.
      Kandel and Weiss expired on December 31, 2007 and are being extended on a
      month-to-month basis. Pursuant to these employment agreements, Mr. Katz has
      agreed to devote substantially all of his time, attention and ability, and
      Messrs. Kandel, Colangelo and Weiss have each agreed to devote all of their
      time, attention and ability, to our business as our Chief Executive Officer,
      President, Chief Financial Officer, Chief Operating Officer, respectively.
      The
      employment agreements provide that Messrs. Katz, Kandel, Colangelo, and Weiss
      will receive a base salary during calendar year 2007 at an annual rate of
      $225,000, $200,000, $175,000, and $165,000 for services rendered in such
      positions. Mr. Kandel agreed to defer payment on his entire 2007 annual base
      salary increase of $25,000 and Mr. Colangelo agreed to defer payment of $15,000
      of his 2007 annual base salary increase of $25,000. During calendar years 2008
      and 2009 under the employment agreements for Messrs. Katz and Colangelo, their
      annual base salaries will be increased to $300,000 and $330,000, respectively,
      for Mr. Katz, and $200,000 and $220,000, respectively, for Mr. Colangelo. During
      calendar years 2010, under the employment agreement for Mr. Katz, the annual
      base salary will be increased to $363,000. In addition, each executive may
      be
      entitled to receive, at the sole discretion of our board of directors, cash
      bonuses based on the executive meeting and exceeding performance goals. The
      cash
      bonuses range from up to 25% of the executive’s annual base salary for Mr.
      Weiss, up to 100% of the executive’s annual base salary for Messrs. Kandel and
      Colangelo, and up to 150% of the executive’s annual base salary for Mr. Katz.
      The cash bonuses for Messrs. Katz, Kandel and Colangelo include a minimum bonus
      due of 40%, 25% and 25% respectively. Messrs. Katz, Kandel, and Colangelo have
      agreed to defer payment on their 2007 bonuses, to which they were entitled.
      Each
      of our executive officers is entitled to participate in our 2005 Incentive
      Compensation Plan. We have also agreed to pay or reimburse each executive
      officer up to a specified monthly amount for the business use of his or her
      personal car and cell phone. The employment agreements provide for termination
      by us upon death or disability (defined as 90 aggregate days of incapacity
      during any 365-consecutive day period) of the executive or upon conviction
      of a
      felony or any crime involving moral turpitude, or willful and material
      malfeasance, dishonesty or habitual drug or alcohol abuse by the executive,
      related to or affecting the performance of his duties. In the event any of
      the
      employment agreements are terminated by us without cause, such executive will
      be
      entitled to compensation for the balance of the term of his employment agreement
      or, if longer, for three years in the case of Mr. Katz and two years in the
      case
      of Mr. Colangelo. Messrs. Katz, Kandel and Colangelo also have the right, if
      terminated without cause, to accelerate the vesting of any stock options or
      other awards granted under our 2005 Incentive Compensation Plan. We intend
      to
      obtain commitments for key-man life insurance policies for our benefit on the
      lives of Messrs. Katz, Kandel and Colangelo equal to three times their
      respective annual base salary. In addition to the key-man life insurance
      policies, we have agreed to maintain throughout the term of each employment
      agreement 15-year term life insurance policies on the lives of Messrs. Katz,
      Kandel and Colangelo, with benefits payable to their designated beneficiaries,
      and to pay all premiums in connection with those policies.




F-27


MDWERKS,
        INC. AND SUBSIDIARIES
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 **December
        31, 2007**
 NOTE
          8 — COMMITMENTS (continued)




In
      the
      event of a change of control of our company, Messrs. Katz and Colangelo may
      terminate their employment with us within six months after such event and will
      be entitled to continue to be paid pursuant to the terms of their respective
      employment agreements.




The
      employment agreements also contain covenants (a) restricting the executive
      from
      engaging in any activities competitive with our business during the terms of
      such employment agreements and one year thereafter, (b) prohibiting the
      executive from disclosure of confidential information regarding us at any time
      and (c) confirming that all intellectual property developed by the executive
      and
      relating to our business constitutes our sole and exclusive
      property.




F-28




**MDWERKS,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




NOTE
      9 — SUBSEQUENT
      EVENTS




On
      January 17, 2008 we filed an amended and restated Certificate of Designations
      (as amended and restated, the “Certificate of Designations”) with the Secretary
      of State of the State of Delaware, to, among other things, increase the number
      of authorized shares of Series B Preferred Stock from 250 shares to 325
      shares.




On
      January 18, 2008, we received net proceeds of $500,000 in connection with a
      financing provided by Vicis. In connection with the financing, we and Vicis
      entered into a Securities Purchase Agreement, dated January 18, 2008 (the
“January Securities Purchase Agreement”), pursuant to which we issued 50 shares
      of Series B Preferred Stock, a seven year Series F Warrant to purchase 375,000
      shares of our common stock at a price of $2.25 per share and a seven year Series
      G Warrant to purchase 250,000 shares of our common stock a price of $2.50 per
      share.




The
      Securities Purchase Agreement, dated January 18, 2008, by and between Vicis
      and
      us (the “January Securities Purchase Agreement”) provides that our obligations
      to Vicis under the Series B Preferred Stock, the January Securities Purchase
      Agreement and the various transaction documents entered into in connection
      with
      the January Securities Purchase Agreement (the “January Transaction Documents”)
      are secured by a lien on all of our assets pursuant to the Security Agreement,
      dated September 28, 2007, between us and Vicis




The
      January Securities Purchase Agreement further provides that our obligations
      under the Series B Preferred Stock, the January Securities Purchase Agreement
      and the January Transaction Documents are guaranteed by each of our subsidiaries
      pursuant to the terms of the Guaranty Agreements, dated September 28, 2007,
      between Vicis and each of our subsidiaries in September 2007.




The
      January Securities Purchase Agreement also provides that the guaranty
      obligations of our subsidiaries in connection with the January Securities
      Purchase Agreement and the January Transaction Documents are secured by the
      liens on all of the assets of each our subsidiaries, except for the accounts
      receivable and certain contract rights of Xeni Financial Services, Corp.,
      created pursuant to the Security Agreements, previously entered into by and
      between our subsidiaries and Vicis in September 2007.




In
      connection with the sale of the Series B Preferred Stock, we amended the
      Registration Rights Agreement, previously entered into, by and between Vicis
      and
      us in September 2007 pursuant to which we agreed, in addition to registering
      the
      securities previously covered by such Registration Rights Agreement, to register
      for resale, the shares of our common stock into which the Series B Preferred
      Stock sold pursuant to the January Securities Purchase Agreement is convertible
      and the shares of our common stock for which the Series F Warrants and the
      Series G Warrants sold pursuant to the January Securities Purchase Agreement
      are
      exercisable.




On
      March
      1, 2008, the Company and Gottbetter amended the Senior Notes to extend the
      maturity date of the Senior Notes to January 1, 2011 and to delay principal
      payments until March 1, 2008, if the Company is able to secure additional
      financing by March 31, 2008. If the Company is unable to secure additional
      financing by March 31, 2008, the amendment to the Senior Notes will be void
      and
      of no force and effect. In consideration of the amendment to the Senior Notes,
      if the Company is able to obtain at least $5,000,000 in additional financing,
      MDwerks, Inc. will issue to Gottbetter 2,000,000 warrants at an exercise price
      to be determined at the time of the financing. We are in discussions with Vicis
      regarding the provision of additional financing.




F-29