**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form
      10-Q**




(Mark
      One)




x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      quarterly period ended March 31, 2008




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




For
      the
      transition period from _______ to _________




**Commission
      File Number: 333-118155**





**MDWERKS,
      INC.**


(Exact
      name of registrant as specified in charter)




**Delaware**
            **33-1095411**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)




**Windolph
      Center, Suite I**


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


**Deerfield
      Beach, FL 33442**


(Address
      of principal executive offices)(Zip Code)




**(954)
      389-8300**


(Registrant's
      telephone number, including area code)




**N/A**


(Former
      name, former address and former fiscal year, if changed since last
      report)




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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.




Large accelerated filer o
            Accelerated filer oNon-accelerated filer o
            Smaller reporting company x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).   Yes o No x




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 12,940,065 shares at May 15,
      2008




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












**MDWERKS,
      INC.**


**FORM
      10-Q**


**FOR
      THE PERIOD ENDED MARCH 31, 2008**







**INDEX**




**Page****PART
                I - FINANCIAL INFORMATION**Item
                1 - Consolidated Financial StatementsConsolidated
                Balance Sheets As of March 31, 2008 (Unaudited) and December 31,
                2007
            3Consolidated
                Statements of Operations (Unaudited) For the Three Months Ended March
                31,
                2008 and 2007
            4Consolidated
                Statements of Cash Flows (Unaudited) For the Three Months Ended March
                31,
                2008 and 2007
            5Notes
                to Unaudited Consolidated Financial Statements
            6-22Item
                2 - Management's Discussion and Analysis of Financial Condition and
                Results of Operations
            23-29Item
                3 - Quantitative and Qualitative Disclosures About Market
                Risk
            29Item
                4 - Controls and Procedures
            29**PART
                II - OTHER INFORMATION**Item
                1 - Legal Proceedings
            30Item
                2 - Unregistered Sales of Equity Securities and Use of
                Proceeds
            30Item
                3 - Defaults Upon Senior Securities
            30Item
                4 - Submission of Matters to a Vote of Security Holders
            30Item
                5 - Other Information
            30Item
                6 - Exhibits
            30




2





**MDWERKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




March
                31,
              2008
              (Unaudited)
            
            December
                31,
              2007**ASSETS**Current
                assets:Cash
            
            $
            6,928,582
            
            $
            320,903Notes
                receivable, net of allowance of $125,000 for March 31, 2008 and $0
                for
                December 31, 2007
            
            
            1,511,091
            
            
            1,652,079Accounts
                receivable
            
            
            79,424
            
            
            66,985Prepaid
                expenses and other
            
            
            203,544
            
            
            215,073Total
                current assets
            
            
            8,722,641
            
            
            2,255,040Long-term
                assets:Property
                and equipment, net of accumulated depreciation of $102,791 for March
                31,
                2008 and $92,995 for December 31, 2007
            
            
            106,106
            
            
            115,902Debt
                issuance and offering costs, net of accumulated amortization of $324,265
                for March 31, 2008 and $273,997 for December 31, 2007
            
            
            520,259
            
            
            400,246Total
                assets
            
            $
            9,349,006
            
            $
            2,771,188**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIENCY)**Current
                liabilities:Notes
                payable, less long-term portion
            
            $
            1,944,444
            
            $
            2,942,842Mandatory
                Redeemable Convertible Series B Preferred Stock, $.001 par value,
                1,250
                shares authorized;1,000 shares issued and outstanding at March 31,
                2008
                and 250 shares authorized; 200 shares issued and outstanding at December
                31, 2007
            
            
            —
            
            
            1,346,326Loans
                payable
            
            
            69,559
            
            
            109,559Accounts
                payable
            
            
            456,906
            
            
            351,482Accrued
                expenses
            
            
            748,391
            
            
            686,917Deferred
                revenue
            
            
            11,107
            
            
            11,296Total
                current liabilities
            
            
            3,230,407
            
            
            5,448,422Long-term
                liabilities:Notes
                payable, net of discount of $2,900,548 at March 31, 2008 and $2,566,395
                at
                December 31, 2007, less current portion
            
