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UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-KSB

(MarkOne)

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|  |   | ANNUALREPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE OF1934 |

For the fiscal year ended December31,  2005

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|  |   | TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE OF1934 |

For the transition period from                     to                    

Commission file number333-118155

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MDWERKS, INC.

(Name of Small Business Issuer in ItsCharter)

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| Delaware                                                     |  | 33-1095411                         |
| (Stateor Other Jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentificationNo.) |
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Windolph Center, Suite I1020N.W. 6th StreetDeerfield Beach, FL 33442

(Address of Principal Executive Offices andZip Code)

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Issuer’sTelephone Number: (954) 834-0352

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

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

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

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

Revenues during the fiscal yearended December  31,  2005 were $57,824.00.

Theaggregate market value of the issuer’s common equity held bynon-affiliates, as of March  24,  2006 was$13,555,729.00.

As of March  24,  2006, therewere 11,732,415 shares of the issuer’s common equityoutstanding.

Documents incorporated by reference:None

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

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TABLE OFCONTENTS

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|     |  |                                                                               |    | PAGE   |
| PART I   |  |                                                                               | 1  |   |
| ITEM1.   |  | DESCRIPTIONOF BUSINESS                                                             |    |   | 1  |   |
| ITEM2.   |  | PROPERTY                                                                           |    |   | 32 |   |
| ITEM 3.  |  | LEGALPROCEEDINGS                                                                   |    |   | 32 |   |
| ITEM4.   |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS                                 |    |   | 32 |   |
| PARTII   |  |                                                                               | 33 |   |
| ITEM5.   |  | MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDERMATTERS                         |    |   | 33 |   |
| ITEM6.   |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OFOPERATION                           |    |   | 36 |   |
| ITEM7    |  | FINANCIAL STATEMENTS                                                               |    |   | 40 |   |
| ITEM 8   |  | CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE |    |   | 40 |   |
| ITEM8A   |  | CONTROLS AND PROCEDURES                                                            |    |   | 41 |   |
| ITEM 8B  |  | OTHERINFORMATION                                                                   |    |   | 42 |   |
| PART III |  |                                                                               | 42 |   |
| ITEM9.   |  | DIRECTORS AND EXECUTIVE OFFICERS                                                   |    |   | 42 |   |
| ITEM10.  |  | EXECUTIVE COMPENSATION                                                             |    |   | 47 |   |
| ITEM 11. |  | SECURITY OWNERSHIPOF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      |    |   | 50 |   |
| ITEM 12. |  | CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS                                      |    |   | 50 |   |
| ITEM 13  |  | EXHIBITS                                                                           |    |   | 51 |   |
| ITEM14   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                             |    |   | 53 |   |
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PARTI

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| ITEM 1.  | DESCRIPTION OF BUSINESS |

General

Unless otherwise indicated, all references to‘‘we’’, ‘‘us’’,‘‘our’’, the‘‘Company’’ and similar terms, as well asreferences to the ‘‘Registrant’’ in thisprospectus, refer to MDwerks, Inc. (including itssubsidiaries).

On November  16,  2005, wecompleted a reverse merger transaction, in which our wholly-ownedsubsidiary, MDwerks Acquisition Corp., was merged with and into MDwerksGlobal Holdings, Inc., a Florida corporation (the‘‘Merger’’). MDwerks Global Holdings, Inc. isengaged in the business of electronic insurance claims processing,billing and coding, and advance funding for healthcare providers basedupon receivables owed from third party payors such as insurancecompanies. The Merger was consummated pursuant to an Agreement ofMerger and Plan of Reorganization, dated October  12,  2005.As a result of the Merger, MDwerks Global Holdings, Inc. became ourwholly-owned subsidiary, with MDwerks Global Holdings Inc.’sformer security holders acquiring a majority of our outstanding sharesof common stock. In connection with the closing of the Merger, wechanged our corporate name from ‘‘Western Exploration,Inc.’’ to ‘‘MDwerks, Inc.’’ andsucceeded to the business of MDwerks Global Holdings, Inc. as our soleline of business under the direction of MDwerks Global Holdings,Inc.’s management.

We operate through three wholly ownedsubsidiaries (the ‘‘Xeni Companies’’) of ourwholly owned subsidiary MDwerks Global Holdings, Inc.: Xeni MedicalSystems, Inc. (‘‘Xeni Systems’’), XeniFinancial Services, Corporation (‘‘XeniFinancial’’) and Xeni Medical Billing, Corp.(‘‘Xeni Billing’’).

XeniSystems

Xeni Systems offers a comprehensive Web-basedpackage of electronic claims solutions to the healthcare providerindustry through Internet access to our MDwerksTM suite ofproprietary products and services (the ‘‘MDwerksSystem’’). The MDwerks System permits doctors, hospitals,diagnostic services and other healthcare providers and their vendors(‘‘Provider(s)’’) to significantly improvedaily insurance claims transaction processing, administration andmanagement. The MDwerks System tools permit Providers to significantlyimprove patient insurance coverage eligibility determinations andinsurance claims creation, correction, pre-certification, referralauthorization, validation, submission, management and remittanceprocessing.

The MDwerks System receives and analyzes claims forpayment submitted by Providers and identifies deficiencies or errors insuch claims, if any. The MDwerks System helps Providers managecontracts with payors such as insurance companies and checks claimsagainst contract pricing and rules. Providers can use MDwerks’explanations, prompts and editing information to correct problems withclaims prior to submitting them to payors. The MDwerks System thensubmits the corrected claims to the payor.

The MDwerks Systemalso can be used to qualify a Provider for short term revolving line ofcredit advances on claims to be submitted to payors. Through its‘‘FUNDwerksTM’’ solution, the MDwerksSystem enables Providers to share with financial institutions the sameprompt or daily (‘‘real time’’) status andvalue of claims simultaneously, as it receives them, stripped of anyprivate patient information. Since the MDwerks System analyzes claimvalues daily against actual Provider/payor contracts, as well as otherpayor payment tables, the Provider and lenders receive substantiallymore accurate payment and accounting information. This informationallows lenders to value Provider’s claims as collateral onsignificantly better borrowing terms than might otherwise beavailable.

Providers also benefit from related features such asautomated real time communication with us, insurance payors and banks,as well as automated and/or batched functions for claims processing,remittance, payment verification, posting, settlement, reporting andaccounting information, tracking 

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and auditing of claims, as well as remittance,reconciliation and payment verification. All transactions are designedto comply with the Health Insurance Portability and Accountability Actof 1996 (‘‘HIPAA’’).

XeniFinancial

Xeni Financial offers loans to Providers securedby Provider claims processed through the MDwerks System. A Provider mayborrow from Xeni Financial by subscribing to Xeni Systems’FUNDwerks solutions and separately agreeing on loan terms with XeniFinancial. Xeni Financial then subscribes for Xeni Systems’online ‘‘FUND-XTM’’ solutions services tosupport lending to that particular borrower.

Xeni Financialelectronically and automatically manages the loan and movement of fundsthrough linked bank accounts administered by Xeni Systems. Typically,the Provider can receive a revolving line of credit on designatedclaims within 1-3 business days of valuation and submission of suchclaims through MDwerks to the payor.

Xeni Billing

Like Xeni Financial, Xeni Billing is a strategic marketing associateto Xeni Systems. Since many of the features and benefits Providers needor expect from billing services are facilitated by MDwerks, XeniBilling accommodates a Provider’s wish to replace its existingbilling process altogether.

Xeni Billing manages claims, whichmay include performing patient billing, collections and/or managingthird party appeals services on the Provider’s behalf. TheProvider must subscribe to Xeni Systems’ MDwerks System forCLAIMwerksTM and may also elect FUNDwerks solutions (collectivelycalled ‘‘CONTROLwerksTM’’). The Providerthen enters into an agreement with Xeni Billing for BILLwerksTMclaims management services. At the same time, Xeni Billing subscribesto the MDwerks System for the FUND-X solution, empowering Xeni Billingto administer and facilitate its management of the claims. The combinedpackage of services offered by Xeni Systems and Xeni Billing called‘‘PRACTICEwerksTM’’ is designed toleverage MDwerks’ features and benefits into the entire billingprocess.

MDwerks Global Holdings, Inc.

Ourwholly-owned subsidiary, MDwerks Global Holdings, Inc., owns all of theoutstanding stock of each of the Xeni Companies. We anticipate that wewill merge MDwerks Global Holdings, Inc. with and into the Company, atwhich point the Xeni Companies will become directly held wholly-ownedsubsidiaries of the Company and MDwerks Global Holdings, Inc. willcease to exist.

MDwerks, Inc.

Our mission is toown, support and develop companies that offer medical claimstransaction processing, management and financing solutions to Providersand their business associates.

We provide strategic support tothe Xeni Companies by consolidating critical functions such asmarketing, sales and financial officer functions. We also coordinatesstrategic objectives across subsidiaries, maintain uniform standards ofmanagement and operations and we leverage purchasing and financingpower.

We anticipate pursuing certain acquisition opportunitiesthat would enhance the growth of the Xeni Companies, market share andplans. Acquisitions of billing companies would permit Xeni Billing andXeni Systems to leverage their coed services into ‘‘oldline’’ billing operations, which may operate with intensivereliance on labor and lack many electronic and automated processes.Implementation of the combined services of Xeni Systems and XeniBilling in such companies may improve their efficiencies and reducecosts of operation, for enhanced profitability. Further, Xeni Systemswould be able to market its FUNDwerks solution and Xeni Financial couldmarket its revolving loans to the clients of an acquired billingcompany.

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We expect to grow and position XeniFinancial’s lending products for strategic opportunities withfinancial institutions, such as national banks or financial servicescompanies. Management believes financial institutions are seekingentrée to the Provider lending market, both for our productsolutions and as a means of selling their other products and services.Core products could be marketed to the Provider, such as corporatecredit cards for drawing on the revolving line without personal creditguarantees, but also asset and wealth management products and services,such as trusts, tax shelters, insurance and estate planning products,and wealth building vehicles. We believe that our family of solutionsand services function as a platform conducive to an asset protectionand wealth planning program.

Private Placement Transaction

In connection with the Merger, we completed the closing of a privateoffering of our securities in which, through December  31,2005, we sold an aggregate of approximately 64 Units toaccredited investors in the Private Placement, pursuant to the terms ofa Confidential Private Placement Memorandum dated June  13,2005, as supplemented. Each Unit consists of 10,000 shares of CommonStock and a warrant to purchase 10,000 shares of Common Stock. Eachwarrant entitles the holder to purchase 10,000 shares of Common Stockfor $2.50 per share. The Units were offered by Brookshire SecuritiesCorporation, as placement agent, pursuant to a placement agentagreement under which the placement agent, in addition to a percentageof gross proceeds of the Private Placement, received 96,000 shares ofCommon Stock and a warrant to purchase up to an aggregate of 64,000shares of Common Stock. We realized gross proceeds from the PrivatePlacement of $1,600,000, before payment of commissions andexpenses.

Pursuant to the Private Placement Subscriptiondocuments, on March  9,  2006, we filed a registrationstatement with the Securities and Exchange Commission to register theshares and warrants held by the selling security holders for resale. Inthe event that we fail to respond to SEC comments within thirty (30)business days, the total number of shares of common stock covered bythe registration statement for each investor in the private placementshall be increased by two percent (2%) per month for each month(or portion thereof) that a response to the comments to theregistration statement has not been submitted to the SEC, except thatthe aggregate increases in shares of common stock will in no eventexceed twenty (20%) percent. We have agreed to use ourcommercially reasonable best efforts to have the registration statementdeclared effective by the SEC as soon as possible after the initialfiling date and to maintain the effectiveness of the registrationstatement from the effective date through and until the earlier of twoyears following December  31,  2005 (which was thetermination date of the private placement) and such time as exemptsales pursuant to Rule144(k) under the Securities Act of 1933(‘‘Rule 144(k)’’) may be permitted forpurchasers of Units.

Corporate Information

Our commonstock is quoted on the Over-the-Counter Bulletin Board under the symbol‘‘MDWK.OB’’.

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

MDwerks GlobalHoldings, Inc. is a corporation organized under the laws of the Stateof Florida, originally formed on October  23,  2003.

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

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

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

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Our principal executive office is locatedat Windolph Center, Suite I 1020 NW 6th Street, Deerfield Beach,Florida 33442 and our telephone number is (954) 834-0352. Our websiteaddress is www.mdwerks.com. Information on our website is notpart of this Memorandum and should not be relied upon with regard tothis Offering.

Business

We offer healthcare providersthe following medical insurance claims processing, management andfinancing solutions:

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|  | •  | Increased officeefficiencies/lower costs; |

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|  | •  | Reduced workload; |

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|  | •  | Improved claims accuracy beforesubmission to, and increased acceptance by, third party payors; |

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|  | •  | Reduced cycle time forremittance; |

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|  | •  | Improved cashmanagement; |

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|  | •  | Increasedoversight and control; |

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|  | •  | Leveraged receivables throughcompetitive short term financing arrangements; |

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|  | •  | Improved informationmanagement, financial security and Provider regulatory compliance; |

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

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|  | •  | A platform for leveragingclaims towards improved asset protection and wealth managementopportunities. |

Claims Management Services

Through XeniSystems, we provide solutions and services that improve a healthcareprovider’s ability to process and manage claims forreimbursement from third party payors by consolidating the process(including clearinghouse, contract management and remittancefunctions). Xeni Systems integrates transactions involving insuranceclaims by providing a single interface for the healthcare provider, thepayor (such as an insurance company) and the lender (when thehealthcare provider elects to take advantage of receivablesfinancing).

Through Xeni Systems’ FUNDwerksTM andFUND-X solutions, providers and third party lenders can use us toestablish the value of insurance claims, assess risk of nonpayment andaccess real time reports on the status of loans.

Xeni Systemscollects transaction fees from healthcare providers for: the analysis,automated, real time and/or batched processing, electronic submission,and reporting of claim information; management of healthcare providercontracts for pricing and rules; and the electronic remittance ofpayments. Fees may also be generated from third party lenders for thevaluation of processed claims that are used as collateral, as well asadministrative tasks related to the disbursement of funds. Fees mayalso be collected from clearinghouses and insurance companies forsubmitting more accurate claims, once certain volume levels areachieved. One-time implementation fees are collected for initial set-upand training.

Additionally, through Xeni Systems, we may offersolutions for back-audit billing, appeals of denied claims and assetand wealth management services through third party sources. We wouldexpect to receive referral or administrative handling fees for theseservices.

Billing Services

Through Xeni Billing, wehelp healthcare providers automate the billing process and make it moreefficient. Xeni Billing also offers patient billing, collections andappeals services. Xeni Billing 

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manages the billing process by leveraging thesolutions and services offered through Xeni Systems. Since Xeni Billingis designed to operate in an integrated fashion with the solutions andservices offered by Xeni Systems, there are fewer manual and paperfunctions to be performed in the combined claims processing/billingsolution offered by Xeni Systems and Xeni Billing. This can enhance ahealthcare provider’s claims related operations and controlseven more than using the stand-alone solutions offered by XeniSystems.

Xeni Billing charges Providers (or as a subcontractorof Xeni Systems) fees as a percentage of collected claims. Xeni Billingalso shares fees (as a channel associate) with Xeni Systems forsupporting its claims process and information management. Additionally,Xeni Billing can collect one-time set-up fees, appeals and third partyappeals work fees and any consulting fees for customization or supportof the healthcare provider outside the scope of services. Finally, XeniBilling may perform back-audit services in return for a share of claimsrevenue recovered.

Lending Services

Through XeniFinancial, we lend money to healthcare providers on a short term,revolving line of credit and occasionally on a term loan basis. Theloans are secured by claims processed by Xeni  Systems. Like XeniBilling, Xeni  Financial leverages the solutions and servicesoffered by Xeni  Systems to value the claims, score risk, documentand track claims payment status, verify remittance and sweep funds tothe appropriate accounts with electronic and automated and/or batchedprocesses. Xeni Financial is able to lend at attractive rates andterms, since it has not had to invest significant capital to develop ormake a major hardware and software purchase of a system to make loanssecured by receivables. It also does not need to maintain a largeworkforce as it can manage many of its business processes through thesolutions and services offered by Xeni Systems. Xeni Financial can lendto healthcare providers on the merit of the receivables and, unlikefactors (lenders who purchase Provider claims outright at a steepdiscount and high effective interest rates), can even lend on Medicareclaims.

Consulting Services

Although we provide‘‘off-the-shelf’’ solutions, we also can offerback audits on selective electronic claims. Healthcare providers cantake advantage of customized and premium enhancements through our thirdparty associates, which may include medical billing services.Consulting services are also available to enhance healthcare providerpractices or business operations.

Market for Our Solutions andServices

Today's health care providers face seriouschallenges in claims processing, as well as in getting correct andprompt claims remittances from payors. Claims must be preparedgathering data from the front office to the back, with processing oftenoccurring at different times and locations for each procedure. Manyhealthcare providers’ current billing system requires theperformance of different steps by different third party sources. Claimscan move among the healthcare provider’s internal staff, througha practice management system and across multiple offices, to billing,editing engines, clearinghouse, contract management, banking and otherresources.

Managed care and regulatory compliance for patientinformation security and privacy require complex data management.Claims may be processed on the payor end through out-of-network claimsadministrators, re-pricing organizations, third party administrators,managed care organizations, independent physician associations, andpreferred provider organizations. Further, healthcare providers facecontinuing pressure from payors to accept lower fees on changingdefinitions of covered claims, with variations in customary remittancevalues. At the same time, payors require precise documentation andjustification for covered claims.

Claims may be rejected for avariety of reasons including medical necessity, eligibility, codingerrors, tardiness, deductibles, referrals, pre-certifications andimproper documentation. Lack of access to basic, but important, claiminformation and the lack of real-time data and feedback may waste

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office hours and affect reimbursement.Repetitive paperwork and phone conversations dealing with disputes,errors and rejections may be typical occurrences in theProvider’s office. Additionally, the failure, or inability, tomatch claims against existing contracts, when added to these otherfactors, can make it extremely difficult to determine how much and whenthe healthcare provider will be paid.

Management of the statusof claims and valuation, remittance and validation of proper paymentand disbursement requires detailed real time information. If claims arenot being compared to contracts in real time, and if robust trackingand auditing mechanisms are not in place, then the availability andtransparency of data cannot be optimized. As a result, the healthcareprovider’s financial managers may only estimate results, withvarying degrees of volatility, cash flow predictability andaccuracy.

The challenges faced in connection with claimsmanagement can result in lost revenue, volatile and unsatisfactory cashflow, inaccurate reporting, inefficient management of operations andattendant increases in office workload, expenses and costs ofborrowing. In the past, healthcare providers have been required to usea patchwork of internal and third party resources to address theseproblems, with mixed results. For example, billing and practicemanagement systems attempt to address the claims processing marketpredominantly by selling proprietary hardware and software products(and  maintenance and upgrades or customization), with variousdegrees of success in features and benefits. They may or may notgenerate HIPAA compliant electronic forms from their systems, and ifthey do, such forms may be mapped and formatted in different ways,leading to potential errors and problems with acceptance andpayment.

Claims-related management challenges have also greatlyimpacted the borrowing abilities of healthcare providers. Healthcareproviders typically borrow by factoring their receivables arising outof non-Medicare insurance claims, personally guarantying a loan withtheir own credit, bundling large provider claims for sale to wealthyprivate investors or taking an asset-based loan against claimsreceivables at a significant discount, reserves and expense. Lenderstypically have not been able to offer short term, revolving creditlines on receivables arising out of insurance claims, because of theexisting difficulty in qualifying them as low risk, high quality, andcommoditized collateral. Lenders remain concerned about safely andaccurately assessing either the true value or the payment riskassociated with any given claim or group of claims. Any solution tothis problem is further complicated by the lender’s resistanceto risking the purchase of an inadequate or expensive customizedsolution to serve this market.

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

We believe our integrated suite of solutionsand services are the first to market offering healthcare providers andtheir lenders comprehensive, cost efficient and superior claimsprocessing and management solutions over the Internet. Our system canbecome a healthcare provider’s single source platform forintegrating claims management and funding functions. Our solutions andservices quickly improve claims accuracy, valuation and remittancesuccess, enable outsourced payor contract management, facilitate promptfinancing of claims, and produce superior cash and informationmanagement. Our technology also offers benefits to small healthcareprovider practices with limited resources and staff, and allows manyfinancial institutions to lend to healthcare providers on qualifiedreceivables, at risk and cost factors not previously available. Withour products and services, healthcare providers have the ability toleverage an ‘‘end-to-end’’ claims managementsolution.

By combining automated, batched and real timefunctionality into a proprietary ‘‘end to end’’claims management and funding system, we believe that our solutions andservices offer superior value and competitive advantages, including thefollowing:

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|  | •  | ReducedWorkload:    Healthcare providers can reduce and/or eliminatemanual, labor intensive, repetitive and inefficient functions. Thelevel of reduction depends on many factors, including the type ofpractice management and billing systems in use, number of staff membersand their training and skills in operating existing systems, practicemix and contractual relationships with payors, and how paper intensiveor electronic their existing process may be. |

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|  | •  | ‘‘Pay As YouGo’’:    Fees charges to healthcare providersfor processing insurance claims typically are fixed monthly orcalculated as a percentage of each claim’s contract valuation(or predicted value based on history and regional Medicare tables forreference, for example if a healthcare provider is out-of-network). Theuse of our solutions and services doesn’t require high up-frontinvestment, hardware and software purchases, or payment based on numberof claims submitted or billed claims. |

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|  | •  | Superior CashManagement:    In as little as 24-72 hours, healthcareproviders can borrow funds from us at competitive short-term ratesagainst a determined value of submitted claims, without factoring(selling) them. Healthcare providers and lenders can choose amounts orcategories of claims for funding, including Medicare claims. Financialinstitutions have an automated risk profile and lending processavailable to them on a daily claim-by-claim basis, which is customizedto their own lending parameters, without the necessity of building newlending tools. |

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|  | •  | Increased Efficiency/LowerCosts:    Claims that we process are automatically‘‘flagged’’ for potential errors as they arereceived, based on a combination of proprietary technology and use ofthe same type of rules engine as many insurance companies. Healthcareproviders can edit the flagged claim using simple prompts, so a‘‘cleaner’’ claim can be submitted to thepayor. Claim values are determined daily against actual contracts andpayment tables, and are adjusted for history and plan changes.Healthcare providers can know almost exactly how much they will getpaid on claims. Also, multiple healthcare provider locations can beconnected to capture information early and more accurately. |

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|  | •  | Superior InformationManagement:    Healthcare providers have access to dailyreports on claims status, their expected (not just billed) value, andtools for tracking, auditing and confirming claims remittance,verification and payment. |

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|  | •  | Web-based, User FriendlyTechnology:    The solutions and services that we offer can beaccessed over the Internet using standard Microsoft Explorer software(or most other browser software) on standard Windows desktop hardwareand software. The systems are designed to be used ‘‘off theshelf’’ and to support large numbers of users. They can beeasily expanded to accommodate future growth. |

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|  | •  | IntegratedFunctions:    Healthcare providers can integrate andconsolidate, through a single source, multiple claims processing andmanagement functions within their offices and across third partyvendors, including insurance companies, banks and clearinghouses. |

We believe that the technology that we deploy offers the followingcompetitive advantages:

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|  | •  | First InMarketplace:    We believe the we are one of first applicationservice providers to offer a comprehensive bundled service thatprovides web-based insurance claims management, billing services andlending services (for both borrowers and lenders). This creates aunique, cost effective advantage in capturing clients and developingbrand loyalty. |

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|  | •  | Barriersto Entry:    We believe potential competitorsface significant barriers to duplicating what we have to offer,including the following: |

Process:    Aggregating and integratinghealthcare providers, insurance companies and financial institutions ina legally compliant manner requires a very complex businessprocess.

Cost to Develop:    Matchingfeatures and benefits of our systems would require substantialinvestment and substantial time and technical resources.

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Extensive/Proprietary FeatureSet:    We offer an extensive and unique feature set.

Complex to Build:    The solutions and servicesthat we offer were developed as a multi-tiered high availabilitysolution, requiring substantial software engineering expertise.Solutions were derived from expertise in insurance, banking, medical,legal and other industries, requiring more than just technicalproduction.

Extensive ComplianceIssues:    We operate amidst a highly regulated environment. Wemust operate in accordance with HIPAA, the Financial Holding CompanyAct and the Gramm Leach Bliley Act. Requirements for handling patientinformation and claims securely are complex and may serve as a majordevelopment challenge to some competitors.

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|  | •  | Features Appeal toLenders:    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 andsoftware from us. At the same time, asset based loan assessments can beperformed against actual claims value and status on a daily basis. |

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|  | •  | Contract management iscritical to maximizing reimbursement:    Complying with termsfor getting paid on a claim, accurately valuing the claim andmonitoring pricing for each contract creates more reliable receivablessecurity for desired loans. |

|  |              |                                                                                                                                                                                                                                                                                                                           |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Superior ClaimsEngine:    We aggregate the entire insurance carrier networkthrough the use of a combination of third party and proprietary claimsengine functions. This enables healthcare providers to have access toall insurance carriers for electronic claims handling through a singlesolution. |

|  |              |                                                                                                                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | ModuleIndependence:    Many components of our solutions and servicescan be utilized independently of each other, making differenttechnologies rapidly available, and allowing us to adapt quickly to newclient requests. |

Industry Analysis

According to theCenters for Medicare & Medicaid Services(‘‘CMS’’), the healthcare industry is expectedto reach $2.4  trillion over the next three years as follows:

The Office of the Actuary atthe CMS produces the National Healthcare expenditure projections; theyare based on historical national health expenditures and are a modelframework that 

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incorporates actuarial, econometric, andjudgmental factors. National health expenditures are projected to reach$2.9  trillion in 2011, growing at a mean annual rate of7.3%. During this period, health spending is expected to grow2.5% per year faster than nominal gross domestic product (GDP),so that by 2011 it will constitute approximately 17.0% of GDPcompared to its 2000 level of 13.2%. The general term‘‘Health Care’’ encompasses a multitude ofproducts and services. The $1.92  trillion health expenditures in2005 are projected to be distributed by type of expenditure as follows(source:  CMS):

Theprojected $1.92  trillion health expenditures in 2005 are expectedto be distributed by source of funds as follows (source: CMS): Privatehealth insurance: $707.0  billion, Federal: $605.0  billion,out-of-pocket payments: $260.9  billion, State and local:$259.3  billion, and Other private funds: $88.7  billion.

According to the Medical Group Management Association(‘‘MGMA’’), the American Medical Association(‘‘AMA’’), and Modern Healthcare (February 2,2004), a total of 226,231 doctors work in 19,747 physician groups inthe U.S with medical claims revenue projections for 2005 in excess of$412.0  billion dollars, and revenue forecasts for 2008 increasingto $507.1  billion.

MarketNeeds

Technology has provided increased efficiency, especiallyin the delivery of healthcare. However, one of the most troubled areasis the medical claims billing, processing, and payment area. This

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segment continues to suffer errors andinefficiencies, as well as large amounts of paper transactions andpiecemeal solutions, leaving a significant claims management burden inthe provider’s back office.

Administration costs consumeup to 33% of total healthcare spending in the U.S., according totwo recent new studies. In a study published in the August21,  2003 New England Journal of Medicine, Harvard MedicalSchool reported that administrative costs in the U.S. healthcare system– including insurers, providers, employers’ benefitsprograms, and other segments of the system – equaled $294.3billion in 1999, or $1,059 per American. A separate study, released byPublic Citizen and conducted in conjunction with Harvard MedicalSchool, estimated that $399.4  billion was spent on the U.S.healthcare bureaucracy in 2003.

Claims processing is a chiefcontributor, since the vast majority of claim transactions are eitherpaper based or manually converted to electronic format. Medicine isunlike many other businesses in that the value of the service isdetermined retrospectively. This fact, combined with a paper and manualwork dependent system, results in significant inefficiencies in theclaims filing and payment and reconciliation process. Our systemsgreatly reduce these costs by automating and replacing many manuallabor intensive paper-ridden processes with electronic processes.Medical claims processed in the United States escalated from just5  billion in 1990 to more than 10  billion at the turn ofthe 21st  century and this figure has been steadily increasing.According to the AMA, the average number of claims generated per doctoris 440 claims per month.

Payors realize the importance of movingclaim transactions to electronic media through the Internet. From thepayors’ perspective, administrative costs could be substantiallylowered if claims were submitted electronically and were accurateenough to be adjudicated by a computer system without any requirementfor manual intervention and/or resubmission. Payors could also saveadministrative costs by implementing electronic payment systems,including electronic explanation of payments.

HIPAA requirespayors to move to electronic claim transactions and establish formatstandards. Although payors continue to make significant technologyinvestments to comply, as well as for their own e-commerce objectives,Providers are behind in technical expertise and system resourcesnecessary to effect change, and are burdened with paying for systemsand processes to become compliant. As HIPAA compliance is enforceable,as of January  2005, by fines, the pressure for secure andcompliant solutions has become greater than ever.

HIPAA hascompelled health plans, clearing houses and other healthcare providersto move to a uniform electronic format. Specifically, HIPAA requiresstandard electronic formats for the following transactions:

|  |              |                                                       |
|--|--------------|-------------------------------------------------------|
|  | •  | Healthcare claims or equivalentencounter information; |

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | Healthcare payment andremittance advice; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | Coordination of benefits whenseparate plans have differing payment responsibilities; |

|  |              |                                                                              |
|--|--------------|------------------------------------------------------------------------------|
|  | •  | Health claims status whenproviders inquire about claims they have submitted; |

|  |              |                                    |
|--|--------------|------------------------------------|
|  | •  | Plan enrollment anddis-enrollment; |

|  |              |                         |
|--|--------------|-------------------------|
|  | •  | Health planeligibility; |

|  |              |                              |
|--|--------------|------------------------------|
|  | •  | Health planpremium payments; |

|  |              |                                            |
|--|--------------|--------------------------------------------|
|  | •  | Referralcertifications and authorizations; |

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | First reports of injuries orillnesses; |

|  |              |                                                        |
|--|--------------|--------------------------------------------------------|
|  | •  | Health claimsattachments used to justify services; and |

|  |              |                                                                     |
|--|--------------|---------------------------------------------------------------------|
|  | •  | Other transactions the federalgovernment may specify in the future. |

The main reason forthe legislation is to make it easier for providers to switch fromtraditional paper claims submission and payment to standardizedelectronic claims submission and payment.

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We view this highly inefficient market asour primary opportunity. Our solutions and services not only cansignificantly decrease the cost of claims processing for both Providersand payors, but also create a new asset class, against which financialinstitutions can lend.

Market Strategy

We plan,initially, to sell to physician and clinical service group practices,hospitals, rehabilitation centers, nursing homes and certain relatedpractice vendors, including diagnostic testing companies, by usinginternal and external resources. Internal resources will consist mainlyof specialized sales executives with industry knowledge and/or aportfolio of contacts. External resources will consist primarily ofindependent sales representatives as well as channel associates such asvendors of practice management systems and medical industry specificsales groups such as office management consultants. These salesresources can leverage an existing customer base and contacts.

Our marketing is based on prioritizing potential subscribers bysize, location and density, need for our products and services anddistribution opportunities. Accordingly, we expect to focus our initialmarketing efforts in geographic areas such as California, Florida andNew York, which contain high concentrations ofprospective clients. Since part of our business involves management andreview of healthcare provider contracts with payors, and theircontracts tend to be similar by region, we believe that a concentrationof marketing efforts in dense areas will also reduce costs (forexample, by reducing processing of repetitive contract pricing andincreasing set-up efficiencies for field reps) as well as increasingrevenues.

Media Marketing

Our advertising strategyprioritizes spending to facilitate sales goals. We expect to utilizeinternal and external resources to develop advertising mediumsto open the appropriate sales opportunities, including thefollowing:

|  |              |                                  |
|--|--------------|----------------------------------|
|  | •  | Business-to-businessadvertising; |

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | Search engineand Web-site advertising; |

|  |              |                   |
|--|--------------|-------------------|
|  | •  | Direct marketing; |

|  |              |                                    |
|--|--------------|------------------------------------|
|  | •  | Magazine/trade journaladvertising; |

|  |              |                                                   |
|--|--------------|---------------------------------------------------|
|  | •  | Trade-showadvertising, slogans and headlines; and |

|  |              |                                                         |
|--|--------------|---------------------------------------------------------|
|  | •  | Media Advertising (television,radio, billboards, etc.). |

Non-Media Marketing

We expectto accelerate client acquisition by marketing through independent salesand affinity business representatives. Typical independent salesrepresentatives are already selling other products and services ofother companies to the same target market and may be looking for new,non-competitive lines to promote. Affinity business representativessell their own complimentary products or services, and may see oursolutions and services as a new product line, enhancement or up-sell totheir existing line. Affinity business representatives are expected toinclude vendors and suppliers of healthcare providers, such asclearinghouses, diagnostic services and medical supply companies, aswell as billing and practice management product sellers. Banks andinsurance companies can make excellent affinity businessrepresentatives, as we offer ‘‘off-the-shelf’’access to the lucrative healthcare provider community for a new lendingproduct, with tremendous up-selling opportunities, including byco-branding and return referrals to the other services that theyrepresent.

We believe independent representatives will offer usaccess to healthcare providers based on existing relationships, as wellas pre-determined variable costs of subscriber acquisition tied tosales or referral success. We believe we will rapidly gain fieldpresence, experienced personnel and credibility without investing in,and building, resources from the ground up. Multiple resources can beengaged in minimal time to acquire subscriber prospects.

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Sales Methods

Sales will begenerated by conventional methods, including direct sales calls, tradeshows, seminars and direct mail. Lead generation will include Internetpresence and third party referral sources. We also expect to obtainsales from strategic business alliances.

RevenueGeneration

We expect to generate revenues derived fromhealthcare providers, their payors and lenders, as well as strategicassociates which pay referral fees. Examples include the following:

CLAIMwerksTM Subscription Fees:    Healthcareproviders pay a monthly fee per doctor for access and use of the claimsprocessing and management solution.

FUNDwerksTMFees:    Healthcare providers are charged a percentage of thevalue of every claim that we process for administration of the process,including claims remittances through various accounts. When electing totake CLAIMwerks and FUNDwerks together, called CONTROLwerksTM,providers pay a percentage of the value of every claim processed, witha minimum monthly fee.

BILLwerksTMFees:    Healthcare providers are charged a percentage of thevalue of every claim that is collected by Xeni Billing for collections,appeals and patient letter billing services. When electing to takeCONTROLwerksTM and BILLwerksTM together, calledPRACTICEwerksTM, clients are charged CONTROLwerks and BILLwerksfees separately, as described above. BILLwerks billing functionality isa value added service to CLAIMwerks solutions and cannot be subscribedto separately.

Support Fees:    Healthcare providersand financial institutions will pay one-time setup and trainingfees.

Payor and Clearinghouse Fees:    We may be ableto charge payors and clearinghouses fees per clean claim submitted,based on achieving minimum volume requirements.

FinancialInstitution Fees:    Lenders pay basis points or other fees tous based on the value of each new claim loaned against, for accessingand using the lending tools that we offer.

Customization andConsulting Fees:    Clients will be charged for any non-standardclient support, consulting and any customization, such as forelectronic interfaces from the healthcare provider’s existinglegacy management system to our systems.

ReferralFees:    Lenders, billing companies and others are expected togenerate referral or administrative fees for cross or up selling oftheir products.

We also plan to generate additional revenuesthrough strategic acquisitions.

Competition

The marketfor medical claims-related products and services is generally highlycompetitive and subject to constant change as a result of new productintroductions, technological developments and market activities ofindustry participants. We anticipate competition from a number ofpublic and private companies involved in the business of medical claimstransaction processing and solutions, including editing engines, claimsmanagement and/or practice management systems, clearinghouses, andmedical receivable funding companies. We are also aware that othercompanies offer products and services with some features similar tothose that we offer. However, we are not aware of any directcompetition that offers in one system the full set of comprehensivefeatures that we offer, including our proprietary combination ofautomation, batching and real time functionality. Some of the varioustypes of services or systems that offer aspects found in suite ofproducts that we offer include the following:

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Claims Management /PracticeManagement Systems:    Claims management and/or practicemanagement systems are used by all forms of healthcare providers andmedical billing companies. They offer such services as eligibilityverification, claim scrubbing, claim status inquiry, claim submissionand remittance, comprehensive reporting, patient statement processingand patient scheduling, although we believe only a few offer the fullrange of services that we offer. |

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For example, AthenaHealth is aWeb-based practice management system offering subscribers all the aboveservices, including a sophisticated rules engine similar to ours, andcharges on a flat monthly fee per provider. AthenaHealth offersproducts and services that are similar to ours, however, it does notcurrently appear to manage contracts and compare claims against payorcontracts in real time, nor offer advance funding features.

Navicure is another Web-based system similar toAthenaHealth, which may also offer competitive products and services;however, unlike AthenaHealth and us, Navicure does not maintain orupdate its rules engine specific to each subscriber. Like AthenaHealth,Navicure does not currently appear to manage contracts, establishclaims value against the contract and payment rules, nor offer advancefunding features.

We believe other practice managementsystems are not currently Web-based and require the healthcare providerto purchase or subscribe to an array of‘‘add-on’’ modules to take advantage of acomplete package of services, whereas our services are packaged asbundled services offering end-to-end solutions. Additionally, thesecompetitors are marketed as an alternative to the healthcareprovider’s current billing system. Our products and services aredesigned to ‘‘plug in’’ to, and work inconjunction with, a healthcare provider’s existing system.

|  |              |                                                                                                                                                                                                                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Clearinghouses:    Aclearinghouse functions primarily as a conduit between a healthcareprovider and payor by electronically transmitting claims, or convertingclaims to paper format when necessary. Currently, there are severalhundred clearinghouses in operation and competition is fierce amongstthem. |

Although many clearinghouses boast about theirparticular ‘‘claim scrubbing’’ features, manyare limited to the most basic editing functions, namely validating forformat and completeness. Some clearinghouses claim to maintain oraccess payor specific databases. Such databases allow potential editingenhancements, but not analysis prior to submission. They also are notscrubbing against the specific contracts, rules and fee schedulesapplicable to the particular provider and particular claim. Oneadvantage clearinghouses do have is their ability to meet the specificdata requirements of designated payors. However, we offer this sameadvantage, by contracting directly with one or more clearinghouses. Theend result is that all the unique features offered by clearinghousesare passed on to our clients, eliminating the need for a healthcareprovider’s separate clearinghouse submission and expense.

One particular clearinghouse, Providerpay.com, claims itwill process a healthcare provider’s submissions againstpayor-specific edits, send the claim on to the payor, advance funds ona line of credit and deposit those funds into the provider’soperating account within two (2) business days. Providerpay also claimsto process the payment and deposit it to the provider’s account.The healthcare provider may access certain information regarding thehistory of submitted claims, including claims status.

Providerpay’s website states that Providerpay is acooperative effort of P5, Inc. and Zions  Bank, and involvestechnology that may be patent protected or patent pending. Providerpayis advertised as ‘‘complete paymentsolutions’’.

Providerpay appears to havesome Web-based tools for performing data-based edits, like otherclearinghouses, and then funding on a line of credit with Zions Bank.There is no indication the edits are based on actual payor contracts oran outsourced contract management system with automated, batched and/orreal time functionality. There is no indication of eligibility,pre-certification or referral analysis. The loan is not advertised as arevolving line of credit, but rather a more conventional type of loanas described below. Similarly, it is unclear Providerpayautomates/batches reconciliation, settlement and account management forall providers and payors, or posts critical information both within itssystem as well as back to the Provider’s practice managementsystem. Rather, its Website and published online help documentationseems to indicate the potential for extensive user 

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interaction with its system. This userintervention may include providers performing their own reconciliationand sending and managing claims through multiple sources andclearinghouses. Finally, there is no indication of patient billing orsecondary billing services, either as a separate or integrated featureof the system.

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | EditingEngines:    Some form of ‘‘editingengine’’ is integrated into most practice management orclaims management systems, as well as clearinghouses. These enginesallow healthcare providers to submit ‘‘clean’’claims to payors, thereby reducing the percentage of rejections,reductions or denials. The significant difference with most editingengines, however, is that the healthcare provider maintains them, whichcan be costly and time consuming. Our clients do not have tocontinually monitor and update the rules engine to ensure the properedits are in place. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Medical ReceivablesFunding:    Until recently, a healthcare provider’soptions for immediate cash flow were mostly limited to bank loans basedon personal credit and personal guarantees, sales of claims tofactoring companies, or bundling of claims in large volume practicesfor sale as short term paper to wealthy private investors. Loansecurity might also include medical equipment and office assets such asfixtures and furnishings, as well as compensating balances. |

A bank loan is reflected on a healthcare provider’sbalance 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. Thismay seem like an attractive offer and quick solution for healthcareproviders; however, it requires settling for a significantly reducedprice, as the ‘‘purchase’’ amount is determinedto a great extent by the estimated risk and time that it will take fora particular payor to adjudicate or deny payment of the claims, as wellas allowing for a substantial discount on the claims, because of thetypically significant variation in billing-to-collection ratiosexperienced by most healthcare providers. Requiring non-claimsreceivables-based security reduces flexibility and ties up Providerassets.

True advance funding of medical receivables isa relatively new service in the healthcare industry. One competitor isMedical Capital Financing, which purports to lend up to 85% ofthe estimated reimbursement on a weekly basis, calculated as anaggregate value based on past billing and collection history. The feescharged to the healthcare provider are also based on such factors assize of practice, size of weekly receivables, and average turnaroundtime. Triad Capital is another competitor. It currently only offerslending to healthcare providers with net receivables of $50,000 ormore, funds on a weekly basis, and charges a set-up fee with an average3-4 point fee for every invoice purchased. It will also purchase agedand charged-off invoices.

First Capital Funding, Corp.(‘‘First Capital’’) represents the typicalmedical receivables funding service, in that it currently arranges forfunding of up to 85% of net receivables (as  determined byFirst Capital) within 48 hours. First Capital merely performs a duediligence audit of outstanding receivables and then finds a lendingsource to provide funding. One significant disadvantage of FirstCapital is that the healthcare provider has no control over the loanedamounts each month. The amount is established at the time ofapplication and remains the same throughout the term of thecontract.

Providerpay.com offers a funding service withsome features bearing some similarity to ours. Providerpay states thatit will provide a line of credit within two (2) business days of aclaim passing certain claim edits and submitted only through itsclearinghouse. Interest, guarantee types, asset security and coveredpayer claims are undisclosed. Comprehensive integrated claimsmanagement and billing solutions do not appear to be offered. Claimsmust be funded only through its clearinghouse and only with Zions Bank.Our revolving line of credit capabilities appear more extensive,including in areas critical to the automation and reduction of workloadand human intervention, as well as information demanded of a completeclaims 

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management and payment solution forproviders and lenders. For instance, our solutions and services aredesigned to work with multiple clearinghouse and lenders.

Despite the increasing business of medical receivablefunding services, we distinguish ourselves by offering a short term(120 days or less) revolving line of credit, secured by claimsreceivables and not by other Provider assets or personal creditguarantees (there are performance guarantees). As an asset-based loan,not a sale of claims, Medicare claims can be leveraged. Since claimsare flagged and scrubbed before submission, and are valued againstactual payor contracts and rules, valuation is enhanced, risk isreduced and costs of money can be more competitive. By offering toadvance funds to healthcare providers within 24-72 hours of submittingclaims, coupled with low administrative fees, and a proprietarycombination of automated or batched reconciliation, posting,settlement, reporting and billing solutions, we believe this service tobe a major and unique marketing edge.

Competitive Analysis– Feature Comparison Chart

|                                      |  |         |  |         |  |          |  |        |  |        |  |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|--------------------------------------|--|---------|--|---------|--|----------|--|--------|--|--------|--|-------------|--|--|--|--|--|--|--|--|--|--|--|--|--|--|
| FEATURES                             |  | MDWERKS |  | NEXTGEN |  | NAVICURE |  | ATHENA |  | eHDL   |  | ProviderPay |
| Real-timeeligibility verification    |  | X       |  | X       |  | X        |  | X      |  | X      |  |        |
| Claim scrubbing andreal-time edits   |  | X       |  | X       |  | X        |  | X      |  | X      |  |        |
| Electronic claimsubmission           |  | X       |  |    |  | X        |  | X      |  | X      |  | X           |
| Secondary claim submission           |  | X       |  |    |  | X        |  | X      |  | X      |  |        |
| Real-time claim statusinquiry        |  | X       |  | X       |  | X        |  | X      |  | X      |  | X           |
| Payorcontract management             |  | X       |  |    |  |     |  |   |  |   |  |        |
| In-depthreports/statistical analyses |  | X       |  |    |  | X        |  | X      |  | X      |  | X           |
| Electronic remittanceprocessing      |  | X       |  |    |  | X        |  | X      |  | X      |  | X           |
| Advance funding ofmedical claims     |  | X       |  |    |  |     |  |   |  |   |  | X           |
| Web-based platform                   |  | X       |  | X       |  | X        |  | X      |  | X      |  | X           |
| Patient billing                      |  | X       |  | X       |  | X        |  | X      |  |   |  |        |
|                                      |

History ofthe Company

After 5 years of research, development and testingwith strategic and ‘‘name brand’’ resources,the designer of Xeni Systems’ products, MEDwerks, LLC,substantially completed the product development cycle for the productsoffered by Xeni Systems. The solutions developed by MEDwerks, LLC wereAlpha and Beta tested with 2 doctors and 2 banks. In October of 2003,MEDwerks, LLC ceased operations, due to a lack of continuing operatingcapital. In October of 2004, substantially all of the assets ofMEDwerks, LLC were acquired by Xeni Systems pursuant to a Contributionand Stockholders Agreement (the ‘‘ContributionAgreement’’) in exchange for MEDwerks, LLC receivingapproximately a 67% equity interest in Xeni Systems. The purposeof the Contribution Agreement transaction was to launch and market theMDwerks System commercially, utilizing a growth oriented managementteam of seasoned professionals. Xeni Systems successfully obtainedinvestment and financing of $450,000 and positioned the technology fordemonstration and pre-commercial sale.

Xeni Financial wasorganized in February  2005, to finance Providers seeking loans onreceivables processed through Xeni Systems. In March of 2005, itsuccessfully obtained $350,000 in equity and debt financing to launchits business. Xeni Billing was organized in March  2005, toprovide billing services to Providers processing their claims throughXeni Systems. In April of 2005, it successfully obtained debt andequity financing of $125,000 to launch its business.

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On April  6,  2005, the XeniCompanies each signed contracts with Atlas Diagnostic Services, LLC,and with each other, to provide their respective services.Subsequently, Xeni Systems also secured the services of severalindependent sales representatives and a practice management systemchannel distributor. We continue to explore and/or secure additionalindependent sales channel resources, including potential strategic andaffinity representatives.

MDwerks Global Holdings, Inc. wasoriginally formed under the name Global IP Communications, Inc., inOctober  2003, as a provider of telecommunications products andservices. In April  2004, MDwerks Global Holdings, Inc. decided todiscontinue its telecommunications business and in December  2004,it decided to focus on a new line of business in the area of providinginsurance claims transaction solutions and related services throughinvestment in Xeni Systems. In December  2004, MDwerks GlobalHoldings, Inc. loaned $250,000 to Xeni Systems in exchange for apromissory note and in early May  2005, MDwerks Global Holdings,Inc. invested another $200,000 into Xeni Systems in exchange for apromissory note. In late May  2005, the Xeni Companies and MDwerksGlobal Holdings, Inc. determined that a holding company structure withMDwerks Global Holdings, Inc. serving as a holding company andoverseeing the business of the Xeni Companies provided certainstrategic advantages to the Xeni Companies. In addition, it alsoprovided the Xeni  Companies with access to cash held by MDwerksGlobal Holdings, Inc. to continue to fund the business of the XeniCompanies. As a result, the Xeni Companies became wholly-ownedsubsidiaries of MDwerks Global Holdings, Inc., pursuant to shareexchange agreements between MDwerks and each of the shareholders of theXeni Companies. Each of the promissory notes issued by XeniSystems to MDwerks Holding, Inc. was cancelled in connection with theshare exchange.

MDwerks, Inc. (f/k/a Western Exploration, Inc.)was incorporated in the State of Delaware on July  22,  2003.From then, until November, 2005, it was a resource exploration stagecompany. In December, 2003 MDwerks, Inc. was presented with theopportunity to purchase a property that potentially contains a largeresource of limestone. Based on such opportunity, MDwerks, Inc. carriedout research on the limestone market in the province of BritishColumbia as well as the Pacific Northwest region of the United States.MDwerks, Inc. was unable to obtain adequate financing to continue itsoperations and determined to cease operations. In November, 2005,MDwerks, Inc. succeeded to the business of MDwerks Global Holdings,Inc. and the Xeni Companies which will be continued as its sole line ofbusiness.

On October  12,  2005, MDwerks, Inc.,MDwerks Global Holdings, Inc. and MDwerks Acquisition Corp., a Floridacorporation (‘‘Acquisition Corp.’’), andwholly-owned subsidiary of MDwerks, Inc., entered into an Agreement ofMerger and Plan of Reorganization (the  ‘‘MergerAgreement’’) pursuant to which Acquisition Corp. was mergedwith and into MDwerks Global Holdings, Inc., with MDwerks GlobalHoldings, Inc. surviving as a wholly-owned subsidiary of MDwerks, Inc.(the ‘‘Merger’’). MDwerks, Inc. acquired all ofthe outstanding capital stock of MDwerks Global Holdings, Inc. inexchange for issuing shares of Common Stock of MDwerks, Inc. to MDwerksGlobal Holdings Inc.’s stockholders at a ratio of 0.158074shares of Common Stock for each share of MDwerks Global Holdings, Inc.common stock outstanding at the effective time of the Merger.

Following the closing of the Merger (the ‘‘ClosingDate’’), we sold to subscribers 64 units (the‘‘Units’’) pursuant to a Confidential PrivatePlacement Memorandum dated June  13,  2005, as amended orsupplemented from time to time (the‘‘Memorandum’’), each Unit consisting of 10,000shares of Common Stock and a warrant(the’’Warrants’’) to purchase shares of CommonStock for $2.50 per share (the ‘‘PrivatePlacement’’). We received gross proceeds from the PrivatePlacement of $1,600,000.

Immediately following the Merger andthe initial closing of the Private Placement, certain stockholders ofthe Company sold an aggregate of 1,275,000 shares of Common Stock toseveral purchasers and forfeited and delivered to treasury 10,960,500shares of Common Stock.

Employees

We employ 13 peoplewho devote their full business time to our activities and contract with7  people who devote some or a significant portion of theirbusiness time to our activities. We also 

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have executed numerous agreements withindependent sales, marketing and public relations consultants whodevote a discretionary or defined portion of their business time to oursales activities.

Intellectual Property

A United Statesbusiness process patent application regarding certain aspects of oursystems was filed by our predecessor, MEDwerks, LLC, on April15,  2002. The application is pending the US PatentOffice’s determination of allowance. Former patent counsel,Piper, Rudnick has advised that a response (Office Action) should beforthcoming from the US Patent Office as early as within the next 6months. If the Office Action is unfavorable or only partiallysuccessful, when compared to prior protected art, the process may beextended up to 3 years and we could incur substantial expenses inprosecuting the patent. We plan to undertake prosecution of the patentfiling to conclusion, if practical and economical. Piper Rudnick hasalso advised that, while the Patent application is currently in thename of MEDwerks, LLC and a separate assignment of the patentapplication must be made from MEDwerks, LLC to Xeni Systems and filedwith the US Patent office. While assignment of the patent was includedas part of assets contributed by MEDwerks, LLC to Xeni Systems inOctober  2004 and MEDwerks, LLC has agreed to complete theassignment and is obligated to do so, we will not have clear title tothe application until the assignment iscomplete.

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Risk Factors

We have a very limited operating history, making it difficultto accurately forecast our revenues and appropriately plan ourexpenses.

We began operations as Xeni Systems, when, inOctober  2004, Xeni Systems acquired substantially all of theassets of MEDwerks, LLC. MEDwerks, LLC, commenced operations in 2000and focused the majority of its capital and time developing softwareprograms for the medical transaction system employed by us. From itsinception, MEDwerks, LLC incurred substantial net losses in each fiscalyear of operation. MEDwerks, LLC closed down its business operations inOctober  2003, before ever launching its products and servicescommercially. Xeni Financial was formed in February  2005 andcurrently provides its solutions and services only to customers ofXeni  Systems. Xeni Billing was formed in March  2005 andcurrently provides its solutions and services only to customers of XeniSystems. MDwerks Global Holdings, Inc. was originally formed inOctober  2003 for the purpose of operating a business as aprovider of telecommunications products and services. In April2004, MDwerks Global Holdings, Inc. discontinued its telecommunicationsbusiness and in December  2004, it began to focus on developingthe business of Xeni Systems. Pursuant to share exchange agreements,MDwerks Global Holdings, Inc. acquired Xeni  Systems, XeniFinancial and Xeni Billing as wholly-owned subsidiaries. In November,2005, we acquired MDwerks Global Holdings, Inc. as a wholly-ownedsubsidiary 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 operatinghistory.