            
            155,008
            
            
            65,763Deferred
                revenues, less current portion
            
            
            3,701
            
            
            1,613Total
                liabilities
            
            
            3,389,116
            
            
            5,515,798Stockholders'
                equity (deficiency):Preferred
                stock, $.001 par value, 10,000,000 shares authorized;
              no
                shares issued and outstanding
            
            
            —
            
            
            —Series
                A preferred stock, $.001 par value, 1,000 shares authorized;
              2
                shares issued and outstanding at March 31, 2008 and December 31,
                2007
            
            
            —
            
            
            —Common
                stock, $.001 par value, 100,000,000 shares authorized;
              12,940,065
                shares issued and outstanding at March 31, 2008 and December 31,
                2007
            
            
            12,940
            
            
            12,940Additional
                paid-in capital
            
            
            45,081,578
            
            
            33,732,690Accumulated
                deficit
            
            
            (39,134,628
            )
            
            (36,490,240
            )Total
                stockholders' equity (deficiency)
            
            
            5,959,890
            
            
            (2,744,610
            )Total
                liabilities and stockholders' equity (deficiency)
            
            $
            9,349,006
            
            $
            2,771,188




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





3





**MDWERKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**For
                the Three Months**
              **Ended
                March 31,****2008**
            
            
            **2007****(Unaudited)**
            
            
            **(Unaudited)**Revenue:Service
                fees
            
            $
            162,242
            
            $
            119,908Financing
                income
            
            
            41,219
            
            
            13,977Total
                revenue
            
            
            203,461
            
            
            133,885Operating
                expenses:Compensation
            
            
            902,102
            
            
            1,417,321Consulting
                expenses
            
            
            65,481
            
            
            162,697Professional
                fees
            
            
            164,688
            
            
            125,547Selling,
                general and administrative
            
            
            290,890
            
            
            409,019Total
                operating expenses
            
            
            1,423,161
            
            
            2,114,584Loss
                from operations
            
            
            (1,219,700
            )
            
            (1,980,699
            )Other
                income (expense):Interest
                income
            
            
            1,924
            
            
            28,239Interest
                expense
            
            
            (766,639
            )
            
            (517,498
            )Loss
                on extinguishment of debt
            
            
            (660,122
            )
            
            —Other
                income (expense)
            
            
            149
            
            
            —Total
                other income (expense)
            
            
            (1,424,688
            )
            
            (489,259
            )Net
                loss
            
            $
            (2,644,388
            )
            $
            (2,469,958
            )NET
                LOSS PER COMMON SHARE - basic and diluted
            
            $
            (0.20
            )
            $
            (0.20
            )WEIGHTED-AVERAGE
                COMMON SHARES OUTSTANDING - basic and diluted
            
            
            12,940,065
            
            
            12,580,065




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




4


**MDWERKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**For
                the Three Months**
              **Ended
                March 31,****2008**
            
            **2007****(Unaudited)**
            
            **(Unaudited)**Cash
                flows from operating activities:Net
                loss
            
            $
            (2,644,388
            )
            $
            (2,469,958
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            9,796
            
            
            10,700Amortization
                of debt issuance cost
            
            
            —
            
            
            5,360Amortization
                of debt discount
            
            
            1,264,742
            
            
            411,409Amortization
                of deferred offering costs
            
            
            73,698
            
            
            44,499Amortization
                of deferred compensation
            
            
            22,168
            
            
            66,510Bad
                debt
            
            
            125,000
            
            
            —Stock-based
                compensation
            
            
            381,505
            
            
            910,653Changes
                in assets and liabilities:Notes
                receivable
            
            
            15,988
            
            
            (129,165
            )Accounts
                receivable
            
            
            (12,439
            )
            
            12,509Prepaid
                expenses and other
            
            
            11,529
            
            
            (9,595
            )Accounts
                payable
            
            
            105,424
            
            
            (95,209
            )Accrued
                expenses
            
            
            61,474
            
            
            (36,267
            )Deferred
                revenues
            
            
            1,898
            
            
            (8,836
            )Total
                adjustments
            
            
            2,060,783
            
            
            1,183,568Net
                cash used in operating activities
            
            
            (583,605
            )
            
            (1,286,390
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            —
            
            
            (1,716
            )Net
                cash used in investing activities
            
            
            —
            
            
            (1,716
            )Cash
                flows from financing activities:Repayment
                of notes payable
            