Because we have had a limited operating history, it isdifficult to accurately forecast our revenues and expenses.Additionally, our operations will continue to be subject to risksinherent in the establishment of a new business, including, among otherthings, efficiently deploying our capital, developing our product andservices offerings, developing and implementing our marketing campaignsand strategies and developing awareness and acceptance of our products.Our ability to generate future revenues will be dependent on a numberof factors, many of which are beyond our control, including the pricingof other services, overall demand for our products, market competitionand government regulation. As with any investment in a company with alimited operating history, ownership of our securities may involve ahigh degree of risk and is not recommended if an investor cannotreasonably bear the risk of a total loss of his or her investment.

We have historically incurred significant losses and may not beprofitable in the future. In addition, we intend to continue to spendresources on maintaining and strengthening our business and this maycause our operating expenses to increase and operating results todecrease.

We have experienced significant net losses sinceour inception. We expect to continue to incur additional substantialoperating and net losses for the foreseeable future. The profitpotential of our business model is unproven, and, to be successful, wemust, among other things, develop and market products and services thatwould be widely accepted by potential users of such products andservices at prices that will yield a profit. If our products andservices cannot be commercially developed and launched, and do notachieve or sustain broad market acceptance, our business, operatingresults and financial condition will be materially adverselyaffected.

If we continue to incur losses in future periods, wemay be unable to retain employees or fund investments in our systemsdevelopment, sales and marketing programs, research and development andbusiness plan. There can be no assurance that we will ever obtainsufficient revenues to exceed our cost structure and achieveprofitability. If we do achieve profitability, there can be noassurance that it we may sustain or increase profitability in thefuture.

We may need to raise additional capital in thefuture and may need to initiate other operational strategies tocontinue our operations.

As of the date of this report,the amount of cash available to us may be insufficient for us toimplement our business plan as anticipated and may require us to seekadditional debt or equity 

18

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financing in the near future, as we may beunable to generate positive cash flow as a result of our operations. Asour business develops, we may need to raise capital through theincurrence of additional long-term or short-term indebtedness or theissuance of additional equity securities in private or publictransactions in order to complete further investments. This couldresult in dilution of existing equity positions, increased interestexpense, decreased net income and diminished shareholder’svalue. In addition, significant capital requirements associated withsuch investments may impair our ability to pay dividends (although wedo not anticipate paying any dividends on its Common Stock in theforeseeable future) or interest on indebtedness or to meet ouroperating needs. There can be no assurance that acceptable financingfor future investments can be obtained on suitable terms, if atall.

Competition from providers of similar products andservices could materially adversely affect our revenues and financialcondition.

We compete in a rapidly evolving, highlycompetitive and fragmented market. We expect competition to intensifyin the future. There can be no assurance that we will be able tocompete effectively. We believe that the main competitive factors inthe medical transactions processing, billing, payment and financingindustry include effective marketing and sales, brand recognition,product quality, product placement and availability, niche marketingand segmentation and value propositions. They also include benefits ofone's company, product and services, features and functionality,and cost. Many of our competitors are established, profitable and havestrong attributes in many, most or all of these areas. They may be ableto leverage their existing relationships to offer alternative productsor services on more attractive terms or with better customer support.Other companies may also enter our markets with better products orservices, greater financial and human resources and/or greater brandrecognition. Competitors may continue to improve or expand currentproducts and introduce new products. We may be perceived as relativelytoo small or untested to be awarded business relative to thecompetition. To be competitive, we will have to invest significantresources in business development, advertising and marketing. We mayalso have to rely on strategic partnerships for critical branding andrelationship leverage, which partnerships may or may not be availableor sufficient. We cannot assure that we will have sufficient resourcesto make these investments or that we will be able to make the advancesnecessary to be competitive. Increased competition may result in feereductions, reduced gross margin and loss of market share. Failure tocompete successfully against current or future competitors could have amaterial adverse effect on our business, operating results andfinancial condition.

Our success will be dependent upon ourtechnology.

Xeni Financial and Xeni Billing will relyalmost exclusively on the technology of Xeni Systems. We believe thatneither Xeni Financial nor Xeni Billing can operate as a stand-alonebusiness, but will provide products and services that are ancillary tothe products and services of Xeni Systems. As a result, the success ofour business proposition is materially and substantially dependent onthe technology of Xeni Systems (and the availability, operability anduse of such technology in whole or in part). If the technology of XeniSystems is not operational and usable, we will be unable to operate, asour systems are dependent upon such technology.

Our products andservices were designed and built using certain key technologies andlicenses from a limited number of suppliers. We will depend on theseother companies for software updates, technical support and possiblyfor system management or for new product development. Although webelieve there might be alternative suppliers for some or all of thesetechnologies, it would take a significant period of time and money toestablish relationships with alternative suppliers and substitute theirtechnologies for technologies currently being used. The loss of any ofour relationships with these suppliers could have a material adverseeffect on our business, operating results and financial condition.

The failure of our systems could materially and adverselyimpact us.

Our operations are dependent upon our abilityto support our highly complex network infrastructure and avoid damagefrom fires, earthquakes, floods, hurricanes, power losses, war,terrorist 

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attacks, telecommunications failures andsimilar natural or manmade events. The occurrence of a naturaldisaster, intentional or unintentional human error or action, or otherunanticipated problem could cause interruptions in the services that weprovide. Additionally, the failure of our third-party backboneproviders to provide the data communications capacity that we require,as a result of natural disaster, operational disruption or any otherreason could cause interruptions in the services that we provide. Anydamage or failure that causes interruptions in our operations couldhave a material adverse effect on our business, operating results andfinancial condition.

If we do not protect our proprietarytechnology and intellectual property rights against infringement ormisappropriation and defend against third parties assertions that wehave infringed on their intellectual property rights, we may lose ourcompetitive advantage, which could impair our ability to grow ourrevenues.

Our predecessor, MEDwerks, LLC filed a UnitedStates business process patent application regarding elements of theMDwerks System on April  15,  2002. The application ispending the US Patent Office’s determination of allowance.Former patent counsel, DLA Piper, Rudnick Gray Cary(‘‘Piper Rudnick’’), Washington, DC, hasadvised us that a response should be forthcoming from the US PatentOffice as early as within the next 6 months. If the response from theUS Patent Office is unfavorable or only partially successful, theprocess may be extended up to 3 years and we could incur substantialexpenses in prosecuting the patent.

Piper Rudnick has alsoadvised that the Patent application is currently in the name ofMEDwerks, LLC and a separate assignment of the patent application mustbe made from MEDwerks, LLC to us and filed with the U.S. Patent office.While assignment of the patent was included as part of assetscontributed by MEDwerks, LLC to Xeni Systems in October  2004 andMEDwerks, LLC has agreed to complete the assignment and is obligated todo so, we will not have clear title to the application until theassignment is complete.

There is no assurance that the patentapplication will be successfully completed and if completed, there canbe no assurance that the patent will afford meaningful protection ofour intellectual property rights. Despite efforts to protect ourintellectual property rights, unauthorized parties may attempt to copyaspects of our systems or our source code to software or to obtain oruse information that is proprietary.

The scope of anyintellectual property rights that we have is uncertain and is notsufficient to prevent infringement claims against us or claims that wehave violated the intellectual property rights of third parties. Whilewe know of no basis for any claims of this type, the existence of andownership of intellectual property can be difficult to verify and wehave not made an exhaustive search of all patent filings. If any of ourproprietary rights are misappropriated or we are forced to defend ourintellectual property rights, we will have to incur substantial costs.We may not have the financial resources to prosecute any infringementclaims that we may have or defend against any infringement claims thatare brought against us, or choose to defend such claims. Even if we do,defending or prosecuting our intellectual property rights will divertvaluable working capital and management’s attention frombusiness and operational issues.

We Rely On Key PersonnelWhose Continued Service Is Not Guaranteed.

Our operationshave been and will continue be dependent on the efforts of Mr.Howard  Katz, our Chief Executive Officer, Mr.  SolonKandel, our President and Mr.  Vincent  Colangelo, our ChiefFinancial Officer. The commercialization of our products and thedevelopment of improvements to our products and systems, as well as thedevelopment of new products is dependent on retaining the services ofGerry Maresca, the former CTO of MDwerks, LLC and its chief architect,and certain technical personnel who were involved in the development ofMDwerks’ products and services. The loss of key management, theinability to secure or retain such key legacy personnel with uniqueknowledge of our products and services and the technology andprogramming employed as part of our products and services, the failureto transfer knowledge from legacy personnel to current personnel, or aninability to attract and retain sufficient numbers of other qualifiedmanagement personnel would 

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adversely delay and affect our business,products and services and could have a material adverse effect on ourbusiness, operating results and financial condition.

WeWill Need To Attract Skilled Personnel.

Our future successdepends, in large part, on our ability to attract and retain highlyskilled personnel. If we are unable to attract or retain qualifiedpersonnel in the future or there are any delays in hiring requiredpersonnel, particularly technical, sales, marketing and financialpersonnel, it could adversely affect our business, operating resultsand financial condition.

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

The use of independentsales representatives or distributors will subject us to certainrisks.

We expect to generate a substantial portion of ourrevenue from independent sales representatives or distributors. Suchrepresentatives and distributors may not be required to meet salesquotas and our ability to manage independent sales representatives ordistributors to performance standards is unknown. Failure to generaterevenue from these sales representatives or distributors or a loss ofone or more key sales representatives or distributors could causematerial adverse effect on our business, operating results andfinancial condition.

Our business may subject us to risksrelated to nationwide or international operations.

If weoffer 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 andresults of operations.

These risks include:

|  |              |                                                      |
|--|--------------|------------------------------------------------------|
|  | •  | greater difficulty incollecting accounts receivable; |

|  |              |                                                                              |
|--|--------------|------------------------------------------------------------------------------|
|  | •  | satisfying import or exportlicensing and product certification requirements; |

|  |              |                                                                                                                                                                   |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | taxes, tariffs, duties, pricecontrols or other restrictions on out-of-state companies, foreigncurrencies or trade barriers imposed by states or foreigncountries; |

|  |              |                                                                                       |
|--|--------------|---------------------------------------------------------------------------------------|
|  | •  | potentialadverse tax consequences, including restrictions on repatriation ofearnings; |

|  |              |                                         |
|--|--------------|-----------------------------------------|
|  | •  | fluctuations incurrency exchange rates; |

|  |              |                                                                                    |
|--|--------------|------------------------------------------------------------------------------------|
|  | •  | seasonal reductions in businessactivity in some parts of the country or the world; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | unexpected changes in local,state, federal or international regulatory requirements; |

|  |              |                                                                    |
|--|--------------|--------------------------------------------------------------------|
|  | •  | burdens of complying with awide variety of state and foreign laws; |

|  |              |                                                                                 |
|--|--------------|---------------------------------------------------------------------------------|
|  | •  | difficulties and costs ofstaffing and managing national and foreign operations; |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | different regulatory andpolitical climates and/or political instability; |

|  |              |                                                                           |
|--|--------------|---------------------------------------------------------------------------|
|  | •  | the impact of economicrecessions in and outside of the United States; and |

|  |              |                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------|
|  | •  | limited ability to enforceagreements, intellectual property and other rights in foreignterritories. |

We are subject to substantial governmentregulation.

The healthcare industry is highly regulatedand is subject to changing political, economic and regulatoryinfluences. Federal and state legislatures have periodically consideredprograms to reform or amend the U.S. healthcare system at both thefederal and state level and to change healthcare 

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financing and reimbursement systems, such asthe Balanced Budget Act of 1997 and the Medicare Modernization Act of2003. These programs may contain proposals to increase governmentalinvolvement in healthcare, lower reimbursement rates or otherwisechange the environment in which healthcare industry participantsoperate. Current or future government regulations or healthcare reformmeasures may affect our business. Healthcare industry participants mayrespond by reducing their investments or postponing investmentdecisions, including investments in our products and services.

Our lending, medical billing and collection activities may begoverned by numerous federal and state civil and criminal laws. Forexample, the Gramm Leach Bliley Act (GLIBA) may govern lendingpractices as related to safeguarding personal customer information.Federal and state regulators may use such laws to investigatehealthcare providers and companies that provide lending, billing andcollection services. In connection with these laws, we may be subjectedto federal or state government investigations and possible penaltiesmay be imposed, false claims actions may have to be defended, privatepayors or their patients may file claims against us, and we may beexcluded from Medicare, Medicaid or other government-funded healthcareprograms. Some of these laws may carry strict liability provisions thatimpose responsibilities and liabilities on us without any wrongdoing ornegligence on our part.

While we are not currently the subjectof any litigation, we may become the subject of false claims litigationor additional investigations relating to our lending, billing andcollection activities, even when simply passing on claims originatingfrom and edited by third parties for content. Any such proceeding orinvestigation could have a material adverse effect on our business,operating results and financial condition.

Under the HealthInsurance Portability and Accountability Act of 1996, or HIPAA, finalrules were published regarding standards for electronic transactions aswell as standards for privacy and security of individually identifiablehealth information. The HIPAA rules set new or higher standards for thehealthcare industry in handling healthcare transactions andinformation, with penalties for noncompliance. We have incurred and wewill continue to incur costs to comply with these rules. Compliancewith these rules may prove to be more costly than we currentlyanticipate. Failure to comply with such rules may have a materialadverse effect on our business and may subject us to civil and criminalpenalties as well as loss of customers.

We will rely upon thirdparties to provide data elements to process electronic medical claimsin a HIPAA compliant format. While we believe we will be fully andproperly prepared to process electronic medical claims in aHIPAA-compliant format, there can be no assurance that third parties,including healthcare providers and payors, will likewise be prepared tosupply all the data elements required to process electronic medicalclaims and make electronic remittance under HIPAA's standards. Wehave made and expect to continue to make investments in productenhancements to support customer operations that are regulated byHIPAA. Responding to HIPAA's impact may require us to makeinvestments in new products or charge higher prices.

HIPAA, inpart, governs the collection, use, storage and disclosure of healthinformation for the purpose of safeguarding the privacy and security ofsuch information. Persons who believe health information has beenmisused or disclosed improperly may file complaints against offendingparties, which may lead to investigation and potential civil andcriminal penalties from Federal or state governments.

Thepassage of HIPAA is part of a wider healthcare reform initiative. Weexpect that the debate on healthcare reform will continue. We alsoexpect that the federal government as well as state governments willpass laws and issue regulations addressing healthcare issues andreimbursement of healthcare providers. We cannot predict whether thegovernmental-bodies regulators will enact new legislation andregulations, and, if enacted, whether such new developments willadversely affect our business, operating results or financialcondition.

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Many healthcare providers who arepotential clients may have existing systems that do not generateelectronic files in a HIPAA-compliant format.

Manyhealthcare providers have practice management systems that do not haveelectronic interfaces which produce a HIPAA compliant form. If theinterface doesn't exist, they must purchase a new system from athird party, which may be expensive and not a desirable businessproposition for such healthcare providers. If claims cannot besubmitted electronically, the claims data must be manually entered intoour system, which can be time consuming and duplicative of work alreadydone by a healthcare provider. Manually entering the data also subjectsclaims to greater risk of human error in the data entry process. Whilewe believe we can provide solutions to healthcare providers to enablethem to establish electronic interfaces to submit claims electronicallyin a HIPAA compliant manner, there can be no assurance healthcareproviders will be willing to implement the solutions that we propose.If healthcare providers can not supply electronic medical claims andsuch claims are processed manually rather than electronically, it couldbe a materially adversely affect our business, operating results orfinancial condition.

We may make errors in processinginformation provided by our clients and, as a result, we may sufferlosses.

We will receive detailed information provided byclients. Even if clients provide full and accurate disclosure of allmaterial 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 toour clients in connection with such mistakes.

Solutionsthat we sell and services that we offer may subject us to productliability claims.

Solutions that we sell may fail toperform in a variety of ways, and services that we provide may not meetcustomer expectations, including shipping a product which is eitherlate, does not meet client requirements or expectations, or is lost,damaged, stolen or corrupted, or which faces frequent Internet serviceinterruptions, which take it off-line. Such problems would seriouslyharm our credibility, market acceptance of our products and the valueof our brands. In addition, such problems may result in liability fordamages arising out of product liability of our products and services.The occurrence of some of these types of problems may seriously harmour business, operating results and financial condition.

Our systems are subject to certain security risks.

Despite the implementation of security measures, our systems may bevulnerable to unauthorized access, computer viruses and otherdisruptive problems. Companies have experienced, and may experience,interruptions in service as a result of the accidental or intentionalactions of Internet users, current and former employees or others.Unauthorized access could also potentially jeopardize the security ofcustomers’ and our confidential information stored in ourcomputer systems, which may result in liability to customers and alsomay deter potential customers from using our products and services.Although we intend to continue to implement industry-standard securitymeasures, such measures have been circumvented in the past, and therecan be no assurance that measures that we implement will not becircumvented in the future. Eliminating computer viruses andalleviating other security problems may require interruptions, delaysor cessation of service to our customers, which could have a materialadverse effect on our business, operating results and financialcondition.

We will need to enter into a bankingrelationship to offer our funding solutions.

We will needto enter into agreements with financial institutions to enable us tooffer sufficient funds for the funding solutions that we plan to offercustomers. These funding solutions will allow customers to utilizereceivables to receive advance funding from such financial institutionsthrough us. To date, we do not have any such agreement with anyfinancial institution. There can be no assurance that we will be ableto enter into such an agreement with a financial institution. Thefailure to enter into such an agreement with a financial institutionwill have a material adverse effect on our business, operating resultsand financial condition.

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We may not recover the value ofamounts that we lend to healthcare providers.

With respectto loans made by us to Providers, we expect to experience charge-offsin the future. A charge-off occurs when all or part of the principal ofa particular loan is no longer recoverable and will not be repaid. Ifwe were to experience material losses on our loan portfolio, it wouldhave a material adverse effect on our ability to fund our business and,to the extent the losses exceed our provision for loan losses, it wouldhave a material adverse effect on our revenues, net income andassets.

Other commercial finance companies have experiencedcharge offs. In addition, like other commercial finance companies, wemay experience missed and late payments, failures by clients to complywith operational and financial covenants in their loan agreements andclient performance below that which it expected when we originated theloan. Any of the events described in the preceding sentence may be anindication that our risk of loss with respect to a particular loan hasmaterially increased.

We intend to make loans to privatelyowned small and medium-sized companies, which present a greater risk ofloss than larger companies.

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

Numerous factors mayaffect a client’s ability to make scheduled payments on itsloan, including the failure to meet its business plan or a downturn inits industry. In part because of their smaller size, our clientsmay:

|  |              |                                                        |
|--|--------------|--------------------------------------------------------|
|  | •  | experience significantvariations in operating results; |

|  |              |                                                                                                                                                                                                                                        |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | depend on the managementtalents and efforts of a single individual or a small group of personsfor their success, the death, disability or resignation of whom couldmaterially harm the client’s financial condition orprospects; |

|  |              |                                                                               |
|--|--------------|-------------------------------------------------------------------------------|
|  | •  | have lessskilled or experienced management personnel than larger companies;or |

|  |              |                                                                                                                         |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------|
|  | •  | could be adverselyaffected by policy or regulatory changes and changes in reimbursementpolicies of insurance companies. |

Accordingly, any of thesefactors could impair a client’s cash flow or result in otherevents, such as bankruptcy, which could limit that client’sability to repay its obligations to us, and may lead to losses in ourloan portfolio and a decrease in our revenues, net income and assetsand result in a material adverse effect on our business, operatingresults and financial condition.

Our lack of operatinghistory makes it difficult to accurately judge the credit performanceof our loan portfolio and, as a result, increases the risk that theallowance for loan losses may prove inadequate.

Ourfunding services depend on the creditworthiness of our clients. Whilewe will conduct extensive due diligence and generally review of thecreditworthiness of each of our clients, this review requires theapplication of significant judgment by our management, which judgmentmay not be correct.

We will maintain an allowance for loanlosses on our consolidated financial statements in an amount thatreflects our judgment concerning the potential for losses inherent inour loan portfolio. Because we have not yet recorded any loancharge-offs, our reserve rate was developed independent of thehistorical performance of our loan portfolio. Because our lack ofoperating history and the relative lack of seasoning of our loans makeit difficult to judge the credit performance of our loan 

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portfolio, there can be no assurance that theestimates and judgment with respect to the appropriateness of ourallowance for loan losses are accurate. Our allowance may not beadequate to cover credit losses in our loan portfolio as a result ofunanticipated adverse changes in the economy or events adverselyaffecting specific clients, industries or markets. If our allowance forloan losses is not adequate, our net income will suffer, and ourfinancial performance and condition could be significantlyimpaired.

We may not have all of the material informationrelating to a potential client at the time that we make a creditdecision with respect to that potential client, or at the time weadvance funds to the client.

We may suffer losses on loansor make advances that we would not have made if we had all of thematerial information about clients.

There is generally nopublicly available information about the privately owned companies towhich we will typically lend. Therefore, we must rely on our clientsand the due diligence efforts of our employees to obtain theinformation that we will consider when making credit decisions. To someextent, our employees depend and rely upon the management of thesecompanies to provide full and accurate disclosure of materialinformation concerning their business, financial condition andprospects. If our employees do not have access to all of the materialinformation about a particular client’s business, financialcondition and prospects, or if a client’s accounting records arepoorly maintained or organized, we may not make a fully informed creditdecision which may lead, ultimately, to a failure or inability torecover the loan in its entirety.

We may make errors inevaluating accurate information reported by our clients and, as aresult, we may suffer losses on loans or advances that we would nothave made if we had properly evaluated the information.

Weintend to make loans primarily secured by claims receivables and notbased on detailed financial information or personal creditworthiness orpersonal credit guarantees provided to us by our clients. Even ifclients provide us with full and accurate disclosure of all materialinformation concerning their businesses and even if we require personalperformance guarantees from our clients, we may misinterpret orincorrectly analyze credit or performance related information. Mistakesby our staff may cause us to make loans that we otherwise would nothave made, to fund advances that we otherwise would not have funded orresult in losses on one or more existing loans, including from lack ofperformance and/or credit worthiness.

A client’sfraud could cause us to suffer losses.

A clientcould defraud us by, among other things:

|  |              |                                                                        |
|--|--------------|------------------------------------------------------------------------|
|  | •  | creating and submitting false,inaccurate or misleading medical claims; |

|  |              |                                                                                                                                                                                                                   |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | directing the proceeds ofcollections of its accounts receivable to bank accounts other thanestablished lockboxes or re-directing elsewhere governmental accountsweeps from client bank accounts to our lockboxes; |

|  |              |                                                        |
|--|--------------|--------------------------------------------------------|
|  | •  | failing to accurately recordaccounts receivable aging; |

|  |              |                                                                              |
|--|--------------|------------------------------------------------------------------------------|
|  | •  | overstating or falsifyingrecords creating or showing accounts receivable; or |

|  |              |                                                               |
|--|--------------|---------------------------------------------------------------|
|  | •  | providing inaccurate reportingof other financial information. |

The failure of a clientto accurately create and submit claims or report its financialposition, compliance with loan covenants or eligibility for additionalborrowings could result in the loss of some or the entire principal ofa particular loan or loans including, in the case of revolving loans,amounts we may not have advanced had we possessed complete and accurateinformation.

Our concentration of loans to a limited numberof borrowers within a particular industry, such as the healthcareindustry, could impair our revenues, if the industry were to experienceeconomic difficulties.

Defaults by our clients may becorrelated with economic conditions affecting particular industries. Asa result, if the healthcare industry were to experience economicdifficulties, the overall timing and 

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amount of collections on our loans to clientsmay differ from what we expected and result in material harm to ourrevenues, net income and assets.

The dependence by our clientson reimbursement revenues could cause us to suffer losses in severalinstances:

|  |              |                                                                                                                                                                                                                                                                                                                |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | If clients failto comply with operational covenants and other regulations imposed bythese programs, they may lose their eligibility to continue to receivereimbursements under the program or incur monetary penalties, either ofwhich could result in the client’s inability to make scheduledpayments. |

|  |              |                                                                                                                                                                                                                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | If reimbursementrates do not keep pace with increasing costs of services to eligiblerecipients, or funding levels decrease as a result of increasingpressures from carriers to control healthcare costs, clients may not beable to generate adequate revenues to satisfy their obligations. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | If a healthcare client were todefault on its loan, we would be unable to invoke our rights to pledgedreceivables directly as the law prohibits payment of amounts owed tohealthcare providers under the Medicare and Medicaid programs to bedirected to any entity other than the actual providers. Consequently, acourt order would be needed to force collection directly against thesegovernmental payors or re-direction of accounts, set-offs or otherdisposition of payments received by providers on government claims.There is no assurance that we would be successful in obtaining thistype of court order. |

We may be unable to recognize or actupon an operational or financial problem with a client in a timelyfashion 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 impairmentor loss of the value of the loan to the client. We may fail to identifyproblems, 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 itquickly enough, adequately enough or at all. As a result, we couldsuffer loan losses, which could have a material adverse effect on ourrevenues, net income and results of operations.

The collateralsecuring a loan may not be sufficient to protect us from a partial orcomplete loss if the loan becomes non-performing, and we are requiredto foreclose.

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

|  |              |                                                                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | problems with theclient’s underlying agreements with insurance carriers, whichresult in greater than anticipated, disputed accounts; |

|  |              |                         |
|--|--------------|-------------------------|
|  | •  | unrecorded liabilities; |

|  |              |                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------|
|  | •  | the disruption or bankruptcy ofkey obligor who is responsible for material amounts of the accountsreceivable; |

|  |              |                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the clientmisrepresents, or does not keep adequate records of, claims orimportant information concerning the amounts and aging of its accountsreceivable; or |

|  |              |                                                                                                                             |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------|
|  | •  | theclient’s government claims are being sent to a client controlledaccount and may require judicial action or relief. |

Anyone or more of the preceding factors could materially impair ourability to recover principal in a foreclosure on the related loan.

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Our advance funding loans are notfully covered by the value of tangible assets or collateral of theclient and, consequently, if any of these loans becomes non-performing,we could suffer a loss of some or all of our value in theloan.

The risks inherent in advance lending basedupon cash receivables include, among other things, the following:

|  |              |                                                                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | reduced use of or demand forthe client’s services and, thus, reduced cash flow of the clientto service the loan as well as reduced value of the client as a goingconcern; |

|  |              |                                                                                                                              |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------|
|  | •  | poor accountingsystems of the client, which adversely affect the ability to accuratelypredict the client’s cash flows; |

|  |              |                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | economic downturns, politicalevents, regulatory changes, litigation or acts of terrorism that affectthe client’s business, financial condition and prospects;and |

|  |              |                             |
|--|--------------|-----------------------------|
|  | •  | poor managementperformance. |

Performance, errors by or dishonesty of ouremployees could result in loan losses.

We will relyheavily on the performance and integrity of our employees in makinginitial credit decisions with respect to loans and in servicing theloans after they have closed. Because there is generally little or nopublicly available information about the clients to whom we will lend,we cannot independently confirm or verify the information employeesprovide for use in making credit and funding decisions. Errors byemployees in assembling, analyzing or recording information concerningclients could cause us to originate loans or fund subsequent advancesthat we would not otherwise originate or fund. This could result inlosses. Losses could also arise if any employees were dishonest. Adishonest employee could collude with clients to misrepresent thecreditworthiness of a prospective client or to provide inaccuratereports regarding the client’s compliance with the covenants inits loan agreement. If, based on an employee’s dishonesty, wemade a loan to a client that was not creditworthy or failed to exerciseour rights under a loan agreement against a client that was not incompliance with covenants in the agreement, we could lose some or theentire principal of the loan. Further, if we determine to pursueremedies against a dishonest employee, the costs of pursuing suchremedies could be substantial and there can be no assurance that wewill be able to obtain an adequate remedy against a dishonest employeeto offset losses caused by such employee.

If interest ratesrise, some of our existing clients may be unable to service interest ontheir loans.

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

Loans could besubject to equitable subordination by a court and thereby increase therisk of loss with respect to such loans.

Courts have, insome cases, applied the doctrine of equitable subordination tosubordinate the claim of a lending institution against a borrower toclaims of other creditors of the borrower, when the lending institutionis found to have engaged in unfair, inequitable or fraudulent conduct.The courts have also applied the doctrine of equitable subordinationwhen a lending institution or its affiliates are found to have exertedinappropriate control over a client, including control resulting fromthe ownership of equity interests in a client. Payments on one or moreof our loans, particularly a loan to a client in which we also holdequity interests, may be subject to claims of equitable subordination.If, when challenged, these factors were deemed to give us the abilityto control or otherwise exercise influence over the business andaffairs of one or more of its clients, this control or influence couldconstitute grounds for equitable subordination. This means that a courtmay treat one or more of our loans as if it were common equity in theclient. In that case, if the client were to liquidate, we would beentitled to repayment of its loan on an equal basis with other holdersof the client’s common equity only after all of theclient’s obligations relating to its debt and preferredsecurities had been satisfied. One or more successful claims ofequitable subordination against us could have an adverse effect on ourbusiness, operating results and financial condition.

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We may incur lender liability as aresult of our lending activities.

In recent years, anumber of judicial decisions have upheld the right of borrowers to suelending institutions on the basis of various evolving legal theories,collectively termed ‘‘lender liability.’’Generally, lender liability is founded on the premise that a lender haseither violated a duty, whether implied or contractual, of good faithand fair dealing owed to the borrower or has assumed a degree ofcontrol over the borrower resulting in the creation of a fiduciary dutyowed to the borrower or its other creditors or shareholders. We may besubject to allegations of lender liability. There can be no assurancethat these claims will not arise or that we will not be subject tosignificant liability if a claim of this type did arise. Such liabilitycould result in a material adverse effect on our business, operatingresults and financial condition.

Our lending activities, aswell as our claims management solutions, are subject to additionalgovernmental regulations and future regulations may make it moredifficult for us to operate on a profitable basis.

Ourhealthcare advance lending business, as well as our claims managementsolutions, is subject to numerous federal and state laws andregulations, which, among other things, may (i) require us to obtainand maintain certain licenses and qualifications, (ii) limit theinterest rates, fees and other charges that we are permitted tocollect, (iii) limit or prescribe certain other terms of our financedreceivables arrangements with clients, and (iv) subject us to certainclaims, defenses and rights of offset. Although we believe that ourcurrent business plan is in compliance with statutes and regulationsapplicable to our business, there can be no assurance that we will beable to maintain such compliance without incurring significant expense.The failure to comply with such statutes and regulations could have amaterial adverse effect upon us. Furthermore, the adoption ofadditional statutes and regulations, changes in the interpretation andenforcement of current statutes and regulations, or the expansion ofthe healthcare finance business into jurisdictions that have adoptedmore stringent regulatory requirements than those in which we currentlyconduct business could have a material adverse effect upon ourbusiness, operating results and financial condition.

There canbe no assurance that currently proposed or future healthcarelegislation or other changes in the administration or interpretation ofgovernmental provider payment programs (‘‘GovernmentPrograms’’) will not have an adverse effect on us or thatpayments under Government Programs will remain at levels comparable topresent levels or will be sufficient to cover the costs allocable topatients eligible for reimbursement pursuant to such programs. Concernabout the potential effects of the proposed reform measures hascontributed to the volatility of prices of securities of companies inhealthcare and related industries, and may similarly affect the priceof our securities in the future.

In addition, certain privatereform efforts have been instituted throughout the healthcare industry,including the capitation of certain healthcare expenditures. Capitationis the pre-payment of certain healthcare costs by third-party payors(typically health maintenance organizations and other managedhealthcare concerns), based upon a predetermined monthly fee for theaggregate patient lives under any given healthcare provider'scare. The healthcare provider then provides healthcare to such patientswhen and as needed, and assumes the risk that its prepayments willcover its costs and provide a profit for all of such services rendered.Since capitation essentially reduces or eliminates clients' needfor claims management solutions and/or accounts receivable that are theprimary source of payment for our financed receivables, capitationcould materially adversely affect our business, operating results andfinancial condition.

We depend upon key personnel who mayterminate their employment with us at any time.

Oursuccess will depend to a significant degree upon the continued servicesof key management including Mr.  Katz,  ChiefExecutive  Officer,  Mr.  Kandel,  President andMr. Colangelo, Chief  Financial  Officer. Mr.Katz,  Mr.  Kandel and Mr.  Colangelo may voluntarilyterminate their employment with us at any time. The loss of theservices of Mr.  Katz,  Mr.  Kandel or Mr.Colangelo could have a material adverse effect on our implementation ofour business plan. We do not have 

28

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‘‘key man’’ lifeinsurance policies for Mr.  Katz,  Mr.  Kandel orMr.  Colangelo. Even if we were to obtain ‘‘keyman’’ insurance for Mr.  Katz,  Mr.  Kandelor Mr.  Colangelo, of which there can be no assurance, the amountof such policies may not be sufficient to cover losses experienced byus as a result of the loss of Mr.  Katz,  Mr.  Kandel orMr.  Colangelo.

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

We have not paid any cashdividends on our Common Stock. For the foreseeable future, it isanticipated that earnings, if any, which may be generated fromoperations will be used to finance our growth and that dividends willnot be paid to holders of Common Stock.

Our certificate ofincorporation, bylaws and state law may contain provisions thatpreserve current management.

Provisions of state law, ourarticles of incorporation and by-laws may discourage, delay or preventa change in our management team that stockholders may considerfavorable. These provisions include:

|  |              |                                                                                                                                |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------|
|  | •  | authorizing the issuance of‘‘blank check’’ preferred stock without anyneed for action by stockholders; |

|  |              |                                                                                  |
|--|--------------|----------------------------------------------------------------------------------|
|  | •  | eliminating the ability ofstockholders to call special meetings of stockholders; |

|  |              |                                                      |
|--|--------------|------------------------------------------------------|
|  | •  | permitting stockholder actionby written consent; and |

|  |              |                                                                                                                                                                                     |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | establishing advance noticerequirements for nominations for election to the board of directors orfor proposing matters that can be acted on by stockholders atstockholder meetings. |

These provisions, if included in ourarticles of incorporation or by-laws, could allow our Board ofDirectors to affect the investor’s rights as a stockholder sincethe Board of Directors can make it more difficult for preferredstockholders or common stockholders to replace members of the Board.Because the Board of Directors is responsible for appointing themembers of the management team, these provisions could in turn affectany attempt to replace the current or future management team.

Our Common Stock may be considered ‘‘pennystock’’ and may be difficult to trade.

The SEChas adopted regulations that generally define ‘‘pennystock’’ to be an equity security that has a market orexercise price of less than $5.00 per share, subject to specificexemptions. The market price of our Common Stock may be less than $5.00per share and, therefore, may be designated as a ‘‘pennystock’’ according to SEC rules. This designation requiresany broker or dealer selling these securities to disclose certaininformation concerning the transaction, obtain a written agreement fromthe purchaser and determine that the purchaser is reasonably suitableto purchase the securities. These rules may restrict the ability ofbrokers or dealers to sell our Common Stock and may affect the abilityof investors to sell their shares. In addition, since our Common Stockis currently only quoted on the OTCBB, investors may find it difficultto obtain accurate quotations of our Common Stock and may experience alack of buyers to purchase such stock or a lack of market makers tosupport the stock price.

A significant number of our sharesare eligible for sale, and their sale could depress the market price ofits stock.

Sales of a significant number of shares of ourCommon Stock in the public market following the effectiveness of ourregistration statement filed on March  9,  2006 covering thesecurities to be sold by the selling stockholders could harm the marketprice of our Common Stock. As additional shares of Common Stock to besold under the prospectus included as part of such registrationstatement, the supply of Common Stock will increase, which coulddecrease its price. Additionally, some or all of our shares of CommonStock may be offered from time to time in the open market pursuant toRule 144, and these sales may have a depressive effect on the marketfor shares of Common Stock. In general, a 

29

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person who has held restricted shares for aperiod of one year may, upon filing with the SEC a notification on Form144, sell into the market Common Stock in an amount equal to thegreater of 1% of the outstanding shares or the average weeklynumber of shares sold in the last four weeks prior to such sale. Suchsales may be repeated once each three months, and any amount of therestricted shares may be sold by a non-affiliate after they have beenheld two years.

There is no public market for our CommonStock other than OTCBB.

There is no public market for ourCommon Stock other than the market that exists in the Common Stock ofthe Company on the over-the-counter bulletin board market(‘‘OTCBB’’). There can be no assurance that anyother trading market will develop in the Common Stock of the Company,or that the OTCBB market trading will be sustained.

UntilNovember, 2005 we were a public shell company. There are certain risksassociated with transactions with public shell companies generally,including increased SEC scrutiny and regulation and lack of analystcoverage of the Company.

In November  2005, wesucceeded to the business of MDwerks Global Holdings, Inc. and theXeni  Companies pursuant to a merger of a wholly owned subsidiaryof ours into MDwerks Global Holdings, Inc. (the‘‘Merger’’). As a result of the Merger, MDwerksGlobal Holdings, Inc. became our wholly owned subsidiary and we beganto operate its business and the businesses of the Xeni  Companiesas our sole line of business. Until such time, the Company was and hadbeen effectively a public shell company with no material assets oroperations whose only value was that it maintained current filings withthe SEC and a class of securities that was offered for sale pursuant tothe OTCBB. The Merger provided an immediate benefit for the thenexisting stockholders of the Company that might not have been readilyavailable, or available at all, to other stockholders who eitheracquired their shares of stock in connection with the purchase of Unitsin this Offering or otherwise.

Substantial additional risks areassociated with a public shell merger transaction such as absence ofaccurate or adequate public information concerning the public shell;undisclosed liabilities; improper accounting; claims or litigation fromformer officers, directors, employees or stockholders; contractualobligations; regulatory requirements and others. Although managementperformed due diligence on the Company, there can be no assurance thatsuch risks do not occur. The occurrence of any such risk couldmaterially adversely affect the Company’s results of operations,financial condition and stock price. In addition, the cost ofoperations of the Company has increased as a result of the Merger dueto legal, regulatory, and accounting requirements imposed upon acompany with a class of registered securities and based upon theacquisition by the Company of an operating company.

Additionalrisks may exist since the Merger involved a ‘‘reversemerger’’ or ‘‘reverse publicoffering.’’ Security analysts of major brokerage firms maynot provide coverage of the Company since there is no incentive tobrokerage firms to recommend the purchase of the Common Stock. Noassurance can be given that brokerage firms will want to conduct anysecondary public offerings on behalf of the Company in the future.

There has been a limited active public market for the CommonStock, and prospective investors may not be able to resell their sharesat or above the offering price, if at all.

Shares of ourCommon are traded on the Over the Counter Bulletin Board(‘‘OTCBB’’). Although we currently plan onseeking to retain the OTCBB status of the Company so that theregistered securities of the Company will have the benefit of a tradingmarket, we will likely be traded only in the OTCBB market for theforeseeable future. Listing on a national exchange such as the AMEX, orNASDAQ Small Cap market may be sought, but is not assured. There is noguarantee that if such listing is pursued the Company will meet thelisting requirements or that such efforts to list the Company’sCommon Stock on any national or regional exchange or the NASDAQ SmallCap market will be successful, or if successful, will be maintained,including but not limited to requirements associated with maintenanceof a minimum net worth, minimum stock price and ability 

30

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to establish a sufficient number of marketmakers. As a result, the reported prices for the Company’ssecurities may be: (i) arbitrarily determined, as a result of thevaluation ascribed to the shares in transactions by the Company andadopted for purposes of securities offerings; and (ii) the result ofmarket forces, and as such reported prices may not necessarily indicatethe value of the traded shares or of the Company. Furthermore, therehas been a limited to no active public market for the Common Stock. Anactive public market for the Common Stock may not develop or besustained.

The market price of our securities may fluctuatesignificantly in response to factors, some of which will be beyond ourcontrol, such as the announcement of new products or productenhancements by the Company or its competitors; developments concerningintellectual property rights and regulatory approvals; quarterlyvariations in our competitors’ results of operations; changes inearnings estimates or recommendations by securities analysts;developments in our industry; and general market conditions and otherfactors, including factors unrelated to our operations.

Thestock market in general may experience extreme price and volumefluctuations. In particular, market prices of securities of technologycompanies have experienced fluctuations that often have been unrelatedor disproportionate to the operating results of these companies. Marketfluctuations could result in extreme volatility in the price of theCommon Stock, which could cause a decline in the value of the CommonStock. Prospective investors should also be aware that price volatilitymight be exacerbated if the trading volume of the Common Stock islow.

There are additional costs of being a public companyand those costs may be significant.

We are a publiclytraded company, and, accordingly, subject to the information andreporting requirements of the U.S. securities laws. The U.S. securitieslaws require, among other things, review, audit and public reporting ofthe Company’s financial results, business activities and othermatters. The public company costs of preparing and filing annual andquarterly reports, proxy statements and other information with the SECand furnishing audited reports to stockholders will cause our expensesto be higher than they would be if we were privately-held. In addition,the Company will incur substantial expenses in connection with thepreparation of the registration statement and related documents withrespect to the registration of the Common Stock required to beregistered pursuant to the Company’s undertaking to file aregistration statement as described herein. These increased costs maybe material and may include the hiring of additional employees and/orthe retention of additional consultants and professionals. Failure bythe Company to comply with the federal or state securities laws couldresult in private or governmental legal action against the Companyand/or its officers and directors, which could have a detrimentaleffect on the business and finances of the Company, the value of theCompany’s stock and the ability of stockholders to resell theirstock.

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|              |          |
|--------------|----------|
| ITEM2.  | PROPERTY |

We lease our officespursuant to terms of a lease with an unaffiliated party. We do not ownany real property.

|               |                  |
|---------------|------------------|
| ITEM 3.  | LEGALPROCEEDINGS |

We are not a party to any pending legalproceedings.

|               |                                                    |
|---------------|----------------------------------------------------|
| ITEM 4.  | SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS |

On September30,  2005, our stockholders authorized, by majority writtenconsent, a 1 for 2 reverse split of the Corporation’soutstanding Common Stock, $0.001 par value.

On October13,  2005, our board of directors authorized a name change fromour former name, ‘‘Western Exploration, Inc.’’,to our present name, ‘‘MDwerks, Inc.’’, andauthorized an amendment of Article 4 of our Articles of Incorporationto give the board of directors authority to provide for, designate andissue one or more series of Preferred Stock of the Corporation, subjectto the terms and conditions set forth therein. Approval of the namechange and amendment of Article 4 was authorized by stockholder writtenconsent on October  13,  2005.

On November16,  2005, our board of directors and a majority of ourstockholders, by joint written consent, authorized:

(i)    the adoption of the MDwerks, Inc. 2005Incentive Compensation Plan, replacing any other stock option orincentive compensation plan with the 2005 Incentive CompensationPlan;

(ii)    the Compensation Committee,or the entire Board, to administer 2005 Incentive Compensation Plan;and

(iii)    the appointment of the firmGoldstein Golub Kessler LLP as independent auditor.

OnNovember  16,  2005, our board of directors and stockholders,by joint written consent, authorized the acceptance of the resignationsof Peter Banysch and Victor Bowman as members of the board of directorsand as officers of the Corporation, and authorized the election andappointment of Howard Katz, Solon Kandel, David Barnes, and Peter Dunneto fill the existing vacancies on the board and authorized the electionand appointment of new officers.

32

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PART II

|               |                                                            |
|---------------|------------------------------------------------------------|
| ITEM 5.  | MARKET FOR OUR COMMON STOCK AND RELATEDSTOCKHOLDER MATTERS |

Our Common Stock has been quoted on the OTCBulletin Board since November 16, 2005 under the symbol MDWK.OB.Prior to that date, there was no active market for our Common Stock. Asof March  1,  2006, there were approximately 85 holders ofrecord of our Common Stock.

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

|                                            |  |        |        |        |  |        |        |        |  |  |
|--------------------------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                                       |  | High   |        | Low    |
| Fiscal Year2004                            |  |   |   |   |  |   |   |   |
| FirstQuarter                               |  | $      | N/A    |   |  | $      | N/A    |   |
| SecondQuarter                              |  |   | N/A    |   |  |   | N/A    |   |
| ThirdQuarter                               |  |   | N/A    |   |  |   | N/A    |   |
| FourthQuarter                              |  |   | N/A    |   |  |   | N/A    |   |
| Fiscal Year2005                            |  |   |   |   |  |   |   |   |
| FirstQuarter                               |  | $      | N/A    |   |  | $      | N/A    |   |
| SecondQuarter                              |  |   | N/A    |   |  |   | N/A    |   |
| ThirdQuarter                               |  |   | N/A    |   |  |   | N/A    |   |
| FourthQuarter (as of November  16,  2005)  |  |   | 4.00   |   |  |   | 2.00   |   |
| FiscalYear2006                             |  |   |   |   |  |   |   |   |
| FirstQuarter (through February  28,  2006) |  | $      | 4.25   |   |  | $      | 2.50   |   |
|                                            |

The prices reported on the OTC BulletinBoard as high and low sales prices vary from inter-dealer bids whichstate inter-dealer quotations. Such inter-dealer bids (and reportedhigh and low sales prices) do not include retail mark-ups, mark-downsor commissions. Such prices do not necessarily represent actualtransactions.

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

Recent Sales of Unregistered Securities

The securities weissued upon the consummation of the Merger were not registered underthe Securities Act of 1933, as amended. At the effective time of theMerger, each outstanding share of common stock of MDwerks GlobalHoldings, Inc. was converted into the right to receive 0.158074 sharesof our common stock. At the effective time of the Merger, approximately59,162,000 shares of MDwerks Global Holdings, Inc. shares of commonstock were outstanding and no options or warrants to purchase shares ofMDwerks Global Holdings, Inc. common stock were outstanding. As aresult of the Merger, the approximately 59,162,000 shares of MDwerksGlobal Holdings, Inc. that were outstanding were exchanged forapproximately 9,352,000 shares of our Common Stock. Set forth below isa list of shareholders who received shares of Common Stock inconnection with such merger and the number of shares they received:

33

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|                                         |  |                          |           |        |  |  |
|-----------------------------------------|--|--------------------------|-----------|--------|--|--|
| Name                                    |  | Number ofShares Received |
| Peter Dunne                             |  |                     | 39,519    |   |
| RosemarieManchio                        |  |                     | 19,715    |   |
| Steven Brandenburg IRA                  |  |                     | 11,903    |   |
| Thomas Stephens                         |  |                     | 35,077    |   |
| Ronald & Lydia Hankins JTWROS       |  |                     | 13,478    |   |
| Bernard O’Neil                    |  |                     | 17,319    |   |
| Robert Bouvier                          |  |                     | 1,628     |   |
| Arthur J. Ballinger                     |  |                     | 11,959    |   |
| RogerHermes                             |  |                     | 36,452    |   |
| F. Bradford Wilson                      |  |                     | 19,805    |   |
| John & Jeanie Garell JTWROS         |  |                     | 62,236    |   |
| Jai Gaur                                |  |                     | 988       |   |
| Phil Dean                               |  |                     | 39,233    |   |
| JosephMorgillo                          |  |                     | 21,435    |   |
| Solon Kandel & VivianKandel TEN ENT |  |                     | 1,018,310 |   |
| 73142 Corp.                             |  |                     | 113,813   |   |
| Arrowhead Consultants, Inc.             |  |                     | 294,308   |   |
| Glenwood Capital, Inc.                  |  |                     | 294,308   |   |
| Steven Brandenburg                      |  |                     | 9,726     |   |
| Kay Garell Trust                        |  |                     | 28,041    |   |
| Wesley Neal                             |  |                     | 11,856    |   |
| Sol Bandiero                            |  |                     | 83,679    |   |
| StephenKatz                             |  |                     | 176,152   |   |
| Gerald Maresca                          |  |                     | 71,713    |   |
| Tonia Pfannenstiel                      |  |                     | 23,350    |   |
| Steven Weiss                            |  |                     | 65,809    |   |
| Phil Margetts                           |  |                     | 33,483    |   |
| RonaldHankins                           |  |                     | 13,609    |   |
| John Garell                             |  |                     | 16,666    |   |
| Todd Adler                              |  |                     | 131,751   |   |
| Leanne Kennedy                          |  |                     | 56,501    |   |
| JonZimmerman                            |  |                     | 54,251    |   |
| Howard Katz and DeniseKatz TEN ENT      |  |                     | 1,084,001 |   |
| Harley Kane                             |  |                     | 102,334   |   |
| Lauren Kluger                           |  |                     | 24,542    |   |
| MedWerks, LLC                           |  |                     | 5,115,912 |   |
| Larry Biggs                             |  |                     | 59,968    |   |
| Peter Chung                             |  |                     | 38,750    |   |
| Sparta Road, Ltd.                       |  |                     | 38,750    |   |
| ToddSnyder                              |  |                     | 20,000    |   |
| Frank Essner Trust                      |  |                     | 20,000    |   |
| Jason Clark                             |  |                     | 20,000    |   |
|                                         |

In connection with the Merger, wecompleted the closing of a private offering of our securities in which,through December  31,  2005, we sold an aggregate ofapproximately 64 Units to accredited investors, pursuant to theterms of a Confidential Private Placement Memorandum dated June13,  2005, as supplemented. Each Unit consists of 10,000 shares ofCommon Stock and a warrant to purchase 10,000 shares of Common Stock.Each warrant entitles the holder to purchase 10,000 shares of CommonStock for $2.50 per share. The Units were offered by BrookshireSecurities Corporation, as placement agent, pursuant to a placementagent agreement under which the 

34

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placement agent, in addition to a percentageof gross proceeds of the Private Placement, received 96,000 shares ofCommon Stock and a warrant to purchase up to an aggregate of 64,000shares of Common Stock. We realized gross proceeds from the PrivatePlacement of $1,600,000, before payment of commissions and expenses.The private placement was made solely to ‘‘accreditedinvestors,’’ as that term is defined in Regulation D underthe Securities Act of 1933. The shares of common stock and warrants topurchase common stock were not registered under the Securities Act of1933, or the securities laws of any state, and were offered and sold inreliance on the exemption from registration afforded by Section 4(2)and Regulation D (Rule 506) under the Securities Act of 1933 andcorresponding provisions of state securities laws. Set forth below is alist of the purchasers in the Private Placement and the number of Unitspurchased:

|                                         |  |                      |            |                        |  |        |      |        |  |  |
|-----------------------------------------|--|----------------------|------------|------------------------|--|--------|------|--------|--|--|
| Name                                    |  | Amount Paidfor Units |            | NumberofUnitsPurchased |
| Arrowhead Consultants, Inc.             |  | $                    | 149,500.00 |                   |  |   | 5.98 |   |
| Constantine G.Barbounis                 |  | $                    | 50,000.00  |                   |  |   | 2    |   |
| BrookshireSecurities Corp.              |  | $                    | 17,000.00  |                   |  |   | 0.68 |   |
| Daniel R. Brown                         |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Jason Clarke / Tanya Clarke (T/E)       |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Donia Hachem Revocable Trust            |  | $                    | 50,000.00  |                   |  |   | 2    |   |
| Ronald Hankins                          |  | $                    | 22,000.00  |                   |  |   | 0.88 |   |
| Philip J.Hempleman                      |  | $                    | 100,000.00 |                   |  |   | 4    |   |
| RogerHermes                             |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| DomenicoIannucci                        |  | $                    | 250,000.00 |                   |  |   | 10   |   |
| Carlos A.Jimenez                        |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Carlos A.Jimenez and Jason M.  Beccaris |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| JTP Holdings, LLC                       |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Dr.  Irving  Karten                     |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Rosemarie Manchio                       |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Daniel J.O'Sullivan                     |  | $                    | 100,000.00 |                   |  |   | 4    |   |
| Eric W. Penttinen                       |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Jonathan J. Rotella                     |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| SCG Capital LLC                         |  | $                    | 300,000.00 |                   |  |   | 12   |   |
| Todd Snyder                             |  | $                    | 50,000.00  |                   |  |   | 2    |   |
| Thomas S. Stephens                      |  | $                    | 12,500.00  |                   |  |   | 0.5  |   |
| Jamie Toddings                          |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Alphonse Tribuiani                      |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Roger Walker                            |  | $                    | 25,000.00  |                   |  |   | 1    |   |
| Todd Wiseberg                           |  | $                    | 50,000.00  |                   |  |   | 2    |   |
| Jon R. Zimmerman                        |  | $                    | 50,000.00  |                   |  |   | 2    |   |
| Robert E. Zimmerman                     |  | $                    | 75,000.00  |                   |  |   | 3    |   |
|                                         |

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|              |                                                          |
|--------------|----------------------------------------------------------|
| ITEM6.  | MANAGEMENT'S DISCUSSION AND ANALYSIS ORPLAN OF OPERATION |

Overview

On November  16,2005, we acquired all of the outstanding capital stock of MDwerksGlobal Holdings, Inc. in connection with the merger of a wholly ownedsubsidiary of the Company with and into MDwerks Global Holdings, Inc.(the ‘‘Merger’’), with the former stockholdersof MDwerks being issued approximately 9,352,000 shares of common stockof the Company in exchange for all their shares of common stock ofMDwerks Global Holdings, Inc. In connection with the Merger, we changedour name to MDwerks, Inc. Simultaneously with the closing of theMerger, we completed the closing of a private placement of units, witheach unit consisting of 10,000 shares of our common stock and a warrantto purchase 10,000 shares of our common stock at an exercise price of$2.50 per share, with gross proceeds of $1,600,000 and net proceeds tous, after deduction of offering expenses and commissions paid at theclosing, of $1,310,000 (the ‘‘PrivatePlacement’’). As we have ceased our prior mining operationswe will operate the business of MDwerks Global Holdings, Inc. and theXeni Companies as our sole line of business, therefore the followingdiscussion and analysis is of the financial condition and results ofoperations for the year ended December  31,  2005 and 2004 ofMDwerks Global Holdings, Inc. and the Xeni Companies. The followingdiscussion and analysis should be read in conjunction with thefinancial statements, including footnotes, and other informationpresented in this prospectus. For purposes of the following discussionand analysis, references to ‘‘we’’,‘‘our’’, ‘‘us’’ or the‘‘Company’’ refers to MDwerks, Inc. andincludes MDwerks Global Holdings, Inc. as its wholly-owned subsidiaryand the Xeni Companies as indirect wholly-owned subsidiaries.