            
            (575,000
            )
            
            (124,629
            )Repayment
                of loan payable
            
            
            (40,000
            )
            
            (2,916
            )Proceeds
                from sale of Mandatory Redeemable Series B preferred stock
            
            
            8,000,000
            
            
            —Placement
                fees and other expenses paid
            
            
            (193,716
            )
            
            —Net
                cash provided (used in) by financing activities
            
            
            7,191,284
            
            
            (127,545
            )Net
                increase (decrease) in cash
            
            
            6,607,679
            
            
            (1,415,651
            )Cash
                - beginning of period
            
            
            320,903
            
            
            3,146,841Cash
                - end of period
            
            $
            6,928,582
            
            $
            1,731,190Supplemental
                disclosure of cash flow information:Cash
                paid for:Interest
            
            $
            66,666
            
            $
            108,254




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




5




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**




**Organization**




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




The
      Company has three operating subsidiaries. Xeni Medical Systems, Inc. ("Xeni
      Medical") was incorporated under the laws of the state of Delaware on July
      21,
      2004.  Xeni Medical provides a Web-based package of electronic claims
      solutions to the healthcare provider industry through Internet access to it’s
‘‘MDwerks’’ suite of proprietary products and services so that healthcare
      providers can significantly improve daily insurance claims transaction
      processing, administration and management. Xeni Financial Services, Corp. ("Xeni
      Financial") was incorporated under the laws of the state of Florida on February
      3, 2005. Xeni Financial offers financing and advances to health care providers
      secured by claims processed through the MDwerks system. Xeni Medical Billing,
      Corp. ("Xeni Billing") was incorporated under the laws of the state of Florida
      on March 2, 2005. Xeni Billing offers health care providers billing services
      facilitated through the MDwerks system. Patient Payment Solutions, Inc. (“PPS”)
      was incorporated under the laws of the state of Florida on May 30, 2007. PPS
      planned to offer healthcare providers a payment improvement process for “out of
      network” claims, but never became operational and is a dormant
      entity.




**Going
      concern**




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




The
      Company has raised funds in the first quarter of 2008 through the sale of
      preferred stock. As reflected in the accompanying consolidated financial
      statements, the Company has stockholders’ equity of $5,809,301 and working
      capital of $5,492,234 at March 31, 2008.




**Basis
      of presentation**




The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with generally accepted accounting principles for interim financial
      information and with the instructions to Form 10-Q and Item 310(b) of Regulation
      S-B. Accordingly, the financial statements do not include all of the information
      and footnotes required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included and such adjustments are
      of
      a normal recurring nature. These consolidated financial statements should be
      read in conjunction with the consolidated financial statements for the year
      ended December 31, 2007 and notes thereto and other pertinent information
      contained in the Form 10-KSB of the Company as filed with the Securities and
      Exchange Commission (the ‘‘Commission’’). The results of operations for the
      three months ended March 31, 2008 are not necessarily indicative of what the
      results will be for the full fiscal year ending December 31,
      2008.





6




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




**Use
      of estimates**




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




**Fair
      value of financial instruments**




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




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




**Cash
      and cash equivalents**




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




At
      various times, the Company has deposits in excess of the Federal Deposit
      Insurance Corporation limit. At March 31, 2008, the Company was approximately
      $6,700,000 in excess of the $100,000 limit. The Company has not experienced
      any
      losses on these accounts.





**Advertising**




The
      Company expenses advertising costs as incurred. Advertising costs charged to
      operations were approximately $2,001 and $34,293 for the three months ended
      March 31, 2008 and 2007, respectively.




**Property
      and equipment**




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




**Revenue
      recognition**




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




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




7




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




**Revenue
      recognition (continued)**




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




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




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




**Income
      taxes**




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




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




**Loss
      per common share**




Basic
      loss per share is computed by dividing net loss by the weighted average number
      of shares of common stock outstanding during the period. Diluted loss per share
      is computed by dividing net loss by the weighted average number of shares of
      common stock and potentially dilutive securities outstanding during each period.
      For the three months ended March 31, 2008 and 2007, the Company had outstanding
      options to purchase an aggregate of 3,514,250 and 2,876,250 shares of common
      stock, respectively and warrants to purchase an aggregate of 57,566,346 and
      2,733,012 shares of common stock, respectively, 40,000 and 100,000 shares of
      common stock, respectively, issuable upon conversion of Series A preferred
      stock, 13,333,334 and 0 shares of common stock, respectively, issuable upon
      conversion of Series B preferred stock, and 2,222,222 and 2,222,222 shares
      of
      common stock, respectively, issuable upon conversion of notes payable which
      could potentially dilute future earnings per share. Diluted loss per common
      share has not been presented for the three months ended March 31, 2008 and
      2007
      since the impact of the stock options and warrants would be antidilutive.




8




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




**Stock-based
      compensation**




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




**Recent
      accounting pronouncements**




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




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




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




9




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      2 — ACCOUNTS AND NOTES RECEIVABLE**




Accounts
      receivable are recorded when revenue has been recognized but not yet collected.
      The Company had $79,424 of accounts receivable as of March 31, 2008 and 66,985
      as of December 31, 2007 from implementation, processing, collection, and other
      fees, and disbursements not yet collected.





Accounts
      and notes receivable are reported at their outstanding unpaid principal balances
      reduced by an allowance for doubtful accounts. The Company estimates doubtful
      accounts based on historical bad debts, factors related to specific customers’
ability to pay and current economic trends. The Company writes off receivables
      against the allowance when a balance is determined to be uncollectible.




At
      March
      31, 2008, the Company advanced six healthcare providers under lines of credit
      and note agreements, respectively, aggregating $1,636,091. Advances under the
      lines of credit are due to be repaid out of providers’ claims
      collections, as defined in the agreement. The notes receivable under note
      agreements are payable as the provider collects certain receivables. The Company
      charged the healthcare providers interest and other charges as defined in the
      agreements. At March 31, 2008, no amounts were past due, but an allowance for
      doubtful accounts of $125,000 was recorded for one note receivable due to the
      company’s estimate of the note holder’s ability to pay. At December 31, 2007,
      the Company had $1,652,079 of notes receivable.







**NOTE
      3 — PROPERTY AND EQUIPMENT**




Property
      and equipment consisted of the following:




**Estimated
                Life**
            
            
            **March
                31,**
              **2008**
            
            
            **December
                31,**
              **2007**Office
                furniture and equipment
            
            5-7
                Years
            
            $
            27,077
            
            $
            27,077Computer
                equipment and software
            
            3-5
                Years
            
            
            181,820
            
            
            181,820Total
            
            
            
            
            208,897
            
            
            208,897Less:
                accumulated depreciation
            
            
            
            
            (102,791
            )
            
            (92,995
            )Property
                and equipment, net
            
            
            
            $
            106,106
            
            $
            115,902




10




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      4 — NOTES PAYABLE**




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





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




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




11




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      4 — NOTES PAYABLE (continued)**




In
      connection with an extension until February 1, 2008 of repayment of principal
      on
      the Senior Notes described above, the Company granted to Gottbetter an
      additional five year Series D warrants to purchase 500,000 shares of its common
      stock at an exercise price of $2.25 per share which warrants expire on September
      27, 2012. These warrants were treated as a discount on the secured promissory
      note and were valued at $252,361 amortized over the 4-month extension. The
      fair
      market value of each stock warrant was estimated on the date of grant using
      the
      Black-Scholes option-pricing model in accordance with SFAS No. 123R using the
      following weighted-average assumptions: expected dividend yield 0%; risk-free
      interest rate of 4.23%; volatility of 116% and an expected term of 5
      years.





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





In
      connection with obtaining the consent and waiver of Gottbetter to the financing
      provided by Vicis Capital Master Fund, an unaffiliated accredited investor
      (“Vicis”) described below, we entered into the Gottbetter Consent Agreement,
      pursuant to which Gottbetter agreed to waive its anti-dilution rights under
      the
      Series D Warrants, Series E Warrants and promissory notes that we previously
      issued to Gottbetter and Gottbetter consented to the financing provided by
      Vicis.