MDwerks Global Holdings, Inc. was incorporated under the laws of thestate of Florida on October  23,  2003. It was originallyformed to provide international telecommunications products andservices. In April  2004, MDwerks Global Holdings, Inc. decidednot to pursue the telecommunications business. In December  2004,it decided to focus on a new line of business involving healthcareprovider claims processing, funding and related services. On May25,  2005, MDwerks Global Holdings, Inc. changed its name fromGlobal IP Communications, Inc, to MDwerks Global Holdings, Inc.

On June  7,  2005, MDwerks Global Holdings, Inc. enteredinto and consummated Share Exchange Agreements with all of thestockholders of each of the Xeni Companies (Xeni Medical, XeniFinancial and Xeni Billing). Pursuant to each of the Share ExchangeAgreements, MDwerks Global Holdings, Inc. acquired 100% of theissued and outstanding shares of common stock of each of the XeniCompanies, in exchange for approximately 52,623,000 shares of commonstock of MDwerks Global Holdings, Inc. (which shares, together with theshares of the holders of common stock of MDwerks Global Holdings, Inc.prior to the share exchanges were exchanged for approximately 9,352,000shares of our common stock in connection with the Merger). As a resultof the share exchanges, each of the Xeni Companies became awholly-owned subsidiary of MDwerks Global Holdings, Inc.

Theacquisition of the Xeni Companies was accounted for as a reversemerger, because, after giving effect to the share exchanges, the formerstockholders of the Xeni Companies held a majority of the outstandingcommon stock of MDwerks Global Holdings, Inc. on a voting and fullydiluted basis. As a result of the share exchanges, Xeni Medical wasdeemed to be the acquirer for accounting purposes. Accordingly, thefinancial statements presented are those of Xeni Medical for allperiods prior to the acquisition of the Xeni Companies on June7,  2005, and the financial statements of the consolidatedcompanies from the acquisition date forward. The historicalstockholders' deficiency of the Xeni Companies prior to theiracquisition has been retroactively restated for the equivalent numberof shares received in the acquisition. The restated consolidatedstockholders' deficiency of the accounting acquirer is carriedforward after the acquisition.

Xeni Medical provides a web-basedpackage of electronic claims solutions to the healthcare providerindustry. Through internet access to our‘‘MDwerks’’ suite of proprietary products andservices, healthcare providers can significantly improve dailyinsurance claims transaction processing, administration, funding andmanagement.

Xeni Financial offers advance funding to healthcareproviders secured by claims processed through the MDwerks system.

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Xeni Billing offers healthcare providersbilling services facilitated through the MDwerks suite of products andservices.

Critical Accounting Policies

The discussionand analysis of our financial condition and results of operations arebased on our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted inthe United States. The preparation of these consolidated financialstatements requires us to make estimates and judgments that affect thereported amounts of assets, liabilities, revenues and expenses, andrelated disclosure of contingent assets and liabilities. On an on-goingbasis, we evaluate our estimates based on historical experience and onvarious other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgmentsabout the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ fromthese estimates under different assumptions or conditions.

Weapply the Securities and Exchange Commission's Staff AccountingBulletin 104 for revenue recognition. In general, we record revenuewhen persuasive evidence of an arrangement exists, services have beenrendered or product delivery has occurred, the sales price to thecustomer is fixed or determinable, and collectability is reasonablyassured. We have identified the policy below as critical to ourbusiness operations and understanding of our financial results:

Revenues derived from fees related to claims and contract managementservices are generally recognized when services are provided to thecustomer. We provide funding services to unaffiliated healthcareproviders. These arrangements typically require us to advance funds tothese unaffiliated healthcare providers (our customers) in exchange forliens on the receivables related to invoices remitted to their clientsfor services performed. The advances are repaid through the remittanceof payments of receivables by their clients directly to us. We withholdfrom these advances interest, an administrative fee and other chargesas well as the amount of receivables relating to prior advances thatremain unpaid after a specified number of days. These interest charges,administrative fees and other charges are recognized as revenue whenearned.

Revenues derived from fees related to billing andcollection services are generally recognized when the customer'saccounts receivable are collected. Revenues from implementation feesare generally recognized upon over the term of the customer agreement.Revenues derived from maintenance, administrative and support fees aregenerally recognized at the time the services are provided to thecustomer.

Results of Operations

For theYear Ended December  31,  2005 Versus Year EndedDecember  31,  2004

Revenues

In July  2005, we beganprocessing claims on our MDwerks suite of products for our first clientand recorded revenues of $42,816 during the six months endedDecember  31,  2005. Additionally, our subsidiary XeniFinancial provided receivable financing for that client and earnedfinancing income of $15,008 for the same period.

OperatingExpenses

Our operating expenses significantly increased forthe year ended December  31,  2005 from the year endedDecember  31,  2004 as a result of increased operations as webegan to implement our business plan.

For the year endedDecember  31,  2005, total operating expenses were $2,038,449as compared to $111,224 for the year ended December  31,2004, an increase of $1,927,225. Included in this increase for the yearended December  31,  2005 is the following:

1.    We recorded compensation expense of $364,248 as compared to$0 for the year ended December  31,  2004. This increase wasattributable to the hiring of permanent sales, operations and

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executive staff, which began onSeptember  26,  2005. We expect compensation expense toincrease as we hire additional administrative, sales and technicalpersonnel;

2.    Consulting expense amounted to $880,567 ascompared to $0 for the year ended December  31,  2004. Forthe year ended December  31,  2005, we paid consultants forsubstantially all of our sales, operations and executive functionsprior to the hiring of permanent staff on September  26,2005. In addition, we recorded $250,000 in non-cash stock-basedconsulting expense for services rendered in connection with thestructuring and consummation of our Merger;

3.    Professional fees amounted to $359,006 as compared to$100,520 for the year ended December  31,  2004, an increaseof $258,486, or 257%. This increase was attributable toincreased accounting fees for the audit of our financial statements andSEC filings, and an increase in legal fees related to the Merger, ourshare exchange agreements and other corporate matters; and

4.    Selling, general and administrative expenses were $434,628as compared to $10,704 for the year ended December  31,2004, an increase of $423,924. This increase was attributable to anincrease in all of our general and administrative expenses as weimplement our business plan.

During the year endedDecember  31,  2005, we recorded a loss on the revaluation ofwarrant liability of $592,467 related to the change in fair value ofthe warrants during this period. In accordance with Emerging IssuesTask Force Issue 00-19 (‘‘EITF 00-19’’),‘‘Accounting for Derivative Financial Instruments IndexedTo, and Potentially Settled in, a Company's OwnStock’’, we initially accounted for the fair value of thewarrants as a liability since we will incur a substantial penalty if wecannot comply with the warrant holders' registration rights. As ofthe closing date of the private placement the fair value of thewarrants was $1,142,770 calculated utilizing the Black-Scholes optionpricing model. In addition, changes in the market value of our commonstock from the closing date through the effective date of theregistration statement will result in non-cash charges or credits tooperations to reflect the change in fair value of the warrants duringthis period. We recorded a charge to operations of approximately$592,467 during the year ended December  31,  2005 to reflectthe change in market value of the warrants. At the effective date, thefair value of the warrants will be reclassified to equity. For the yearended December  31,  2004, we did not have any warrantliability.

For the year ended December  31,  2005,interest expense was $5,242 as compared to $917 for the year endedDecember  31,  2004, an increase of $4,325. This increase wasdue to an increase in borrowings.

During the year endedDecember  31,  2004, we recorded a gain from the forgivenessof liabilities of $1,092,003 related to the settlement of old accountspayable. For the year ended December  31,  2005, we did nothave any forgiveness of liabilities income.

As a result of thesefactors, we reported a net loss of $(2,576,938) or $(.27) per share forthe year ended December  31,  2005 as compared to net incomeof $979,862 or $.11 per share for the year ended December31,  2004.

Liquidity and Capital Resources

On December  31,  2005, we completed and terminated aPrivate Placement Offering thereby offering no additional Units forsale. The Private Placement Offering resulted in gross proceeds of$1,600,000 and net proceeds to the Company of approximately $1,310,000,after deduction of offering expenses and commissions paid at theclosing. We anticipate conducting an additional Private Placementtransaction in an additional amount of gross proceeds of up to$3,000,000 and $4,040,000 if the over-allotment option is exercised.While we have sufficient funds to conduct our business and operationsas they are currently undertaken for the near term, our ability tocontinue to implement our revenue and profit growth strategy could beadversely affected if we are unable to consummate the additionalprivate placement transaction.

Through December  31,2005, in addition to the proceeds of the Private Placement, we raisedcash of $119,229 from the sale of shares of our common stock.Additionally, we received capital contributions of $550,886 from formerstockholders of the Xeni Companies.

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Through December  31,  2005, wealso borrowed $135,000 under 8% promissory notes.  Theoutstanding balance and accrued and unpaid interest become due andpayable on dates ranging through July  8,  2006.

As ofSeptember  30,  2005, we borrowed $98,700 from an unrelatedindividual. The loan bears interest at 8% per annum and ispayable on a monthly basis, less fees. The loan shall be repaidproportionally upon repayment of certain of our notes receivable.

We used the proceeds from the sales of common stock throughDecember  31,  2005 and proceeds from notes and loans payablefor working capital purposes and to fund our note receivable of whichwe have $363,845 owed to us at December  31,  2005. We willcontinue to advance funds under note agreements to providers thatsubscribe to our MDwerks financial services solution.

Wecurrently have no material commitments for capital expenditures.

Cash flows

At December  31,  2005, we hadcash of $766,464.

Net cash used in operating activities was$1,777,562 for the year ended December 31, 2005 as compared to$323,016 for the year ended December  31,  2004. Thisincrease is primarily attributable to an increase in our net lossand:

1.    An increase of $12,752 in depreciation andamortization as a result of an increase in the acquisition of propertyand equipment;

2.    An increase of $363,845 in notesreceivable as a result of funding of provider receivables;

3.    An increase of $79,231 in prepaid and other current assetsfor the payment of software licenses that will be amortized over thelicense period; offset by

4.    An increase in accountspayable and accrued expenses related to an increase in operations.

Net cash used in investing activities increased to $81,950 for theyear ended December  31,  2005 as compared to $11,869 for theyear ended December  31,  2004. This change is primarily theresult of an increase of $81,950 in capital expenditures for theacquisition of computer and office equipment and furniture during theyear ended December  31,  2005 as compared to the priorperiod.

Net cash provided by financing activities was $2,358,588for the year ended December  31,  2005 as compared to$602,273 for the year ended December  31,  2004. For the yearended December  31,  2005, we received proceeds from notesand loans payable of $233,700, received capital contributions from theformer stockholders of the Xeni Companies of $550,886, and received netproceeds from the sale of our common stock of $1,574,002. For the yearended December  31,  2004, we received capital contributionsof $499,090 from the former stockholders of the Xeni Companies, wereceived proceeds of $250,000 from notes payable, and received netproceeds of $50,000 from the sale of common stock. These increases wereoffset by the repayment of related party loans of $196,817.

OffBalance Sheet Arrangements

We had no off balance sheetarrangements as of December  31,  2005.

CautionaryLanguage Regarding Forward-Looking Statements and Industry Data

This report contains ‘‘forward-lookingstatements’’ within the meaning of the Private SecuritiesLitigation Reform Act of 1995 that involve risks and uncertainties,many of which are beyond our control. Our actual results could differmaterially and adversely from those anticipated in such forward-lookingstatements as a result of certain factors, including those set forthbelow and elsewhere in this prospectus. Important factors that maycause actual results to differ from projections include, but are notlimited to, for example:

|  |              |                             |
|--|--------------|-----------------------------|
|  | •  | adverse economicconditions; |

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|  |              |                                                                                |
|--|--------------|--------------------------------------------------------------------------------|
|  | •  | inabilityto raise sufficient additional capital to implement our businessplan; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | intensecompetition, including entry of newly-developed alternative drugtechnologies; |

|  |              |                                                                                     |
|--|--------------|-------------------------------------------------------------------------------------|
|  | •  | unexpected costs andoperating deficits, and lower than expected sales and revenues; |

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | adverse results of anylegal proceedings; |

|  |              |                                                                               |
|--|--------------|-------------------------------------------------------------------------------|
|  | •  | inability to satisfygovernment and commercial customers using our technology; |

|  |              |                                                                 |
|--|--------------|-----------------------------------------------------------------|
|  | •  | the volatility of ouroperating results and financial condition; |

|  |              |                                                                                                                                  |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------|
|  | •  | inability to attractor retain qualified senior management personnel, including sales andmarketing, and technology personnel; and |

|  |              |                                                                |
|--|--------------|----------------------------------------------------------------|
|  | •  | other specific risksthat may be alluded to in this prospectus. |

All statements, otherthan statements of historical facts, included in this report regardingour strategy, future operations, financial position, estimated revenueor losses, projected costs, prospects and plans and objectives ofmanagement are forward-looking statements. When used in thisprospectus, the words ‘‘will,’’‘‘may,’’ ‘‘believe,’’‘‘anticipate,’’‘‘intend,’’‘‘estimate,’’‘‘expect,’’‘‘project,’’ ‘‘plan’’and similar expressions are intended to identify forward-lookingstatements, although not all forward-looking statements contain suchidentifying words. All forward-looking statements speak only as of thedate of this report. We do not undertake any obligation to update anyforward-looking statements or other information contained herein.Potential investors should not place undue reliance on theseforward-looking statements. Although we believe that our plans,intentions and expectations reflected in or suggested by theforward-looking statements in this report are reasonable, no one canassure investors that these plans, intentions or expectations will beachieved.

Information regarding market and industry statisticscontained in this report is included based on information available tous that we believe is accurate. It is generally based on academic andother publications that are not produced for purposes of securitiesofferings or economic analysis. We have not reviewed or included datafrom all sources, and we cannot assure investors of the accuracy orcompleteness of the data included in this prospectus. Forecasts andother forward-looking information obtained from these sources aresubject to the same qualifications and the additional uncertaintiesaccompanying any estimates of future market size, revenue and marketacceptance of products and services. We have no obligation to updateforward-looking information to reflect actual results or changes inassumptions or other factors that could affect those statements.

|              |                      |
|--------------|----------------------|
| ITEM 7  | FINANCIAL STATEMENTS |

See ourFinancial Statements beginning on page F-1.

|              |                                                                                     |
|--------------|-------------------------------------------------------------------------------------|
| ITEM8.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE |

On November  16,2005, we dismissed Gately & Associates, LLC as our independentaccountant. Gately & Associates, LLC had been previously engaged asthe principal accountant to audit our financial statements. The reasonfor the dismissal of Gately & Associates, LLC was that, followingthe Merger the former stockholders of MDwerks Global Holdings, Inc.became the owners of a majority of the outstanding shares of our commonstock. The business of MDwerks Global Holdings, Inc. became our primarybusiness, and the then current independent registered accountants ofMDwerks Global Holdings, Inc. was the firm of Goldstein Golub KesslerLLP. We believe that it is in our best interests to have GoldsteinGolub Kessler LLP continue to work with our business. Goldstein GolubKessler LLP is located at 1185 Avenue of the Americas, Suite 500, NewYork, NY 10036.

As of November  16,  2005, GoldsteinGolub Kessler LLP was engaged as our new independent publicaccountants. Appointment of Goldstein Golub Kessler LLP was recommendedand approved by the Audit Committee of our Board of Directors. Duringour two most recent fiscal years, and the subsequent interim periods,prior to November  16,  2005, we did not consult GoldsteinGolub Kessler LLP regarding either: (i) the application of accountingprinciples to a specified transaction, completed 

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or proposed, or the type of audit opinionthat might be rendered on our financial statements, or (ii)  anymatter that was either the subject of a disagreement as defined in Item304(a)(1)(iv) of Regulation S-B or a reportable event as described inItem 304(a)(1)(v) of Regulation S-B.

The reports of Gately &Associates, LLC on our financial statements for the past two yearscontained no adverse opinion or disclaimer of opinion and were notqualified or modified as to uncertainty, audit scope or accountingprinciples.

During our two most recent fiscal years, and thesubsequent interim periods, prior to November  16,  2005,there were no disagreements with Gately & Associates, LLC on anymatter of accounting principles or practices, financial statementdisclosure, or auditing scope or procedure which, if not resolved tothe satisfaction of Gately & Associates, LLC, would have caused itto make reference to the matter in connection with its reports. Therewere no ‘‘reportable events’’ as that term isdescribed in Item 304(a)(1)(v) of Regulation S-K.

A letter fromGately & Associates, LLC regarding its agreement with thestatements made by the Company in this Item 8 is filed herewith asExhibit 16.1.

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|----------------|------------------------|
| ITEM 8A.  | CONTROLS ANDPROCEDURES |

We maintain ‘‘disclosure controls andprocedures,’’ as such term is defined in Rule 13a-15(e)under the Securities Exchange Act of 1934 (the ‘‘ExchangeAct’’), that are designed to ensure that informationrequired to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified inthe Securities and Exchange Commission rules and forms, and that suchinformation is accumulated and communicated to our management,including our Chief Executive Officer and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure.We conducted an evaluation (the‘‘Evaluation’’), under the supervision and withthe participation of our Chief Executive Officer(‘‘CEO’’) and Chief Financial Officer(‘‘CFO’’), of the effectiveness of the designand operation of our disclosure controls and procedures(‘‘Disclosure Controls’’) as of the end of theperiod covered by this report pursuant to Rule 13a-15 of the ExchangeAct. Based on this Evaluation, our CEO and CFO concluded that ourDisclosure Controls were effective as of the end of the period coveredby this report.

We have also evaluated our internal controls forfinancial reporting, and there have been no significant changes in ourinternal controls or in other factors that could significantly affectthose controls subsequent to the date of their last evaluation.

Our management, including our CEO and CFO, does not expect that ourDisclosure Controls and internal controls will prevent all errors andall fraud. A control system, no matter how well conceived and operated,can provide only reasonable, not absolute, assurance that theobjectives of the control system are met. Further, the design of acontrol system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relativeto their costs. Because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, within the Companyhave been detected. These inherent limitations include the realitiesthat judgments in decision-making can be faulty, and that breakdownscan occur because of a simple error or mistake. Additionally, controlscan be circumvented by the individual acts of some persons, bycollusion of two or more people, or by management or board override ofthe control. The design of any system of controls also is based in partupon certain assumptions about the likelihood of future events, andthere can be no assurance that any design will succeed in achieving itsstated goals under all potential future conditions; over time, controlsmay become inadequate because of changes in conditions, or the degreeof compliance with the policies or procedures may deteriorate. Becauseof the inherent limitations in a cost-effective control system,misstatements due to error or fraud may occur and not be detected. CEOand CFO Certifications Appearing immediately following the signaturessection of this report there are Certifications of the CEO and the CFO.The Certifications are required in accordance with Section 302 of theSarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Itemof this report, which you are currently reading is the informationconcerning the Evaluation referred to in the Section 302 Certificationsand this information should be read in conjunction with the Section 302Certifications for a more complete understanding of the topicspresented.

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|                |                  |
|----------------|------------------|
| ITEM 8B.  | OTHERINFORMATION |

Not applicable.

PART III

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|--------------|----------------------------------|
| ITEM9.  | DIRECTORS AND EXECUTIVE OFFICERS |

Thefollowing table sets forth information regarding the members of ourBoard of Directors and our executive officers. The directors listedbelow will serve until the next annual meeting of our stockholders.Tonia Pfannenstiel has tendered her resignation as Vice President,Compliance, effective March  24,  2006. The Board ofDirectors has agreed to accept her resignation.

|                    |  |     |  |                                     |  |  |  |  |  |  |
|--------------------|--|-----|--|-------------------------------------|--|--|--|--|--|--|
| Name               |  | Age |  | Position                            |
| Howard Katz        |  | 64  |  | Chief ExecutiveOfficer and Director |
| Solon Kandel       |  | 45  |  | President and Director              |
| Vincent Colangelo  |  | 62  |  | Chief Financial Officer             |
| GerardMaresca      |  | 60  |  | Chief Operating Officer             |
| Steven M. Weiss    |  | 52  |  | Chief TechnologyOfficer             |
| Tonia Pfannenstiel |  | 36  |  | Vice President, Compliance          |
| David Barnes       |  | 63  |  | Director                            |
| Peter Dunne        |  | 48  |  | Director                            |
|                    |

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

Howard B.Katz became, effective as of November  16,  2005, ourChief Executive Officer and a Member of our Board of Directors.Mr.  Katz is also the Chief Executive Officer and a Director ofour wholly-owned subsidiary MDwerks Global Holdings, Inc., whichpositions he has held since June,  2005. Since July, 2004,Mr.  Katz has been a Director and Chief Executive Officer ofXeni  Medical Systems, Inc., and Mr.  Katz has been the soleDirector and Chief Executive Officer of Xeni Medical Billing Corp.since March  2005, and has been the sole Director and ChiefExecutive Officer of Xeni  Financial Services, Corporation sinceFebruary  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 inconnection with insurance and litigation matters. From August1998 to December, 2002, Mr.  Katz was the Chief Executive Officerof Imagine Networks, Inc., a company based in New York City thatengaged 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 August2005. Mr.  Katz has over 35 years of operating, financial andsenior management experience, in both public and private companies. Hisresponsibilities have included numerous progressive positions as CFO,President and CEO of ‘‘high tech’’, softwaredevelopment and other high growth businesses, including one involvingbanking transactions. Mr.  Katz was President of National FiberNetwork, Inc. which later became MetroMedia Fiber Network, Inc. andreached a peak public market capitalization of over $30  billion.Mr.  Katz has been a principal in, or helped consummate, numerouspublic offerings and other successful business ventures. Mr.  Katzreceived an MBA from New York University.

Solon L. Kandelbecame, effective as of November  16,  2005, our Presidentand a member of our Board of Directors. Mr.  Kandel is also thePresident and a Director of MDwerks Global Holdings, Inc., whichpositions 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 FinancialServices, Corporation since February  2005. Since November2000, Mr.  Kandel has been the Chief Executive Officer andManaging Member of The Ashwood Group, L.L.C., a venture development andbusiness consulting company based in Springfield, New Jersey. FromApril  1999 to October  2000, Mr.  Kandel was thePresident, Chief Executive Officer of Independent Wireless One, Inc., awireless voice, data and internet 

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company based in Albany, New York. FromApril  1999 to April  2002, Mr.  Kandel also served as amember of the Board of Directors of Independent Wireless One, Inc.Mr.  Kandel has enjoyed over 15  years of progressive anddiverse operating and senior management experience, ranging fromstart-up to large, multi-billion dollar company environments. Prior tobusiness management, Mr.  Kandel performed corporate and bankingtransactions law for several years and was a Senior Attorney at McCawCellular Communications. Mr.  Kandel received a JD from RutgersUniversity School of Law and is a Truman Scholar.

VincentColangelo became, effective as of November  16,  2005,our Chief Financial Officer. Since July, 2005, until becoming our ChiefFinancial Officer, Mr.  Colangelo provided consulting services tous. Since March  2004, Mr.  Colangelo was the President andPrincipal Consultant of Weston Business Advisors, Inc., a businessconsulting company based in Weston, Florida. From January  2003 toMarch  2004, Mr.  Colangelo was the President of CartridgeWorld Florida in Weston, Florida, a master franchisee for the State ofFlorida for a world wide print cartridge refilling organization. FromSeptember  1995 to December  2002, Mr.  Colangelo wasthe President and Principal Consultant of Birchwood Associates, Inc., abusiness consulting company based in Weston, Florida. Mr.Colangelo has over 35 years of financial executive and operationalmanagement experience. As a principal of the management consultingfirms, Mr.  Colangelo provided interim CFO, COO and generalfinancial consulting services to clients ranging from small businessesto Fortune 100 companies. Mr.  Colangelo brings to us a uniquecombination of financial management skills, industry experience andfamiliarity with our product line. Mr.  Colangelo was alsoPresident of a start-up multi-national publishing company and worked atXerox’ world headquarters as a consolidations and regulatoryreporting manager and as a financial planning manager. Mr.Colangelo received an MBA and a BBA from Iona College and is a formerNew York State CPA.