On
      December 3, 2007 we received gross proceeds of $575,000 in connection with
      a
      financing provided by Vicis. In connection with the financing, we issued a
      Convertible Note to Vicis in the original principal amount of $575,000 (the
      “Note”). The Note bears interest at the rate of 8% per year. Subject to certain
      prepayment provisions, unpaid principal and interest due under the Note was
      due
      and payable on December 2, 2008. On March 31, 2008 both interest and principal
      on this Note were paid in full as part of the March Securities Purchase
      Agreement described below.




As
      consideration for Gottbetter entering into the Gottbetter Consent Agreement,
      we
      issued to Gottbetter a Series I warrant to purchase 1,000,000 shares of our
      common stock at an exercise price of $0.75 per share. The Series I Warrant
      is
      exercisable for a period of five years from the date of issuance. The Series
      I
      Warrant may be exercised on a cashless basis to the extent that the resale
      of
      shares of common stock underlying the Series I Warrant is not covered by an
      effective registration statement. The exercise price will be subject to
      adjustment in the event of subdivision or combination of shares of our common
      stock and similar transactions, distributions of assets, issuances of shares
      of
      common stock with a purchase price below the exercise price of the Series I
      Warrant, issuances of any rights, warrants or options to purchase shares of
      our
      common stock with an exercise price below the exercise price of the Series
      I
      Warrant and issuances of convertible securities with a conversion price below
      the exercise price of the Series I Warrant. The fair market value of each stock
      warrant was estimated on the date of grant using the Black-Scholes
      option-pricing model in accordance with SFAS No. 123R using the following
      weighted-average assumptions: expected dividend yield 0%; risk-free interest
      rate of 2.46%; volatility of 117% and an expected term of 5 years.




12




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      4 — NOTES PAYABLE (continued)**




For
      the
      three months ended March 31, 2008, amortization of the debt discount on notes
      payable amounted to $418,760.





The
      promissory notes are as follows:




**March
                31,**
              **2008**
            
            **December
                31,**
              **2007**Notes
                payable
            
            $
            5,000,000
            
            $
            5,575,000Less:
                unamortized discount on notes payable
            
            
            (2,900,548
            )
            
            (2,566,395
            )Notes
                payable, net
            
            $
            2,099,452
            
            $
            3,008,605Less
                current portion
            
            
            (1,944,444
            )
            
            (2,942,842
            )Notes
                payable, net of discount of $2,900,548, less current
                portion
            
            $
            155,008
            
            $
            65,763




On
      August
      31, 2007 we received gross proceeds of $250,000 in connection with a financing
      provided by Vicis. In connection with the financing, we issued a 31-day
      Convertible Note to Vicis in the original principal amount of
      $250,000.





On
      September 28, 2007 we received gross proceeds of $2,000,000 (net proceeds of
      $1,691,445 after repayment of the $250,000 31-day August 31, 2007 Convertible
      Note, interest and closing expenses) in connection with a financing provided
      by
      Vicis. In connection with the financing, pursuant to the terms of a Securities
      Purchase Agreement, we issued 200 shares of Series B Convertible Preferred
      Stock
      (a “Series B Preferred Stock”), a seven year Series F Warrant to purchase
      1,500,000 shares of our common stock at a price of $2.25 per share and a seven
      year Series G Warrant to purchase 1,000,000 shares of our common stock at a
      price of $2.50 per share. As security for our obligations, we, along with our
      subsidiaries entered into Security Agreements with the Investor, pursuant to
      which we granted a security interest in all of our assets, except for the
      accounts receivable and certain contract rights of Xeni Financial, to the
      Investor. The fair market value of each stock warrant was estimated on the
      date
      of grant using the Black-Scholes option-pricing model in accordance with SFAS
      No. 123R using the following weighted-average assumptions: expected dividend
      yield 0%; risk-free interest rate of 4.23%; volatility of 116% and an expected
      term of 7 years.







13




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      4 — NOTES PAYABLE (continued)**





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





On
      January 18, 2008, we received net proceeds of $500,000 in connection with a
      financing provided by Vicis. In connection with the financing, we and Vicis
      entered into a Securities Purchase Agreement, dated January 18, 2008 (the
“January Securities Purchase Agreement”), pursuant to which we issued 50 shares
      of Series B Preferred Stock, a seven year Series F Warrant to purchase 375,000
      shares of our common stock at a price of $2.25 per share and a seven year Series
      G Warrant to purchase 250,000 shares of our common stock a price of $2.50 per
      share. The fair market value of each stock warrant was estimated on the date
      of
      grant using the Black-Scholes option-pricing model in accordance with SFAS
      No.
      123R using the following weighted-average assumptions: expected dividend yield
      0%; risk-free interest rate of 4.75%; volatility of 118% and an expected term
      of
      7 years.





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





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




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






14





**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      4 — NOTES PAYABLE (continued)**





We
      amended the Registration Rights Agreement, previously entered into, by and
      between Vicis and us in September 2007. We agreed, in addition to registering
      the securities previously covered by such Registration Rights Agreement, to
      register for resale, the common stock relating to convertible shares of our
      preferred stock and the Series F Warrants and the Series G Warrants that are
      exercisable pursuant to the January Securities Purchase Agreement.





On
      March
      1, 2008, the Company and Gottbetter amended the Senior Notes to extend the
      maturity date of the Senior Notes to January 1, 2011 and to delay principal
      payments until March 1, 2008, since the Company was able to secure additional
      financing by March 31, 2008. If the Company was unable to secure additional
      financing by March 31, 2008, the amendment to the Senior Notes would have been
      void and of no force and effect. In consideration of the amendment to the Senior
      Notes, the Company issued to Gottbetter 1,000,000 Series I warrants. The Series
      I Warrants are exercisable at a price of $0.75 per share for a period of five
      years from the date of issuance.





On
      March
      31, 2008, we received net proceeds of $6,809,794 in connection with a financing
      provided by Vicis. In connection with the financing, we and Vicis entered into
      a
      Securities Purchase Agreement, dated March 31, 2008 (the “March Securities
      Purchase Agreement”), pursuant to which we issued 750 shares of Series B
      Convertible Preferred Stock, par value $0.001 ( “Series B Preferred Stock”), a
      ten year Series H Warrant to purchase 53,333,334 shares of our common stock
      at a
      price of $0.75 per share (the “Series H Warrant”), and pursuant to which Vicis
      Surrendered for cancellation all Series F Warrants and all Series G Warrants
      held by Vicis, which warrants were exercisable in the aggregate for 3,125,000
      shares of our common stock. The fair market value of each stock warrant was
      estimated on the date of grant using the Black-Scholes option-pricing model
      in
      accordance with SFAS No. 123R using the following weighted-average assumptions:
      expected dividend yield 0%; risk-free interest rate of 2.46%; volatility of
      117%
      and an expected term of 7 years.





For
      the
      three months ended March 31, 2008, amortization of the debt discount on
      mandatory redeemable convertible Series B preferred stock amounted to $845,982.





The
      mandatory redeemable convertible Series B preferred stock is as
      follows:





**March
                31,**
              **2008**
            
            **December
                31,**
              **2007**Mandatory
                redeemable convertible Series B preferred stock
            
            $
            10,000,000
            
            $
            2,000,000Less:
                unamortized discount on preferred stock
            
            
            (10,000,000
            )
            
            (653,674
            )Mandatory
                redeemable convertible Series B preferred stock, net
            
            $
            —
            
            $
            1,346,326





In
      connection with the sale of the Series B Preferred Stock, we amended and
      restated the Registration Rights Agreement, dated September 28, 2007, by and
      between Vicis and us (as amended and restated, the “Amended and Restated
      Registration Rights Agreement”), pursuant to which, among other things, we
      agreed, to register for resale all of the shares of our common stock into which
      the outstanding Series B Preferred Stock is convertible and all of the shares
      of
      our common stock for which the Series H is exercisable.





In
      connection with obtaining the consent and waiver of Gottbetter to the financing
      provided by Vicis, we entered into an Amendment, Consent and Waiver Agreement
      (the “Gottbetter Consent Agreement”), pursuant to which (i) we issued to
      Gottbetter a five year Series I warrant to purchase one million shares of our
      common stock at an exercise price of $0.75 per share; (ii) Gottbetter agreed
      to
      waive its anti-dilution rights under the Series D Warrants, Series E Warrants
      and Promissory Notes that we previously issued to Gottbetter and (iii)
      Gottbetter consented to the financing provided by Vicis.