Gerard Maresca became, effectiveFebruary  14,  2006, our Chief Operating Officer. FromNovember  16,  2005 until February  14,  2006,Mr.  Maresca was our Vice President of Business Development. Priorto joining us, since January  2004, Mr.  Maresca has operateda technology and business consulting company called GMAR, Inc. FromFebruary  2000 to October  2003, Mr.  Maresca was theExecutive Vice President and Chief Technology Officer of MEDwerks, LLC,and was responsible for development of our products. Mr.  Marescahas 28 years of technology, engineering, and program managementexperience, focused on hardware and software development of computerbased products. Mr.  Maresca has served as a hardware and softwaresystem architect, with experience in Internet and web applications.While Product Director at Intel Corp.(‘‘Intel’’) for 9 1⁄2 years, hemanaged development of Intel's i860program parallelmicroprocessor, product marketing, manufacturing and R&D, as wellas new business development and client support. Mr.  Maresca wasalso Vice President at Diagnostic Retrieval Systems, Inc. for 8 yearsuntil he began working with MEDwerks, LLC. Mr.  Maresca received aBSEC from Brooklyn Polytech, and a MSCS from Columbia University. Heholds five U.S. patents and has published.

Stephen M.Weiss became, effective as of November  16,  2005, ourChief Technology Officer. Mr. Weiss has provided consulting services tous and served as acting Chief Technology Officer of MDwerks GlobalHoldings, Inc. since March  2005. From March  2002 toMarch  2005, Mr. Weiss was the Chief Technology Officer and ChiefOperating Officer of Enterprise Technology Corporation, a financialsoftware services consulting company that served many Fortune 500clients. From September  1999 to November  2001, Mr. Weisswas the Chief Technology Officer at Imagine Networks, Inc., where hedesigned and managed the development of electronic payment systemslinked to telecommunications pre-paid systems. Prior to joining ImagineNetworks, Inc., he co-founded AstraTek, a software products andconsulting firm that developed products and consulting services forfinancial and technology companies including Microsoft, IBM and Citrix.Mr. Weiss also served as Vice President at Bankers Trust Company forover 13 years, where he developed a number of advanced communicationsystems, including a global cryptography-based authentication systemand links in Tokyo between the bank’s back office systems andthe Bank of Japan’s money transfer and clearance systems. Mr.Weiss received a BA from Buffalo State College.

ToniaPfannenstiel became, effective as of November  16,  2005,our Vice President of Compliance. Since February  2003, Ms.Pfannenstiel has been self-employed as a legal, compliance and medical

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billing/coding consultant, and has providedconsulting services to us since January  2005. From December2001 to February  2003, Ms.  Pfannenstiel was an Associate atPanza, Maurer & Maynard, P.A. where she was responsible forhealthcare regulatory matters, including reimbursement, licensure,fraud and abuse, compliance and HIPAA. From July  2000 toDecember  2001, Ms.  Pfannenstiel was a legal assistant atCatri, Holton, Kessler, Kessler & Tuzzio, P.A., a law firmspecializing in insurance defense. Ms.  Pfannenstiel has enjoyed15 years of education and experience in healthcare operations,regulations and finance. She has extensive administrative, billing andcoding experience in various healthcare fields. Ms.  Pfannenstielreceived a JD from St. Louis University with a certificate in HealthLaw.

David Barnes became, effective as of November16,  2005, a member of our Board of Directors and will serve onour Audit Committee and our Compensation Committee. Mr.  Barneshas served as the Chief Financial Officer of American United Global,Inc., from May  15,  1996 to the present and has been ChiefFinancial Officer of Cyber Defense Systems, Inc. (OTCBB: CYDF) sinceAugust  1,  2005. Mr.  Barnes has also been a directorof American United Global, Inc. since August  1996. Mr.Barnes is also a member of the board of directors and Audit Committeeof each of SearchHelp, Inc. (OTCBB: SHLP), Thinkpath, Inc (OTCBB:THPHF) and Roadhouse Foods, Inc. (OTCBB: RHSE) and was a director andAudit Committee member of In Veritas Medical Diagnostics fromAugust  2004 to February  2005.

Peter Dunnebecame, effective as of November  16,  2005, a member of ourBoard of Directors and will serve on our Audit Committee and ourCompensation Committee. Mr.  Dunne has spent over 20 years incommunications management. Currently he is President and partner ofFranklin/Trade Graphics, LLC, a full service graphic services company,a position he has held since July  2002. From March  2002 toJuly  2002 he was Regional General Manager for KelmscottCommunications, LLC overseeing Franklin Graphics, Trade Litho, LittleRiver Press, and Lauderdale Graphics. From to September  2000 toJuly  2002 he held the position of Regional Controller for thesame companies. From September  1982 to September  2000 hewas Vice President and Controller of Franklin Graphics. Mr.Dunne’s other experiences include positions in Dataco, anational data entry service business, and Robertson Leasing Corp, anequipment leasing company, both formerly divisions of RobertsonFinancial Corporation. Mr.  Dunne is on the Board of Directors ofthe Printing Association of Florida and on the CEO Advisory Board tothe Printing Industries of America.

Board of DirectorComposition and Committees

The Company’s Board ofDirectors is comprised of four directors, Messrs. Katz, Kandel, Barnesand Dunne. We expect to increase the size of our Board of Directors tofive directors. David Barnes and Peter Dunne will serve as the initialmembers of our Audit Committee and Compensation Committee. We intend tohave three independent parties serve on each of the Audit Committee andthe Compensation Committee.

Director Compensation

Weintend to compensate non-management directors through the issuance ofstock awards including, without limitation, stock options, restrictedstock awards, stock grants and/or stock appreciation rights.

Audit Committee Financial Expert

David Barnes will serve onour Audit Committee as an audit committee financial expert. Mr.Barnes is independent (as such term is used in Item 7(d) (3) (iv) ofSchedule 14A under the Exchange Act).

Executive OfficerEmployment Agreements

Effective January  1,  2006,each of Howard B. Katz, Solon L. Kandel, Vincent Colangelo, Stephen W.Weiss and Gerard J. Maresca entered into an employment agreement withus. The employment agreements with Messrs. Katz and Colangelo extendfor a term expiring on December  31,  2008, and 

44

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the employment agreements with Messrs.Kandel, Weiss and Maresca extend for a term expiring on December31,  2006. Pursuant to these employment agreements, Mr.  Katzhas agreed to devote substantially all of his time, attention andability, and Messrs. Kandel, Colangelo, Weiss and Maresca have agreedto devote all of their time, attention and ability, to our business asour Chief Executive Officer, President, Chief Financial Officer, ChiefTechnology Officer and Vice President-Business Development,respectively. The employment agreements provide that Messrs. Katz,Kandel, Colangelo, Weiss and Maresca will receive a base salary duringcalendar year 2006 at an annual rate of $195,000, $175,000, $150,000,$150,000 and $150,000, respectively, for services rendered in suchpositions. During calendar years 2007 and 2008 under the employmentagreements for Messrs. Katz and Colangelo, their annual base salarieswill be increased to $225,000 and $300,000 for Mr.  Katz, and$175,000 and $200,000 for Mr.  Colangelo, respectively. Inaddition, each executive may be entitled to receive, at the solediscretion of our board of directors, cash bonuses based on theexecutive meeting and exceeding performance goals. The cash bonusesrange from up to 25% of the executive’s annual basesalary for Messrs. Weiss and Maresca, up to 100% of theexecutive’s annual base salary for Messrs. Kandel and Colangelo,and up to 150% of the executive’s annual base salary forMr.  Katz. Each of Messrs. Katz, Kandel, Colangelo, Weiss andMaresca are entitled to participate in our 2005 Incentive CompensationPlan. We have also agreed to pay or reimburse each executive up to aspecified monthly amount for the business use of his personal car andcell phone. Under Mr.  Kandel’s employment agreement, wealso agreed to reimburse him for expenses of up to $18,000 inconnection with his relocation to Florida.

The employmentagreements provide for termination by us upon death or disability(defined as 90 aggregate days of incapacity during any 365-consecutiveday period) of the executive or upon conviction of a felony or anycrime involving moral turpitude, or willful and material malfeasance,dishonesty or habitual drug or alcohol abuse by the executive, relatedto or affecting the performance of his duties. In the event any of theemployment agreements are terminated by us without cause, suchexecutive will be entitled to compensation for the balance of the termof his employment agreement or, if longer, for one year in the case ofMr.  Kandel and two years in the case of Messrs. Katz andColangelo. Messrs. Katz, Kandel and Colangelo also have the right, ifterminated without cause, to accelerate the vesting of any stockoptions or other awards granted to him under our 2005 IncentiveCompensation Plan. We intend to obtain commitments for key-man lifeinsurance policies for our benefit on the lives of Messrs. Katz, Kandeland Colangelo equal to three times their respective annual base salary.In addition to the key-man life insurance policies, we have agreed tomaintain throughout the term of each employment agreement 15-year termlife insurance policies on the lives of Messrs. Katz, Kandel andColangelo, with benefits payable to their designated beneficiaries, andto pay all premiums in connection with those policies.

In theevent of a change of control of our company, Messrs. Katz, Kandel andColangelo may terminate their employment with us within six monthsafter such event and will be entitled to continue to be paid pursuantto the terms of their respective employment agreements. The employmentagreements with Messrs. Weiss and Maresca do not have any change ofcontrol provisions.

The employment agreements also containcovenants (a) restricting the executive from engaging in any activitiescompetitive with our business during the terms of such employmentagreements and one year thereafter, (b) prohibiting the executive fromdisclosure of confidential information regarding us at any time and (c)confirming that all intellectual property developed by the executiveand relating to our business constitutes our sole and exclusiveproperty.

The foregoing summaries of our employment agreementsare qualified by reference to the full texts of the form of each of theSenior Executive Level Employment Agreement and Executive LevelEmployment Agreement, filed as Exhibits 10.1 and 10.2 to our CurrentReport on Form 8-K, filed with the SEC on January  5,  2006,respectively, each of which is incorporated herein in its entirety.

Currently, we do not have an employment agreement with ToniaPfannenstiel and, therefore, her employment is on an‘‘at-will’’ basis.

45

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Indemnification of Directors andOfficers

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

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

We may provide to pay the expensesof officers and directors incurred in defending a civil or criminalaction, suit or proceeding as the expenses are incurred and in advanceof the final disposition of the action, suit or proceeding, uponreceipt of an undertaking by or on behalf of the director or officer torepay the amount if it is ultimately determined by a court of competentjurisdiction that they are not entitled to be indemnified.

TheDGCL also permits a corporation to purchase and maintain liabilityinsurance or make other financial arrangements on behalf of any personwho is or was

|  |              |                                                |
|--|--------------|------------------------------------------------|
|  | •  | a director,officer, employee or agent of ours, |

|  |              |                                                                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | or is or was serving at therequest of the corporation as a director, officer, employee or agent ofanother corporation, partnership, joint venture, trust or otherenterprises. |

Such coverage may be for any liability assertedagainst them and liability and expenses incurred by them in theircapacity as a director, officer, employee or agent, or arising out oftheir status as such, whether or not the corporation has the authorityto indemnify them against such liability and expenses.

Insofaras indemnification for liabilities arising under the Securities Act, asamended, may be permitted to officers, directors or persons controllingour company pursuant to the foregoing provisions, we have been informedthat in the opinion of the SEC such indemnification is against publicpolicy as expressed in such Act and is therefore unenforceable.

Code of Ethics

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

Compliance with Section16(a) of the Securities Exchange Act of 1934

Section 16(a) ofthe Securities Exchange Act of 1934, as amended, which requiresexecutive officers and directors, and persons who beneficially own morethan ten (10%) percent of the common stock of a company with aclass of securities registered under the Securities Exchange Act of1934, to file initial reports of ownership and reports of changes inownership with the Securities and Exchange Commission, is not currentlyapplicable to us.

46

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|                |                       |
|----------------|-----------------------|
| ITEM 10.  | EXECUTIVECOMPENSATION |

Incentive Compensation Plan

InNovember, 2005, we approved the MDwerks, Inc. 2005 IncentiveCompensation Plan (the  ‘‘IncentivePlan’’). The Incentive Plan covers grants of stock options,grants of equity securities, dividend equivalents and other customaryitems covered by such plans. Persons eligible to receive awards underthe Incentive Plan are the officers, directors, employees, consultantsand other persons who provide services to us or any Related Entity (asdefined in the Incentive Plan).

The Incentive Plan will beadministered by our Compensation Committee, however, the Board ofDirectors can exercise any power or authority granted to theCompensation Committee under the Incentive Plan, unless expresslyprovided otherwise in the Incentive Plan.

We will reservebetween five to ten percent of our authorized Common Stock for issuancepursuant to grants under the Incentive Plan.

As ofFebruary  1,  2006, the following awards have been granted tothe executive officers named in this prospectus under the IncentivePlan.

|                   |  |                        |        |                            |  |                                              |         |         |  |        |      |         |  |  |
|-------------------|--|------------------------|--------|----------------------------|--|----------------------------------------------|---------|---------|--|--------|------|---------|--|--|
| Nameof Grantee    |  | IncentiveStock Options |        | Non-QualifiedStock Options |  | Percentage of allOptionsGranted to Employees |
| Howard Katz       |  |                   | 50,000 | 1                     |  |                                         | 400,000 | 2  |  |   | 42.5 | %  |
| Solon Kandel      |  |                   | 50,000 | 1                     |  |                                         | 275,000 | 3  |  |   | 30.7 | %  |
| Vincent Colangelo |  |                   | 50,000 | 1                     |  |                                         | 100,000 | 4  |  |   | 14.2 | %  |
| Gerald Maresca    |  |                   | 30,000 | 5                     |  |                                         | — |    |  |   | 2.8  | %  |
| Stephen Weiss     |  |                   | 30,000 | 5                     |  |                                         | — |    |  |   | 2.8  | %  |
| Phil Margetts     |  |                   | 20,000 | 6                     |  |                                         |    |    |  |   | 1.9  | %  |
|                   |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                                                                                                                                                                 |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1 | Consistsof (i) options to purchase 25,000 shares of Common Stock at a price of$3.25 per share, granted on December  29,  2005, and vestingin 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. |

|   |                                                                                                                                                                                                       |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Consists ofoptions to purchase 400,000 shares of Common Stock at a price of $3.40per share, granted on January  3,  2006, and vesting in 1/3increments on each anniversary date of the date of grant. |

|   |                                                                                                                                                                                                       |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3 | Consists ofoptions to purchase 275,000 shares of Common Stock at a price of $3.40per share, granted on January  3,  2006, and vesting in 1/3increments on each anniversary date of the date of grant. |

|   |                                                                                                                                                                                                       |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4 | Consists ofoptions to purchase 100,000 shares of Common Stock at a price of $3.40per share, granted on January  3,  2006, and vesting in 1/3increments on each anniversary date of the date of grant. |

|   |                                                                                                                                                                                                                                                                                                                                |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 5 | 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 vestingin 1/3 increments on each anniversary date of the date of grant and(ii) options to purchase 5,000 shares of Common Stock at a price of$3.40 per share, granted on January  3,  2006. |

|   |                                                                                                                                                                                                       |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 6 | Consists ofoptions to purchase 20,000 shares of Common Stock at a price of $3.25per share, granted on December  29,  2005, and vesting in 1/3increments on each anniversary date of the date ofgrant. |

47

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The following awards have been granted tothe executive officers named in this prospectus under the IncentivePlan in the last fiscal year.

|                   |  |                        |        |                            |  |                                                               |         |        |  |        |      |         |  |  |
|-------------------|--|------------------------|--------|----------------------------|--|---------------------------------------------------------------|---------|--------|--|--------|------|---------|--|--|
| Nameof Grantee    |  | IncentiveStock Options |        | Non-QualifiedStock Options |  | Percentage ofallOptions Grantedto Employees inLast FiscalYear |
| Howard Katz       |  |                   | 25,000 | 1                     |  |                                                          | — |   |  |   | 12.5 | %  |
| Solon Kandel      |  |                   | 25,000 | 1                     |  |                                                          | — |   |  |   | 12.5 | %  |
| Vincent Colangelo |  |                   | 25,000 | 1                     |  |                                                          | — |   |  |   | 12.5 | %  |
| Gerald Maresca    |  |                   | 25,000 | 2                     |  |                                                          | — |   |  |   | 12.5 | %  |
| Stephen Weiss     |  |                   | 25,000 | 2                     |  |                                                          | — |   |  |   | 12.5 | %  |
| Phil Margetts     |  |                   | 20,000 | 3                     |  |                                                          |    |   |  |   | 10.0 | %  |
|                   |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                                       |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1 | Consistsof options to purchase 25,000 shares of Common Stock at a price of$3.25 per share, granted on December  29,  2005, and vestingin 1/3 increments on each anniversary date of the date ofgrant. |

|   |                                                                                                                                                                                                        |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Consists ofoptions to purchase 25,000 shares of Common Stock at a price of $3.25per share, granted on December  29,  2005, and vesting in 1/3increments on each anniversary date of the date of grant. |

|   |                                                                                                                                                                                                        |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3 | Consists ofoptions to purchase 20,000 shares of Common Stock at a price of $3.25per share, granted on December  29,  2005, and vesting in 1/3increments on each anniversary date of the date of grant. |

48

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Executive Compensation

Thefollowing executives received compensation from MDwerks GlobalHoldings, Inc. and Xeni Medical Systems, Inc. in the amounts set forthin the chart below for the twelve months ended December  31,2005. No other item of compensation was paid to any officer or directorof the Company other than reimbursement of expenses.

SUMMARYCOMPENSATION TABLE

|                                     |  |        |      |                     |  |        |         |                          |  |                          |         |                                   |  |             |         |                       |  |        |         |         |  |        |         |         |  |        |         |        |  |        |         |        |  |  |
|-------------------------------------|--|--------|------|---------------------|--|--------|---------|--------------------------|--|--------------------------|---------|-----------------------------------|--|-------------|---------|-----------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                |  |   |      | Annual Compensation |  |   |         | Long-TermCompensation    |  |                     |
|                                |  |   |      |                |  |   |         |                     |  |                     |         | Awards                            |  | Payouts     |         |                  |
| NameandPrincipal Position           |  | Year   |      | Salary              |  | Bonus  |         | Other AnnualCompensation |  | RestrictedStock Award(s) |         | SecuritiesUnderlyingOptions /SARs |  | LTIPPayouts |         | All OtherCompensation |
| Howard Katz                         |  |   | 2005 |                |  | $      | 79,231  |                     |  |                     | — |                              |  | $           | 50,769  | 1                |  |   | — |    |  |   | 25,000  | 3  |  |   | — |   |  |   | — |   |
| Chief ExecutiveOfficer and Director |  |   | 2004 |                |  |   | — |                     |  |                     | — |                              |  |        | — |                  |  | $      | 28,800  | 2  |  |   | — |    |  |   | — |   |  |   | — |   |
| SolonKandel                         |  |   | 2005 |                |  |   |    |                     |  |                     | — |                              |  | $           | 46,154  | 4                |  |   | — |    |  |   | 25,000  | 3  |  |   | — |   |  |   | — |   |
| President andDirector               |  |   | 2004 |                |  | $      | 53,846  |                     |  |                     | — |                              |  |        | — |                  |  | $      | 20,000  | 5  |  |   | — |    |  |   | — |   |  |   | — |   |
| Vincent Colangelo                   |  |   | 2005 |                |  | $      | 50,385  |                     |  |                     | — |                              |  | $           | 25,500  | 6                |  |   | — |    |  |   | 25,000  | 3  |  |   | — |   |  |   | — |   |
| Chief FinancialOfficer              |  |   | 2004 |                |  |   | — |                     |  |                     | — |                              |  |        | — |                  |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |   |
| Gerard Maresca                      |  |   | 2005 |                |  | $      | 40,296  |                     |  |                     |    |                              |  | $           | 90,185  | 7                |  |   | — |    |  |   | 25,000  | 3  |  |   | — |   |  |   | — |   |
| Vice President,Business Development |  |   | 2004 |                |  |   | — |                     |  |                     |    |                              |  |        | — |                  |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |   |
| Steven M. Weiss                     |  |   | 2005 |                |  | $      | 33,391  |                     |  |                     |    |                              |  | $           | 67,000  | 8                |  |   | — |    |  |   | 25,000  | 3  |  |   | — |   |  |   | — |   |
| Chief TechnologyOfficer             |  |   | 2004 |                |  |   | — |                     |  |                     |    |                              |  |        | — |                  |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |   |
| Tonia Pfannenstiel                  |  |   | 2005 |                |  | $      | 30,557  |                     |  |                     |    |                              |  | $           | 43,191  | 9                |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |   |
| Vice President,Compliance           |  |   | 2004 |                |  |   | — |                     |  |                     |    |                              |  |        | — |                  |  |   | — |    |  |   | — |    |  |   | — |   |  |   | — |   |
|                                     |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                          |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1 | $18,333was paid to Mr.  Katz as consulting fees and $32,436 was paid toGreater Condor Evaluations, Inc., an entity owned and controlled byMr.  Katz, as consulting fees. |

|   |                                                                                                                                                                                                                                                                                                       |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | 720,000 shares ofCommon Stock of MDwerks Global Holdings, Inc., were issued to 7/31/42Corp., an entity controlled by Mr.  Katz, for services rendered ata value of $0.04 per share. Such shares were exchanged for 113,813shares of Class A Common Stock of the Company in connection with theMerger. |

|   |                                                                                                                                                                                          |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3 | Consists ofincentive stock options granted in December  29,  2005,exercisable at a price of $3.25 per share, and vesting in 1/3increments on each anniversary date of the date of grant. |

|   |                                                                                                                                                                    |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4 | $33,333 was paid toMr.  Kandel as consulting fees and $12,821 was paid to The AshwoodGroup, LLC, an entity owned and controlled by Mr.  Kandel, asconsulting fees. |

|   |                                                                                                                                                                                                                                                 |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 5 | 500,000 shares ofCommon stock of MDwerks Global Holdings, Inc., were issued to Mr.Kandel for services rendered at a value of $0.04 per share. Such shareswere exchanged for 79,037 shares of Class A Common Stock in connectionwith the Merger. |

|   |                                                                                                                |
|---|----------------------------------------------------------------------------------------------------------------|
| 6 | Paid as consultingfees to Weston Business Advisors, Inc., a corporation owned andcontrolled by Mr.  Colangelo. |

|   |                                                                                         |
|---|-----------------------------------------------------------------------------------------|
| 7 | Paid as consultingfees to GMAR, Inc., a corporation owned and controlled by Mr.Maresca. |

|   |                                                                                                             |
|---|-------------------------------------------------------------------------------------------------------------|
| 8 | Paid as consultingfees to Argent Consulting Services, Inc., a corporation owned andcontrolled by Mr. Weiss. |

|   |                                              |
|---|----------------------------------------------|
| 9 | Paid as consultingfees to Ms.  Pfannenstiel. |

49

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|                |                                                               |
|----------------|---------------------------------------------------------------|
| ITEM 11.  | SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |

Thefollowing table sets forth information regarding the number of sharesof Common Stock beneficially owned on February  1,  2006, byeach person who is known by the Company to beneficially own 5%or more of the Company’s Common Stock, each of theCompany’s directors and executive officers, and all of theCompany’s directors and executive officers, as a group:

|                                                                               |  |               |           |                                 |  |        |        |         |  |  |
|-------------------------------------------------------------------------------|--|---------------|-----------|---------------------------------|--|--------|--------|---------|--|--|
| Nameof Beneficial Owner                                                       |  | No. of Shares |           | Percentage of SharesOutstanding |
| Howard B.Katz                                                                 |  |          | 1,197,814 | (1)                        |  |   | 10.4   | %  |
| Solon Kandel                                                                  |  |          | 1,018,310 |                            |  |   | 8.8    | %  |
| VincentColangelo                                                              |  |          | 0         |                            |  |   | 0.0    | %  |
| StevenWeiss                                                                   |  |          | 65,809    |                            |  |   | 0.6    | %  |
| GerardMaresca                                                                 |  |          | 71,713    |                            |  |   | 0.6    | %  |
| ToniaPfannenstiel                                                             |  |          | 23,350    |                            |  |   | 0.2    | %  |
| David Barnes                                                                  |  |          | 0         |                            |  |   | 0.0    | %  |
| Peter Dunne                                                                   |  |          | 39,519    |                            |  |   | 0.3    | %  |
| Directors and officers as a group (8persons):                                 |  |          | 2,416,515 |                            |  |   | 20.9   | %  |
| Persons known to beneficiallyown more than 5% of the outstanding CommonStock: |  |          |      |                            |  |   |   |    |
| MEDwerks, LLC                                                                 |  |          | 5,115,912 | (2)                        |  |   | 44.3   | %  |
|                                                                               |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                        |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Includes113,813 shares of Common Stock owned by 7/31/42 Corp., an entitycontrolled by Howard Katz as the sole officer and director.Mr. Katz is not a shareholder of 7/31/42 Corp. |

|     |                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | These shares areowned by MEDwerks, LLC, an entity controlled by Dr. Jack Nudel,MDwerks’ former Chairman, as Managing Member and as majoritymember. |

|                |                                               |
|----------------|-----------------------------------------------|
| ITEM 12.  | CERTAIN RELATIONSHIPSAND 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 legalcounsel. The Company is charged Peckar & Abramson’s standardbilling rates for legal services rendered.