15




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      4 — NOTES PAYABLE (continued)**




March
      Securities Purchase Agreement





The
      March
      Securities Purchase Agreement provided for the sale by us to Vicis of (i) 750
      shares of Series B Preferred Stock (ii) and a Series H Warrant to purchase
      an
      aggregate of 53,333,334 shares of our common stock at a price of $0.75 per
      share. Pursuant to the March Securities Purchase Agreement, the aggregate gross
      purchase price for the Series B Preferred Stock and the Series H Warrant was
      $7,500,000, which was paid by wire transfer of immediately available funds
      and
      the surrender for cancellation of a promissory note that we issued to Vicis
      in
      the principal amount of $575,000. Principal and accrued interest under the
      promissory note and $100,000 of Vicis’ expenses were applied against the
      purchase price.





The
      March
      Securities Purchase Agreement provides to Vicis, for a period of eighteen months
      after the closing date, a right of first refusal with respect to subsequent
      placements of equity or equity equivalent securities by us. The right of first
      refusal is on a pro rata basis (based upon the amount invested) with
      Gottbetter.





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





Events
      of
      default under the March Securities Purchase Agreement include: (i) default
      in
      the payment of dividends on or the failure to redeem the Series B Preferred
      Stock when due; (ii) failure to perform the covenants contained in the
      Securities Purchase Agreement or the related transaction documents; (iii)
      suspension from listing on the OTC Bulletin Board or other exchange for 10
      consecutive trading days; (iv) the failure to timely deliver shares of common
      stock upon conversion of the Series B Preferred Stock or exercise of the Series
      H Warrant ; (v) default in the payment of indebtedness in excess of $250,000;
      (vi) a judgment entered against us in excess of $250,000; and (vii) insolvency,
      bankruptcy and similar circumstances.




16




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      4 — NOTES PAYABLE (continued)**





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





Series
      B
      Preferred Stock





On
      March
      31, 2008 we filed an amended and restated Certificate of Designations (as
      amended and restated, the “Certificate of Designations”) with the Secretary of
      State of the State of Delaware to, among other things, increase the number
      of
      authorized shares of Series B Preferred Stock from 325 shares to 1,250
      shares.




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





Each
      share of Series B Preferred Stock is entitled to cumulative dividends at the
      annual rate of 12% of the stated value of the Series B Preferred Stock. The
      stated value of each share of Series B Preferred Stock is $10,000. Dividends
      are
      payable in cash or additional shares of Series B Preferred Stock.





Each
      share of Series B Preferred Stock is convertible, at any time, at the option
      of
      the holder, into the number of shares of Common Stock determined by dividing
      the
      stated value of the Series B Preferred Stock by the conversion price. The
      initial conversion price of the Series B Preferred Stock is $0.75 per
      share.





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





To
      the
      extent that any shares of Series B Preferred Stock remain outstanding on March
      31, 2010, each holder thereof shall have the option to either require us to
      redeem such holder’s shares of Series B Preferred Stock or convert such holder’s
      shares of Series B Preferred Stock into shares of Common Stock at the conversion
      price then in effect.





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





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





As
      of the
      March 31, 2008, there are 1,000 shares of Series B Preferred Stock issued and
      outstanding.




17





**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      4 — NOTES PAYABLE (continued)**




Series
      H
      Warrant




The
      Series H Warrant is exercisable at a price of $0.75 per share for a period
      of
      ten years from the date of issuance. The Series H Warrant may be exercised
      on a
      cashless basis to the extent that the resale of shares of common stock
      underlying the Series H Warrant is not covered by an effective registration
      statement. The exercise price will be subject to adjustment in the event of
      subdivision or combination of shares of our common stock and similar
      transactions, distributions of assets, issuances of shares of common stock
      with
      a purchase price below the exercise price of the Series H Warrant, issuances
      of
      any rights, warrants or options to purchase shares of our common stock with
      an
      exercise price below the exercise price of the Series H Warrant, issuances
      of
      convertible securities with a conversion price below the exercise price of
      the
      Series H Warrant.




As
      of
      March 31, 2008, the outstanding Series H Warrant is exercisable for an aggregate
      of 53,333,334 shares or our common stock.