50

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|               |          |
|---------------|----------|
| ITEM13.  | EXHIBITS |

EXHIBITS

|            |  |                                                                                                                                           |  |  |  |  |
|------------|--|-------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  | Exhibits                                                                                                                                  |
| 3.1        |  | Company Certificate ofIncorporation1                                                                                                      |
| 3.2        |  | Amendment toCompany’ Certificate of Incorporation changing name toMDwerks,  Inc. and amending terms of Blank Check PreferredStock2  |
| 3.3        |  | Certificate ofDesignations Designating Series A Convertible PreferredStock.3                                                              |
| 3.4        |  | Bylaws of theCompany.4                                                                                                                    |
| 4.1        |  | MDwerks, Inc.2005 Incentive Compensation Plan.5                                                                                           |
| 4.2        |  | Form of Warrants to purchase shares of CommonStock at a price of $2.50 per share.6                                                        |
| 4.3        |  | Form of Warrants issued to Placement Agent (andsub-agents) to purchase shares of Common Stock at a price of $1.25 pershare.7              |
| 10.1       |  | Agreement ofMerger and Plan of Reorganization among Western Exploration, Inc.,MDwerks Acquisition Corp. and MDwerks Global Holdings,Inc.8 |
| 10.2       |  | Placement AgentAgreement by and among the Company, MDwerks and Brookshire SecuritiesCorporation.9                                         |
| 10.3       |  | Form of LockUp Agreement between the Company and executive officers and certainstockholders.10                                            |
| 10.4       |  | Form ofPrivate Placement Subscription Agreement.11                                                                                        |
| 14.1       |  | Code of Ethics12                                                                                                                          |
| 16.1       |  | Letter on change in certifyingaccountant13                                                                                                |
| 21.1       |  | Subsidiaries14                                                                                                                            |
| 23.1       |  | Consentof Goldstein Golub Kessler LLP                                                                                                     |
| 31.1       |  | Section 302 Certification of Principal Executive Officer                                                                                  |
| 31.2       |  | Section 302 Certification of Principal FinancialOfficer                                                                                   |
| 32.1       |  | Section 906 Certification ofPrincipal Executive Officer                                                                                   |
| 32.2       |  | Section906 Certification of Principal Financial Officer                                                                                   |
| 99.1       |  | Audit Committee Charter15                                                                                                                 |
| 99.2       |  | Compensation CommitteeCharter16                                                                                                           |
|            |

|  |
|--|
|  |  |
|  |

|   |                                                                                                           |
|---|-----------------------------------------------------------------------------------------------------------|
| 1 | Incorporatedby reference to our Registration Statement on Form SB-2 filed with theSEC on August 12, 2004. |

|   |                                                                                                                                 |
|---|---------------------------------------------------------------------------------------------------------------------------------|
| 2 | Incorporated byreference to Exhibit 3.1 included with our Current Report on Form 8-K,filed with the SEC on November  18,  2005. |

|   |                                                                                                                                  |
|---|----------------------------------------------------------------------------------------------------------------------------------|
| 3 | Incorporated byreference to Exhibit 3.3 to our Registration Statement in Form SB-2,filed with the Commission on March  9,  2006. |

|   |                                                                                                  |
|---|--------------------------------------------------------------------------------------------------|
| 4 | Incorporated byreference to our Re Statement on Form SB-2, filed with the SEC onAugust 12, 2004. |

|   |                                                                                                                               |
|---|-------------------------------------------------------------------------------------------------------------------------------|
| 5 | Incorporated byreference to Exhibit 4.1 included with our Current Report on Form 8-K,filed with the SEC on November 18, 2005. |

|   |                                                                                                                                 |
|---|---------------------------------------------------------------------------------------------------------------------------------|
| 6 | Incorporated byreference to Exhibit 4.2 included with our Current Report on Form 8-K,filed with the SEC on November  18,  2005. |

51

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|   |                                                                                                                                 |
|---|---------------------------------------------------------------------------------------------------------------------------------|
| 7 | Incorporatedby reference to Exhibit 4.3 included with our Current Report on Form8-K, filed with the SEC on November  18,  2005. |

|   |                                                                                                                                 |
|---|---------------------------------------------------------------------------------------------------------------------------------|
| 8 | Incorporated byreference to Exhibit 10.1 included with our Current Report on Form 8-K,filed with the SEC on October  13,  2005. |

|   |                                                                                                                                  |
|---|----------------------------------------------------------------------------------------------------------------------------------|
| 9 | Incorporated byreference to Exhibit 10.2 included with our Current Report on Form 8-K,filed with the SEC on November  18,  2005. |

|    |                                                                                                                                  |
|----|----------------------------------------------------------------------------------------------------------------------------------|
| 10 | Incorporated byReference to Exhibit 10.3 included with our Current Report on Form 8-K,filed with the SEC on November  18,  2005. |

|    |                                                                                                                                |
|----|--------------------------------------------------------------------------------------------------------------------------------|
| 11 | Incorporated byreference to Exhibit 10.4 included with our Current Report on Form 8-K,filed with the SEC on November 18, 2005. |

|    |                                                                                                                               |
|----|-------------------------------------------------------------------------------------------------------------------------------|
| 12 | Incorporated byreference to Exhibit 14.1 included with our Current Report on Form 8-Kfiled with the SEC on November 18, 2005. |

|    |                          |
|----|--------------------------|
| 13 | To be filed byamendment. |

|    |                                                                                                                                   |
|----|-----------------------------------------------------------------------------------------------------------------------------------|
| 14 | Incorporated byreference to Exhibit 21.1 to our Registration Statement on Form SB-2,filed with the Commission on March  9,  2006. |

|    |                                                                                                                                |
|----|--------------------------------------------------------------------------------------------------------------------------------|
| 15 | Incorporated byreference to Exhibit 99.2 included with our Current Report on Form 8-K,filed with the SEC on November 18, 2005. |

|    |                                                                                                                                |
|----|--------------------------------------------------------------------------------------------------------------------------------|
| 16 | Incorporated byreference to Exhibit 99.3 included with our Current Report on Form 8-K,filed with the SEC on November 18, 2005. |

52

----

|                |                                       |
|----------------|---------------------------------------|
| ITEM 14.  | PRINCIPALACCOUNTANT FEES AND SERVICES |

The following table sets forth thefees billed by our independent accountants for each of our last twofiscal years for the categories of services indicated.

|                     |
|---------------------|
|                     |  |  |  |  |  |  |  |  |  |  |
|                |  | Year Ended December31, |
| Category            |  | 2005 |  | 2004 |
| AuditFees1          |  | $ | 35,000 |   |  | $ | 61,500 |   |
| Audit Related Fees2 |  |   | 0 |   |  |   | 0 |   |
| Tax Fees3           |  |   | 5,750 |   |  |   | 3,250 |   |
| All Other Fees4     |  |   | 6,500 |   |  |   | 0 |   |
|                     |

|  |
|--|
|  |  |  |
|  |

|  |   |                                                                                                                                                                                                                                                             |
|--|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 1 | Consistsof fees billed for the audit of our annual financial statements, reviewof financial statements included in our Form 8-K and services that arenormally provided by the accountant in connection with statutory andregulatory filings or engagements. |

|  |   |                                                                                                                                                                                                                                                                                                                                                                |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 2 | Consists ofassurance and related services that are reasonably related to theperformance of the audit and reviews of our financial statements andare not included in ‘‘audit fees’’ in thistable. The services provided by our accountants within this categoryconsisted of advice relating to SEC matters and employee benefitmatters. |

|  |   |                                                                                                                                              |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------|
|  | 3 | Consists ofprofessional services rendered by a company aligned with our principalaccountant for tax compliance, tax advice and tax planning. |

|  |   |                                                                                                                                                                      |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 4 | The servicesprovided by our accountants within this category consisted of adviceand other services relating to SEC matters, accounting issues andclient conferences. |

Through September  30,  2005,Goldstein Golub Kessler LLP (the ‘‘Firm’’) hada continuing relationship with American Express Tax and BusinessServices Inc. (‘‘TBS’’) from which it leasedauditing staff who were full time, permanent employees of TBS andthrough which its partners provided non-audit services. Subsequent toSeptember  30,  2005 this relationship ceased and the Firmestablished a similar relationship with RSM McGladrey, Inc.(‘‘RSM’’). The Firm has no full time employees,and, therefore, none of the audit services performed were provided bypermanent, full-time employees of the Firm. The Firm manages andsupervises the audit and audit staff and is exclusively responsible forthe opinion rendered in connection with its examination.

AuditCommittee Pre-Approval Policy

In addition to retainingGoldstein Golub Kessler LLP to audit our consolidated financialstatements for the years ended December  31,  2005 and 2004,we retained Goldstein Golub Kessler to provide other auditing andadvisory services to us in our 2005 and 2004 fiscal years. Weunderstand the need for Goldstein Golub Kessler to maintain objectivityand independence in its audit of our financial statements. To minimizerelationships that could appear to impair the objectivity of GoldsteinGolub Kessler, our audit committee has restricted the non-auditservices that Goldstein Golub Kessler and its aligned company mayprovide to us primarily to tax services.

The audit committeealso has adopted policies and procedures for pre-approving allnon-audit work performed by Goldstein GolubKessler.

53

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SIGNATURES

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

|        |  |               |  |                   |  |                        |  |  |  |  |  |  |  |  |
|--------|--|---------------|--|-------------------|--|------------------------|--|--|--|--|--|--|--|--|
|   |  | MDwerks, INC. |
|   |  | By:           |  | /s/Howard B. Katz |
|   |  |          |  | Name:             |  | Howard B.Katz          |
|   |  |          |  | Title:            |  | Chief ExecutiveOfficer |
|   |  |          |  | Date:             |  | March 22,2006          |
|        |

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

|                      |  |                                                                                  |  |                  |
|----------------------|--|----------------------------------------------------------------------------------|--|------------------|
| Signature            |  | Title                                                                            |  | Date             |
|                      |
| /s/Howard B. Katz    |  | ChiefExecutive Officer and Director (Principal Executive Officer)                |  | March  22,  2006 |
|                      |
| Howard B. Katz       |
|                      |
| /s/ VincentColangelo |  | ChiefFinancial Officer and Secretary (Principal Accounting and FinancialOfficer) |  | March  22,  2006 |
|                      |
| Vincent Colangelo    |
|                      |
| /s/ Solon Kandel     |  | President and Director                                                           |  | March  22,2006   |
|                      |
| Solon Kandel         |
|                      |
| /s/ Adam Friedman    |  | Controller                                                                       |  | March22,  2006   |
|                      |
| AdamFriedman         |
|                      |
| /s/ DavidBarnes      |  | Director                                                                         |  | March  22,  2006 |
|                      |
| David Barnes         |
|                      |
| /s/ PeterDunne       |  | Director                                                                         |  | March  22,  2005 |
|                      |
| Peter Dunne          |
|                      |

54

----

MDWERKS,INC. AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTSDecember  31,  2005

INDEX

|                                                                             |  |            |  |  |  |  |
|-----------------------------------------------------------------------------|--|------------|--|--|--|--|
|                                                                        |  | Pages      |
| Report of IndependentRegistered Public Accounting Firm                      |  | F-2        |
| Consolidated Balance Sheet                                                  |  | F-3        |
| ConsolidatedStatement of Operations                                         |  | F-4        |
| Consolidated Statement of Changes inStockholders’ Equity (Deficiency) |  | F-5        |
| Consolidated Statement of CashFlows                                         |  | F-6        |
| Notes toConsolidated Financial Statements                                   |  | F-7 toF-16 |
|                                                                             |

F-1

----

REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

To the Board of Directors andStockholdersMDwerks, Inc.

We have audited theaccompanying consolidated balance sheet of MDwerks, Inc. andSubsidiaries as of December 31, 2005 and the relatedconsolidated statements of operations, changes in stockholders’equity (deficiency) and cash flows for each of the two years in theperiod then ended. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibilityis to express an opinion on these consolidated financial statementsbased on our audits.

We conducted our audits inaccordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable 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. andSubsidiaries as of December 31, 2005 and the results of theiroperations and their cash flows for each of the two years in the periodthen ended in conformity with accounting principles generally acceptedin the United States of America.

The accompanyingconsolidated financial statements have been prepared assuming that theCompany will continue as a going concern. As discussed in Note 8 to thefinancial statements, the Company has suffered recurring losses fromoperations and has a net capital deficiency that raise substantialdoubt about its ability to continue as a going concern.Management’s plan in regard to these matters is also describedin Note 8. The consolidated financial statements do not include anyadjustments that might result from the outcome of this uncertainty.

/s/ GOLDSTEIN GOLUB KESSLER LLP

NewYork, New YorkJanuary  25,  2006, except for the secondparagraph in Note 10, as to which the date is February  1,2006 and the third paragraph of Note 10, as to which the date isFebruary  13,  2006

F-2

----

MDWERKS, INC. ANDSUBSIDIARIESCONSOLIDATED BALANCE SHEETDecember  31,2005

|                                                                                                      |  |        |             |         |  |  |
|------------------------------------------------------------------------------------------------------|--|--------|-------------|---------|--|--|
| ASSETS                                                                                               |
| Currentassets:                                                                                       |  |   |        |    |
| Cash                                                                                                 |  | $      | 766,464     |    |
| Notes receivable                                                                                     |  |   | 363,845     |    |
| Prepaid expenses and other                                                                           |  |   | 79,231      |    |
| Total currentassets                                                                                  |  |   | 1,209,540   |    |
| Property and equipment                                                                               |  |   | 80,391      |    |
| Total assets                                                                                         |  | $      | 1,289,931   |    |
| LIABILITIESAND STOCKHOLDERS'DEFICIENCY                                                               |
| Currentliabilities:                                                                                  |  |   |        |    |
| Notes payable                                                                                        |  | $      | 135,000     |    |
| Loan payable                                                                                         |  |   | 98,700      |    |
| Accounts payable                                                                                     |  |   | 211,517     |    |
| Accrued expenses                                                                                     |  |   | 167,382     |    |
| Deferred revenues                                                                                    |  |   | 5,357       |    |
| Warrant liability                                                                                    |  |   | 1,735,237   |    |
| Total current liabilities                                                                            |  |   | 2,353,193   |    |
| Long-termliabilities:                                                                                |  |   |        |    |
| Deferred revenues, lesscurrent portion                                                               |  |   | 3,390       |    |
| Total liabilities                                                                                    |  |   | 2,356,583   |    |
| Stockholders'deficiency:                                                                             |  |   |        |    |
| Preferred stock, $.001 parvalue, 10,000,000 shares authorized; no shares issued andoutstanding       |  |   | —     |    |
| Common stock,$.001 par value, 100,000,000 shares authorized; 11,538,730 sharesissued and outstanding |  |   | 11,539      |    |
| Additional paid-in capital                                                                           |  |   | 15,480,037  |    |
| Accumulated deficit                                                                                  |  |   | (16,558,228 | )  |
| Total stockholders'deficiency                                                                        |  |   | (1,066,652  | )  |
| Total liabilities andstockholders' deficiency                                                        |  | $      | 1,289,931   |    |
|                                                                                                      |

Theaccompanying notes should be read in conjunction with the consolidatedfinancial statements

F-3

----

MDWERKS, INC. ANDSUBSIDIARIESCONSOLIDATED STATEMENT OF OPERATIONS

|                                                                    |  |                               |            |         |  |        |           |         |  |  |
|--------------------------------------------------------------------|--|-------------------------------|------------|---------|--|--------|-----------|---------|--|--|
|                                                               |  | For the Year EndedDecember31, |
|                                                               |  | 2005                          |            | 2004    |
| Revenue:                                                           |  |                          |       |    |  |   |      |    |
| Servicefees                                                        |  | $                             | 42,816     |    |  | $      | —   |    |
| Financing income                                                   |  |                          | 15,008     |    |  |   | —   |    |
| Total revenue                                                      |  |                          | 57,824     |    |  |   | —   |    |
| Operatingexpenses:                                                 |  |                          |       |    |  |   |      |    |
| Compensation                                                       |  |                          | 364,248    |    |  |   | —   |    |
| Consultingexpenses and outside services                            |  |                          | 880,567    |    |  |   | —   |    |
| Professional fees                                                  |  |                          | 359,006    |    |  |   | 100,520   |    |
| Selling, generaland administrative                                 |  |                          | 434,628    |    |  |   | 10,704    |    |
| Total operating expenses                                           |  |                          | 2,038,449  |    |  |   | 111,224   |    |
| Loss from operations                                               |  |                          | (1,980,625 | )  |  |   | (111,224  | )  |
| Other income(expense):                                             |  |                          |       |    |  |   |      |    |
| Interest income                                                    |  |                          | 1,396      |    |  |   | —   |    |
| Interestexpense                                                    |  |                          | (5,242     | )  |  |   | (917      | )  |
| Losson revaluation of warrant liability                            |  |                          | (592,467   | )  |  |   | —   |    |
| Gain on forgiveness ofliabilities                                  |  |                          | —    |    |  |   | 1,092,003 |    |
| Total other income(expense)                                        |  |                          | (596,313   | )  |  |   | 1,091,086 |    |
| Net income (loss)                                                  |  | $                             | (2,576,938 | )  |  | $      | 979,862   |    |
| NET INCOME (LOSS) PER COMMON SHARE– basic anddiluted         |  | $                             | (0.27      | )  |  | $      | 0.11      |    |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING– basicand diluted |  |                          | 9,547,492  |    |  |   | 9,246,339 |    |
|                                                                    |

The accompanying notes shouldbe read in conjunction with the consolidated financialstatements

F-4

----

MDWERKS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY(DEFICIENCY) For the Years Ended December  31,  2005 and2004

|                                                                   |  |                            |            |                          |  |                    |         |                                            |  |        |            |         |  |        |             |         |  |        |            |         |  |  |
|-------------------------------------------------------------------|--|----------------------------|------------|--------------------------|--|--------------------|---------|--------------------------------------------|--|--------|------------|---------|--|--------|-------------|---------|--|--------|------------|---------|--|--|
|                                                              |  | Common Stock$.001 ParValue |            | AdditionalPaid-inCapital |  | AccumulatedDeficit |         | TotalStockholders’Equity(Deficiency) |
|                                                              |  | Number ofShares            |            | Amount                   |
| Balance, December  31,  2003,as restated for the recapitalization |  |                       | 9,246,339  |                     |  | $                  | 9,247   |                                       |  | $      | 13,751,121 |    |  | $      | (14,961,152 | )  |  | $      | 1,200,784  |    |
| Capital Contributions                                             |  |                       | —    |                     |  |               | — |                                       |  |   | 499,090    |    |  |   | —     |    |  |   | 499,090    |    |
| Net income                                                        |  |                       | —    |                     |  |               | — |                                       |  |   | —    |    |  |   | 979,862     |    |  |   | 979,862    |    |
| Balance,December  31,  2004                                       |  |                       | 9,246,339  |                     |  |               | 9,247   |                                       |  |   | 14,250,211 |    |  |   | (13,981,290 | )  |  |   | 278,168    |    |
| Common Stock issued in recapitalization                           |  |                       | 1,350,000  |                     |  |               | 1,350   |                                       |  |   | (1,350     | )  |  |   | —     |    |  |   | —    |    |
| Capital contributions                                             |  |                       | —    |                     |  |               | — |                                       |  |   | 550,886    |    |  |   | —     |    |  |   | 550,886    |    |
| Sale of common stock, net                                         |  |                       | 842,391    |                     |  |               | 842     |                                       |  |   | 1,573,160  |    |  |   | —     |    |  |   | 1,574,002  |    |
| Common stock issued forconsultingfees                             |  |                       | 100,000    |                     |  |               | 100     |                                       |  |   | 249,900    |    |  |   | —     |    |  |   | 250,000    |    |
| Warrant liability                                                 |  |                       | —    |                     |  |               | — |                                       |  |   | (1,142,770 | )  |  |   | —     |    |  |   | (1,142,770 | )  |
| Net loss                                                          |  |                       | —    |                     |  |               | — |                                       |  |   | —    |    |  |   | (2,576,938  | )  |  |   | (2,576,938 | )  |
| Balance,December  31,  2005                                       |  |                       | 11,538,730 |                     |  | $                  | 11,539  |                                       |  | $      | 15,480,037 |    |  | $      | (16,558,228 | )  |  | $      | (1,066,652 | )  |
|                                                                   |

The accompanying notesshould be read in conjunction with the consolidated financialstatements

F-5

----

MDWERKS, INC. ANDSUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS

|                                                                                    |  |                               |            |         |  |        |            |         |  |  |
|------------------------------------------------------------------------------------|--|-------------------------------|------------|---------|--|--------|------------|---------|--|--|
|                                                                               |  | For the Year EndedDecember31, |
|                                                                               |  | 2005                          |            | 2004    |
| Cash flows from operatingactivities:                                               |  |                          |       |    |  |   |       |    |
| Net income (loss)                                                                  |  | $                             | (2,576,938 | )  |  | $      | 979,862    |    |
| Adjustments to reconcile net income (loss) tonet cash used in operatingactivities: |  |                          |       |    |  |   |       |    |
| Depreciation                                                                       |  |                          | 13,256     |    |  |   | 504        |    |
| Gain on forgivenessof liabilities                                                  |  |                          | —    |    |  |   | (1,092,003 | )  |
| Revaluation of warrant liability                                                   |  |                          | 592,467    |    |  |   | —    |    |
| Common stock issued forservices                                                    |  |                          | 250,000    |    |  |   | —    |    |
| Changes in assets andliabilities:                                                  |  |                          |       |    |  |   |       |    |
| Notes receivable                                                                   |  |                          | (363,845   | )  |  |   | —    |    |
| Prepaidexpenses and other                                                          |  |                          | (79,231    | )  |  |   | —    |    |
| Accounts payable                                                                   |  |                          | 211,517    |    |  |   | (212,296   | )  |
| Accrued expenses                                                                   |  |                          | 166,465    |    |  |   | 917        |    |
| Deferredrevenues                                                                   |  |                          | 8,747      |    |  |   | —    |    |
| Total adjustments                                                                  |  |                          | 799,376    |    |  |   | (1,302,878 | )  |
| Net cash used in operating activities                                              |  |                          | (1,777,562 | )  |  |   | (323,016   | )  |
| Cash flows from investingactivities:                                               |  |                          |       |    |  |   |       |    |
| Purchase of property andequipment                                                  |  |                          | (81,950    | )  |  |   | (11,869    | )  |
| Net cash used in investingactivities                                               |  |                          | (81,950    | )  |  |   | (11,869    | )  |
| Cash flows from financingactivities:                                               |  |                          |       |    |  |   |       |    |
| Proceeds from notespayable                                                         |  |                          | 135,000    |    |  |   | 250,000    |    |
| Proceeds from loan payable                                                         |  |                          | 98,700     |    |  |   | —    |    |
| Repayment of related partyloans                                                    |  |                          | —    |    |  |   | (196,817   | )  |
| Capital contributions                                                              |  |                          | 550,886    |    |  |   | 499,090    |    |
| Net proceeds from sale of commonstock                                              |  |                          | 1,574,002  |    |  |   | 50,000     |    |
| Net cash provided by financing activities                                          |  |                          | 2,358,588  |    |  |   | 602,273    |    |
| Net increase in cash                                                               |  |                          | 499,076    |    |  |   | 267,388    |    |
| Cash – beginning of year                                                     |  |                          | 267,388    |    |  |   | —    |    |
| Cash – end of year                                                           |  | $                             | 766,464    |    |  | $      | 267,388    |    |
| Supplemental disclosure of cash flowinformation:                                   |  |                          |       |    |  |   |       |    |
| Cash paidfor:                                                                      |  |                          |       |    |  |   |       |    |
| Interest                                                                           |  | $                             | 1,429      |    |  | $      | —    |    |
| Noncash investing and financingactivities:                                         |  |                          |       |    |  |   |       |    |
| Increase in warrant liability                                                      |  | $                             | 1,142,770  |    |  | $      | —    |    |
| Note payable contributed to additional paid in Capitalas part of recapitalization  |  | $                             | 250,000    |    |  | $      | —    |    |
|                                                                                    |

The accompanying notes should beread in conjunction with the consolidated financialstatements

F-6

----

MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

NOTE 1 —ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

Organization

On November  16,  2005, a wholly-owned subsidiaryof MDwerks, Inc. (f/k/a Western Exploration, Inc., and hereinafterreferred to as the ‘‘Company’’) was merged withand into MDwerks Global Holdings,  Inc., a Florida corporation(‘‘MDwerks’’), with MDwerks surviving. TheCompany acquired all of the outstanding capital stock of MDwerks inexchange for issuing 9,352,328 shares of the Company’s commonstock, par value $0.001 per share to MDwerks’ stockholders,which at closing of the Merger Agreement represented approximately87.4% of the issued and outstanding shares of theCompany’s common stock. In connection with the Merger, theCompany changed its corporate name to MDwerks, Inc.

Theacquisition was accounted for as a reverse merger because, on apost-merger basis, the MDwerks stockholders hold a majority of theoutstanding common stock of the Company on a voting and fully dilutedbasis. As a result, MDwerks was deemed to be the acquirer foraccounting purposes. Accordingly, the consolidated financial statementspresented, beginning with the period ending December  31,2005, are those of the Company for all periods prior to theacquisition, and the financial statements of the consolidated companiesfrom the acquisition date forward. The historical stockholders’deficit of the Company prior to the acquisition has been retroactivelyrestated (a  recapitalization) for the equivalent number of sharesreceived in the acquisition after giving effect to any differences inthe par value of the Company and MDwerks common stock, with an offsetto additional paid-in capital. The restated consolidated accumulateddeficit of the accounting acquirer (MDwerks) carried forward after theacquisition.

On June  7,  2005, MDwerks enteredinto and consummated Share Exchange Agreements with all of theshareholders of each of the Xeni Companies (Xeni Medical Systems, Inc.(‘‘XMS’’), Xeni Financial Services, Corp.(‘‘XFS’’), and Xeni Medical Billing Corp.(‘‘XMB’’)). Pursuant to each of the ShareExchange Agreements, MDwerks acquired 100% of the issued andoutstanding shares of each of the Xeni Companies’ commonstock.

The acquisition of the Xeni Companies by MDwerkswas accounted for as a reverse merger because, on a post-merger basis,the former Xeni shareholders held a majority of the outstanding commonstock of MDwerks on a voting and fully diluted basis. As a result, Xeniwas deemed to be the acquirer for accounting purposes. Accordingly, thefinancial statements of MDwerks are those of Xeni for all periodspresented.

XMS was incorporated under the laws of thestate of Delaware on July  21,  2004. XMS provides aWeb-based package of electronic claims solutions to the healthcareprovider industry through Internet access to its‘‘MDwerks’’ suite of proprietary products andservices so that healthcare providers can significantly improve dailyinsurance claims transaction processing, administration andmanagement.

XFS was incorporated under the laws of thestate of Florida on February  3,  2005. XFS offers financingand advances to health care providers secured by claims processedthrough the MDwerks system.

XMB was incorporated underthe laws of the state of Florida on March  2,  2005. XMBoffers health care providers billing services facilitied through theMDwerks system.

Basis of presentation

The consolidated statements include the accounts of theCompany and its wholly owned subsidiaries, XMS, XFS and XMB. Allsignificant intercompany balances and transactions have beeneliminated.

Use of estimates

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

F-7

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

Fair value of financialinstruments

Statement of Financial AccountingStandards No. 107, ‘‘Disclosures about Fair Value ofFinancial Instruments,’’ requires disclosures ofinformation about the fair value of certain financial instruments forwhich it is practicable to estimate the value. For purpose of thisdisclosure, the fair value of a financial instrument is the amount atwhich the instrument could be exchanged in a current transactionbetween willing parties, other than in a forced sale orliquidation.

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

Cash and cashequivalents

For purposes of the consolidatedstatements of cash flows, the Company considers all highly liquidinstruments purchased with a maturity of three months or less and moneymarket accounts to be cash equivalents.

At various times,the Company has deposits in excess of the Federal Deposit InsuranceCorporation limit. The Company has not experienced any losses on theseaccounts.

Advertising

TheCompany generally expenses advertising costs as incurred. Advertisingcosts charged to operations were approximately $50,000 and $0 for theyears ended December  31,  2005 and 2004, respectively.

Property and equipment

Property andequipment are stated at cost. Depreciation and amortization areprovided using the straight-line method over the estimated usefullife.

Revenue recognition

The Company follows the guidance of the Securities andExchange Commission’s (‘‘SEC’’) StaffAccounting Bulletin 104 for revenue recognition.  In general,the Company records revenue when persuasive evidence of an arrangementexists, services have been rendered or product delivery has occurred,the sales price to the customer is fixed or determinable, andcollectability is reasonably assured.  The following policiesreflect specific criteria for the various revenues streams of theCompany.

Revenue derived from fees related to claims andcontract management services are generally recognized when services areprovided to the customer.

The Company provides advancefunding services to unaffiliated healthcare providers (theCompany’s ‘‘Customer’’). The Customeradvances are typically collateralized by Security Agreements grantingfirst position liens on the medical claims submitted by its Customersto third party payors (the  ‘‘Payors’’).The advances are repaid through the remittance of payments of Customermedical claims, by Payors, directly to the Company. The Companywithholds from these advances interest, an administrative fee and othercharges as well as any amount for prior advances that remain unpaidafter a specified number of days. These interest charges,administrative fees and other charges are recognized as revenue whenearned. There is no right of cancellation or refund provisions in thesearrangements and the Company has no further obligations once theservices are rendered.

Revenue derived from fees relatedto billing and collection services are generally recognized when thecustomer’s accounts receivable are collected.

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

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

Income taxes

Income taxes are accounted for under the asset and liabilitymethod of Statement of Financial Accounting Standards No. 109,‘‘Accounting for Income Taxes’’(‘‘SFAS 109’’). Under SFAS 109, deferred taxassets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carryingamounts of existing assets and liabilities and their respective taxbases. Deferred tax assets and liabilities are measured using enactedtax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled.Under SFAS 109, the effect on deferred tax assets and liabilities of achange in tax rates is recognized in income in the period that includesthe enactment date.

Net income (loss) percommon share

Basic income (loss) per share iscomputed by dividing net income (loss) by the weighted average numberof shares of common stock outstanding during the period. Diluted income(loss) per share is computed by dividing net income by the weightedaverage number of shares of common stock, potential common stock andpotentially dilutive securities outstanding during each period. As ofDecember  31,  2005, the Company had outstanding options topurchase an aggregate of 200,000 shares of common stock and warrants topurchase an aggregate of 704,640 shares of Common Stock, which couldpotentially dilute future earnings per share. Diluted loss per commonshare has not been presented for the year ended December31,  2005 since the impact of the stock options and warrants wouldbe antidilutive. As of December  31,  2004, the Company didnot have any potential common stock.

Stock-based compensation

The Company accounts for stock options issued toemployees in accordance with the provisions of Accounting PrinciplesBoard (‘‘APB’’) Opinion No. 25,‘‘Accounting for Stock Issued to Employees,’’and related interpretations. As such, compensation cost is measured onthe date of grant as the excess of the current market price of theunderlying stock over the exercise price. Such compensation amounts, ifany, are amortized over the respective vesting periods of the optiongrant. The Company adopted the disclosure provisions of SFAS No. 123,‘‘Accounting for Stock-Based Compensation’’ andSFAS No. 148, ‘‘Accounting for Stock-Based Compensation— Transition and Disclosure,’’ which permits entitiesto provide pro forma net income (loss) and pro forma earnings (loss)per share disclosures for employee stock option grants as if thefair-valued based method defined in SFAS No. 123 had been applied. TheCompany accounted for stock options and stock issued to nonemployeesfor goods or services in accordance with the fair value method of SFASNo. 123.

Had compensation cost for the stockoption plan been determined based on the fair value of the options atthe grant dates consistent with the method of SFAS No. 123,‘‘Accounting for Stock Based Compensation,’’the Company’s net loss and loss per share would have beenchanged by an immaterial amount for the year ended December31,  2005. There were no options granted in 2004.

Recent accounting pronouncements

The Financial Accounting Standards Board(‘‘FASB’’) issued SFAS 123(R),‘‘Share-Based Payment,’’ which will require theCompany to measure compensation costs for all share-based payments,including employee stock options, at fair value. This statement will beeffective for the Company with the quarter beginning January1,  2006. Statement 123(R) permits public companies to adopt itsrequirements using either the modified prospective or modifiedretrospective transition method. The 

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

Company has decided to use the modifiedprospective transition method, which require that compensation cost isrecognized for all awards granted, modified or settled after theeffective date as well as for all awards granted to employees prior tothe effective date that remain unvested as of the effective date. It isexpected that the adoption of SFAS 123(R) will have a material impacton the consolidated financial statements. However, uncertainties suchas stock price volatility, estimated forfeitures and employee stockoption exercise behavior make it difficult to determine what the futurestock-based compensation expense will be recorded.

In June of 2005, the FASB issued Statement ofFinancial Accounting Standards No. 154,(‘‘SFAS  154’’), ‘‘AccountingChanges and Error Corrections,’’ a replacement of APBOpinion No. 20, ‘‘Accounting Changes’’and FASB Statement No. 3, ‘‘Reporting AccountingChanges in Interim Financial Statements.’’ SFAS 154 appliesto all voluntary changes in accounting principle and changes therequirements for accounting for and reporting a change in accountingprinciple. SFAS 154 requires the retrospective application to priorperiods’ financial statements of the direct effect of avoluntary change in accounting principle unless it is impracticable.APB No. 20 required that most voluntary changes in accountingprinciple be recognized by including in net income of the period of thechange the cumulative effect of changing to the new accountingprinciple. The Company does not believe that the adoption of SFAS 154will have a material effect on its results of operations or financialposition.

The Company does not believe that anyother recently issued, but not yet effective accounting standards willhave a material effect on the Company’s consolidated financialposition, results of operations or cash flows.

NOTE 2— NOTES RECEIVABLE

At December31,  2005, the Company advanced two health care providers underlines of credit agreements aggregating $363,845. The advances are dueto be repaid out of providers’ claims collections, as defined ineach respective agreement. The Company charged the health careproviders interest and other charges as defined in the agreements. AtDecember  31,  2005 no amounts were past due.

Notes receivable are reported at their outstanding unpaidprincipal balances reduced by an allowance for doubtful accounts. TheCompany estimates doubtful accounts based on historical bad debts,factors related to specific customers’ ability to pay andcurrent economic trends. The Company writes off receivables against theallowance when a balance is determined to be uncollectible. AtDecember  31,  2005 the Company has no allowance for doubtfulaccounts.

NOTE 3 — PROPERTY ANDEQUIPMENT

At December  31,  2005,property and equipment consisted of the following:

|                                |  |                |                |        |  |        |         |         |  |  |
|--------------------------------|--|----------------|----------------|--------|--|--------|---------|---------|--|--|
|                           |  | Estimated Life |                |   |
| Office furniture and equipment |  |           | 5-7 Years |   |  | $      | 741     |    |
| Computerequipment and software |  |           | 3-5 Years |   |  |   | 93,078  |    |
|                           |  |           |           |   |  |   | 93,819  |    |
| Less: accumulated depreciation |  |           |           |   |  |   | (13,428 | )  |
|                           |  |           |           |   |  | $      | 80,391  |    |
|                                |

NOTE4 — NOTES PAYABLE

The Company hasnotes payable of $135,000 to unrelated parties that bear interest at8%. The outstanding principal and all accrued and unpaidinterest is due and payable 180 days from the date of 

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

each loan through July  2006. At theCompany’s option, all or any part of the outstanding principalbalance and accrued interest may be prepaid. In the event the Companyraises $2.5  million or more in a financing transaction involvingthe sale of equity securities, the notes shall become due and payableat the closing of such transaction. Additionally, in such event, theCompany shall grant to the note holders four-year warrants to purchasean aggregate of 135,000 shares of the Company’s common stock orthe Company’s successor parent company at $1.25 per share. SeeNote 10 for subsequent event regarding conversion of certain notespayable.

NOTE 5 — LOANPAYABLE

The Company has a loan payable to anunrelated individual in the amount of $98,700. The loan bears interestat 8% per annum and is payable on a monthly basis, less fees.The loan shall be repaid proportionally upon repayment of certain ofthe Company’s notes receivable.

NOTE 6 —STOCKHOLDERS’ DEFICIENCY

Preferred stock

The Companyis authorized to issue 10,000,000 shares of preferred stock, $.001 parvalue, with such designations, rights and preferences as may bedetermined from time to time by the Board of Directors.

Common stock

Prior to theconsummation of the Merger Agreement, former shareholders of the Xenicompanies contributed capital of $550,886.

In August andSeptember  2005, the Company sold 105,991 shares of common stockfor proceeds of $119,229 (net of placement fees of $13,250).

In November  2005, the Company issued 100,000 shares asconsulting fees in connection with the merger. These shares were valuedat $2.50 per share, which is the value of the shares in the offeringdescribed below. The Company recorded $250,000 in noncash stock-basedconsulting expense during the year ended December  31,2005.

In November and December  2005, pursuant to aConfidential Private Placement Memorandum dated June  13,2005, as amended, the Company commenced a private offering of up to$5,000,000 in units, each unit costing $25,000 and consisting of 10,000shares of common stock and a warrant to purchase 10,000 shares of theCompany’s common stock exercisable at $2.50 per share (the‘‘Offering’’). Through December  31,2005, the Company sold 64.04 units for net proceeds of $1,454,773 andissued 640,400 shares of common stock and issued warrants to purchasean aggregate of up to 640,600 shares of common stock at an exerciseprice of $2.50 per share.

Brookshire SecuritiesCorporation (‘‘Brookshire’’), a NASD brokerdealer, acted as selling agent in connection with the offering. TheCompany was to pay Brookshire a total of eight percent (8%) ofthe total proceeds resulting from the sale of the securities. TheCompany also was to reimburse Brookshire for its expenses in the amountof two percent (2%) of the selling price of the securities soldon a non-accountable basis. Through December  31,  2005, theCompany paid placement agent fees of $80,000 in full satisfaction ofall cash placement fees due. As additional compensation to Brookshire,the Company shall issue equity compensation in the form of up to300,000 shares of the Company’s common stock determined on a prorata basis by comparison of the gross proceeds raised compared to themaximum offering and, in the event of the exercise of theover-allotment option, up to an additional 275,000 shares of commonstock determined on a pro rata basis by comparison of the grossproceeds raised in the over-allotment to the full amount of theover-allotment. As of December  31,  2005, the Company issuedto Brookshire 96,000 shares of the Company’s common stock as aplacement fee.

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

Stockoptions

In November  2005, the Company and itsstockholders approved the MDwerks, Inc. 2005 Incentive CompensationPlan (the ‘‘Incentive Plan’’). The IncentivePlan 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 theofficers, directors, employees, consultants and other persons whoprovide services to the Company or any related entity (as defined inthe Incentive Plan). The Incentive Plan will be administered by theCompany’s Compensation Committee; however, the Board ofDirectors can exercise any power or authority granted to theCompensation Committee under the Incentive Plan, unless expresslyprovided otherwise in the Incentive Plan. The Company will reservebetween five to ten percent of the Company’s authorized commonstock for issuance pursuant to grants under the Incentive Plan.

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

Common stock warrants

In connectionwith the Offering, the Company issued to investors three-year warrantsto purchase an aggregate of 640,600 shares of its common stock at anexercise price of $2.50 per share, which expire on November16,  2008.

In connection with the Offering, theCompany issued Brookshire five-year warrants to purchase, at anexercise price of $1.25 per share, the number of shares of common stockequal to 10% of the number of shares of common stock sold in theOffering. As of December  31,  2005, the Company issuedwarrants to purchase an aggregate of 64,040 shares of its common stockto Brookshire for its services with regard to the offering at anexercise price of $1.25 per share, which expire on November16,  2010.

A summary of the status of theCompany’s common stock shares into which outstanding stockwarrants are excercisable as of December  31,  2005 andchanges during the year ending on that date is as follows:

|                                                      |  |        |         |                                |  |        |         |        |  |  |
|------------------------------------------------------|--|--------|---------|--------------------------------|--|--------|---------|--------|--|--|
|                                                 |  | Shares |         | Weighted-AverageExercise Price |
| Outstanding at December 31, 2004                     |  |   | — |                           |  | $      | — |   |
| Issued                                               |  |   | 704,640 |                           |  |   | 2.25    |   |
| Exercised                                            |  |   | — |                           |  |   | — |   |
| Forfeited                                            |  |   | — |                           |  |   | — |   |
| Outstanding at December 31, 2005                     |  |   | 704,640 |                           |  | $      | 2.25    |   |
| Common stock issuable upon exercise ofwarrants       |  |   | 704,640 |                           |  | $      | 2.25    |   |
| Weighted-average fair value of Common stock issuable |  | $      | 2.25    |                           |  |   |    |   |
|                                                      |

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

The following information appliesto common stock issuable upon exercise of the warrants outstanding atDecember  31,  2005:

|                         |  |                                                           |         |                                                 |  |                               |      |        |  |                               |      |        |  |        |         |        |  |   |      |        |  |  |
|-------------------------|--|-----------------------------------------------------------|---------|-------------------------------------------------|--|-------------------------------|------|--------|--|-------------------------------|------|--------|--|--------|---------|--------|--|---|------|--------|--|--|
|                    |  | Common Stock issuable uponexercise ofWarrants Outstanding |         | Common Stockissuable uponWarrants Exercisable   |
| Rangeof Exercise Prices |  | Shares                                                    |         | Weighted-AverageRemainingContractualLife(Years) |  | Weighted-AverageExercisePrice |      | Shares |  | Weighted-AverageExercisePrice |
| $1.25                   |  |                                                      | 64,040  |                                            |  |                          | 4.90 |   |  | $                             | 1.25 |   |  |   | 64,040  |   |  | $ | 1.25 |   |
| $2.50                   |  |                                                      | 640,600 |                                            |  |                          | 2.90 |   |  | $                             | 2.50 |   |  |   | 640,600 |   |  | $ | 2.50 |   |
|                         |

Registrationrights

The Company has agreed to use its bestefforts to file a ‘‘resale’’ registrationstatement with the SEC covering all shares of common stock and sharesof common stock underlying the warrants (including shares of commonstock and underlying warrants issued to the Placement Agent) issued inconnection with the Private Placement following the termination of thePrivate Placement which was terminated on December  31,2005. The Company has agreed that it will maintain the effectiveness ofthe ‘‘resale’’ registration statement from theeffective date through and until the earlier of two years and the timeat which exempt sales pursuant to Rule 144(k) may be permitted. TheCompany will use its best efforts to respond to any SEC comments to the‘‘resale’’ registration statement on or priorto the date which is 20 business days from the date such comments arereceived, but in any event not later than 30 business days from thedate such comments are received. The Company has agreed to use its bestefforts to have such ‘‘resale’’ registrationstatement declared effective by the SEC as soon as possible after theinitial filing date.

In the event the‘‘resale’’ registration statement is not filedwith the SEC on or prior to the date which is 180 days after the lastclosing date of the Private Placement, each investor in the PrivatePlacement will receive as liquidating damages an additional number ofshares of common stock equal to 2% of the total number of sharesof common stock purchased by the investor in the Private Placement foreach month (or portion thereof) that the Registration Statement is notso filed, provided that the aggregate increase in such shares of commonstock as a result of the delinquent filing will in no event exceed20% of the original number of shares of common stock purchasedin the Private Placement.

In the event that the Companyfails to respond to SEC comments to the Registration Statement within30 business days, each investor in the Private Placement will receivean additional number of shares of common stock equal to 2% ofthe total number of shares of common stock purchased by the investor inthe Private Placement for each month (or portion thereof) that aresponse to the comments to the Registration Statement has not beensubmitted to the SEC, provided that the aggregate increase in suchshares shall in no event exceed 20% of the original number ofshares of common stock purchased in the Private Placement.

In accordance with Emerging Issues Task Force Issue 00-19(‘‘EITF 00-19’’), ‘‘Accounting forDerivative Financial Instruments Indexed To, and Potentially Settledin, a Company’s Own Stock’’, the Company hasinitially accounted for the fair value of the warrants as aliability since the Company will incur penalties if the Companycannot comply with the warrant holders’ registration rights. Asof the closing date of the private placement the fair value of thewarrants was $1,142,770 calculated utilizing the Black-Scholes optionpricing model. In addition, changes in the market value of theCompany’s common stock from the closing date through the date offiling of the registration statement will result in non-cash charges orcredits to operations to reflect the change in fair value of thewarrants during this period. The Company recorded a charge tooperations of $592,467 during the year ended December  31,2005 to reflect the change in market value of the warrants. At the datethe Company files the registration statement, the fair value of thewarrants will be reclassified to equity.

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

At December  31,  2005,the assumptions used in valuing the warrants include:

|                                  |  |           |  |  |  |  |
|----------------------------------|--|-----------|--|--|--|--|
| Risk free interest rate (annual) |  | 3.75      |
| Expected volatility              |  | 105%      |
| Expected life                    |  | 3-5 years |
| Assumeddividends                 |  | none      |
|                                  |

NOTE 7 —INCOME TAXES

The Company accounts forincome taxes under Statement of Financial Accounting Standards No. 109,‘‘Accounting for Income Taxes’’(‘‘SFAS 109’’). SFAS 109 requires therecognition of deferred tax assets and liabilities for both theexpected impact of differences between the financial statements and thetax basis of assets and liabilities, and for the expected future taxbenefit to be derived from tax losses and tax credit carryforwards.SFAS 109 additionally requires the establishment of a valuationallowance to reflect the likelihood of realization of deferred taxassets. Realization of deferred tax assets, including those related tonet operating loss carryforwards, are dependent upon future earnings,if any, of which the timing and amount are uncertain. Accordingly, thenet deferred tax assets have been fully offset by a valuationallowance.

The Company has net operating losscarryforwards for tax purposes totaling approximately $2,262,000 atDecember  31,  2005, expiring through the year 2025 subjectto the Internal Revenue Code Section 382, which places a limitation onthe amount of net operating losses that can offset by taxable incomeafter a change in control (generally greater than a 50% changein ownership). The Company recorded a deferred tax asset ofapproximately $860,000 offset by a full valuation of $860,000 since itis more likely than not that the deferred tax asset will not berealized.

The table below summarizes the differencesbetween the Company’s effective tax rate and the statutoryfederal rate as follows for fiscal 2005 and 2004:

|                                                                    |  |        |       |          |  |        |       |          |  |  |
|--------------------------------------------------------------------|--|--------|-------|----------|--|--------|-------|----------|--|--|
|                                                               |  | 2005   |       | 2004     |
| Computed ‘‘expected’’ tax expense(benefit) |  |   | (34.0 | )%  |  |   | (34.0 | )%  |
| State income taxes                                                 |  |   | (4.0  | )%  |  |   | (4.0  | )%  |
| Other permanent differences                                        |  |   | 10.0  | %   |  |   | 0.0   | %   |
| Change in valuation allowance                                      |  |   | 28.0  | %   |  |   | 38.0  | %   |
| Effective tax rate                                                 |  |   | 0.0   | %   |  |   | 0.0   | %   |
|                                                                    |

NOTE 8 —GOING CONCERN

As reflected in theaccompanying consolidated financial statements, the Company has astockholders’ deficiency of $1,066,652, and a working capitaldeficiency of $1,143,653 at December  31,  2005.

While the Company is attempting to attain revenue growth andprofitability, the growth has not been significant enough to supportthe Company’s daily operations. Management intends to attempt toraise additional funds by way of a public or private offering and makestrategic acquisitions. While the Company believes in the viability ofits strategy to improve sales volume and in its ability to raiseadditional funds, there can be no assurances to that effect. Theability of the Company to continue as a going concern is dependent onthe Company’s ability to further implement its business plan andgenerate revenue. The financial statements do not include anyadjustments that might be necessary if the Company is unable tocontinue as a going concern. Management believes that the actionspresently being taken to further implement its business plan andgenerate revenue provide the opportunity for the Company to continue asa going concern.

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

NOTE 9 —COMMITMENTS

Employmentagreements

Effective January  1,  2006,the Company entered into employment agreements with Howard B. Katz,Solon L. Kandel, Vincent Colangelo, Stephen W. Weiss and Gerard J.Maresca. The employment agreements with Messrs. Katz and Colangeloextend for a term expiring on December  31,  2008, and theemployment agreements with Messrs. Kandel, Weiss and Maresca extend fora term expiring on December  31,  2006. Pursuant to theseemployment agreements, Mr.  Katz has agreed to devotesubstantially all of his time, attention and ability, and Messrs.Kandel, Colangelo, Weiss and Maresca have agreed to devote all of theirtime, attention and ability, to the Company’s business as theCompany’s Chief Executive Officer, President, Chief FinancialOfficer, Chief Technology Officer and Vice President-BusinessDevelopment, respectively. The employment agreements provide thatMessrs. Katz, Kandel, Colangelo, Weiss and Maresca will receive a basesalary during calendar year 2006 at an annual rate of $195,000,$175,000, $150,000, $150,000 and $150,000, respectively, for servicesrendered in such positions. During calendar years 2007 and 2008 underthe employment agreements for Messrs. Katz and Colangelo, the annualbase salaries will be increased to $225,000 and $300,000 for Mr.Katz, and $175,000 and $200,000 for Mr.  Colangelo, respectively.In addition, each executive may be entitled to receive, at the solediscretion of the Board of Directors, cash bonuses based on theexecutive meeting and exceeding performance goals of the Company. Thecash bonuses range from up to 25% of the executive’sannual base salary for Messrs. Weiss and Maresca, up to 100% ofthe executive’s annual base salary for Messrs. Kandel andColangelo, and up to 150% of the executive’s annual basesalary for Mr.  Katz.  Messrs.  Katz,Kandel,  Colangelo, Weiss and Maresca are entitled to participatein the 2005 Incentive Compensation Plan.

The Company hasalso agreed to pay or reimburse each executive up to a specifiedmonthly amount for the business use of his personal car and cell phone.Lastly, under Mr.  Katz’s employment agreement, the Companyagreed to reimburse him up to a specified monthly amount for therequired business use of a home office and for the business use of aportion of his personal home for business guest lodging, meetings andentertainment, and under Mr.  Kandel’s employmentagreement, the Company agreed to reimburse him up to a fixed amount forexpenses in connection with his relocation to Florida.

The employment agreements provide for termination by theCompany upon death or disability (defined as 90 aggregate days ofincapacity during any 365-consecutive-day period) of the executive orupon conviction of a felony or any crime involving moral turpitude, orwillful and material malfeasance, dishonesty or habitual drug oralcohol abuse by the executive, related to or affecting the performanceof his duties. In the event any of the employment agreements areterminated by the Company without cause, such executive will beentitled to compensation for the balance of the term of his employmentagreement or, if longer, for one year in the case of Mr.  Kandel,and two years in the cases of Messrs. Katz and 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 grantedto them under the Company’s 2005 Incentive Compensation Plan.The Company intends to obtain commitments for key-man life insurancepolicies for the Company’s benefit on the lives of Messrs. Katz,Kandel and Colangelo equal to three times their respective annual basesalary. In addition to the key-man life insurance policies, the Companyhas agreed to maintain throughout the term of each employment agreement15-year term life insurance policies on the lives of Messrs. Katz,Kandel and Colangelo, with benefits payable to their designatedbeneficiaries, and to pay all premiums in connection with thosepolicies.

In the event of a change of control of ourcompany, Messrs. Katz, Kandel and Colangelo may terminate theiremployment within six months after such event and will be entitled tocontinue to be 

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MDWERKS,INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember 31,2005

paid pursuant to the terms of theirrespective employment agreements. The employment agreements withMessrs. Weiss and Maresca do not have any change of controlprovisions.

The employment agreements also containcovenants (a) restricting the executive from engaging in any activitiescompetitive with the Company's business during the terms of suchemployment agreements and one year thereafter, (b) prohibiting theexecutive from disclosure of confidential information regarding theCompany at any time and (c) confirming that all intellectual propertydeveloped by the executive and relating to the Company constitutes thesole and exclusive property of the Company.

NOTE 10— SUBSEQUENT EVENTS

On January3,  2006, the Company granted options to purchase 860,000 sharesof common stock to employees of the Company under the Incentive Plan.The options are exercisable at $3.40 per share. The options vest as to33.33% of such shares on each of the first and secondanniversaries of the date of grant and as to 33.34% of suchshares on the third anniversary of the date of grant, and expire onJanuary  3,  2016 or earlier due to employment termination.As of January  1,  2006, the Company will account for stockoptions issued to employees in accordance with the provisions ofSFAS 123(R) and related interpretations. The fair value of thisoption grant was estimated on the date of grant using the Black-Scholesoption-pricing model with the following weighted-average assumptionsdividend yield of 0%; expected volatility of 105%;risk-free interest rate of 3.75% and a term of 10 years. Inconnection with these options, the Company valued these options at afair market value of approximately $2,690,000 and will recordstock-based compensation expense over the vesting period.

On February  1,  2006, the Board of Directors ofthe Company authorized the creation of 1,000 shares of $.001 par valueSeries 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 preferredstock shall not be entitled to receive dividends or other distributionsfrom the Company. Each holder of record of shares of the Series Aconvertible preferred stock shall have the right at suchholder’s option, at any time and from time to time, to convertany of such shares of Series A convertible preferred stock into fullypaid shares of common stock. Each share of Series A convertiblepreferred stock shall initially be convertible into 20,000 shares ofcommon stock (the  ‘‘Conversion Rate’’),subject to adjustment due to consolidation, merger or sale or commonstock dividends. The holders of shares of Series A convertiblepreferred stock shall be entitled to vote on all matters submitted to avote of the stockholders of the Company and shall have such number ofvotes equal to the number of shares of the Company’s commonstock into which such holders’ shares of Series A convertiblepreferred stock are convertible. No Series A convertible preferredshares have been issued.

On February  13,2006, $45,000 of the notes payable plus accrued interest of $1,342 asdescribed in Note 4 was converted into 92,685 shares of theCompany’s common stock in full satisfaction of the notespayable. In connection with the conversion of the notes payable, theCompany will record a loss on extinguishment of debt of approximately$181,000 in the quarter ended March  31,  2006 since thenotes were extinguished at a conversion rate lower than the fair valueof the common stock on the date ofconversion.

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