Company
      Security Agreement




Pursuant
      to the terms of the March Securities Purchase Agreement, we agreed that the
      lien
      granted pursuant to the Company Security Agreement would, in addition to
      securing the obligations previously secured thereby, secure our obligations
      in
      connection with the March Securities Purchase Agreement, the March Transaction
      Documents and the Series B Preferred Stock issued in connection with the March
      Securities Purchase Agreement. The Company Security Agreement provides for
      a
      lien on all of our assets in favor of Vicis.




Guaranty
      Agreements




Pursuant
      to the terms of the March Securities Purchase Agreement, we agreed that the
      Guaranty Agreements would, in addition to applying to the obligations previously
      guaranteed thereby, apply to our obligations in connection with the March
      Securities Purchase Agreement, the March Transaction Documents and the Series
      B
      Preferred Stock issued pursuant to the January Securities Purchase Agreement.
      The Guaranty Agreements provide for unconditional guaranties of the obligations
      guaranteed thereunder.




Guarantor
      Security Agreements




Pursuant
      to the terms of the March Securities Purchase Agreement, we agreed that the
      security interests granted by our subsidiaries pursuant to the Guarantor
      Security Agreements would, in addition to securing the obligations previously
      secured thereunder, secure the obligations of our subsidiaries under the
      Guaranty Agreements insofar as those obligations related to the January
      Securities Purchase Agreement, the March Transaction Documents and the Series
      B
      Preferred Stock issued pursuant to March Securities Purchase Agreement. The
      Guarantor Security Agreements provide for liens in favor of Vicis on all of
      the
      assets of each of our subsidiaries, except for the accounts receivable and
      certain contract rights of Xeni Financial Services, Corp.




18




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**







**NOTE
      4 — NOTES PAYABLE (continued)**




Amended
      and Restated Registration Rights Agreement




Pursuant
      to the Amended and Restated Registration Rights Agreement, we agreed to register
      for resale, the shares of our common stock into which the Series B Preferred
      Stock is convertible and the shares of our common stock for which the Series
      H
      Warrant is exercisable.




The
      Registration Rights Agreement requires us to file a registration statement
      covering the resale of the shares underlying the Series B Preferred Stock and
      the Series H warrant within 60 days after the closing date. We are only required
      to register up to thirty percent of the number of outstanding shares of common
      stock in such registration statement and then file subsequent registration
      statements after the later of (i) sixty days following the sale of the
      securities covered by the initial registration statement or any subsequent
      registration statement and (ii) six months following the effective date of
      the
      initial registration statement or any subsequent registration statement. We
      are
      required to cause the initial registration statement to become effective on
      or
      before the date which is 150 calendar days after the closing date if the
      Securities and Exchange Commission (the “SEC”) does not review the registration
      statement or 180 calendar days after the closing if the registration statement
      receives a full review by the SEC. If we fail to file a registration statement
      in the time frame required, fail to file a request for acceleration in the
      time
      frame required, or fail to maintain the effectiveness of a registration
      statement as required by the Registration Rights Agreement, we will be required
      to pay a cash penalty in the amount of 1.5% of the aggregate stated value of
      the
      Series B Preferred Stock for each month, or part thereof, that such registration
      statement is not filed or effective, as the case may be. The cash penalty is
      limited to 9% of the aggregate stated value of the Series B Preferred
      Stock. The cash penalty will not apply to the registration of shares of common
      stock underlying the Series H Warrant. The Registration Rights Agreement also
      provides for piggyback registration rights.






**NOTE
      5 — LOAN PAYABLE**




The
      Company has a loan payable to an unrelated individual in the amount of $69,559
      at March 31, 2008 and December 31, 2007. The loan bears interest at 8% per
      annum
      and is payable on a monthly basis. The loan shall be repaid proportionally
      upon
      repayment of certain of the Company’s notes receivable.





The
      Company also had a net loan payable at December 31, 2007 to a customer of the
      Company in the amount of $40,000. During March 2008, the remaining $40,000
      of
      this loan payable was paid in full to the customer.




19




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      6 — STOCKHOLDERS’ EQUITY**




**Common
      stock**  ****




The
      Company is authorized to issue 100,000,000 shares of Common stock, $.001 par
      value, with such designations, rights and preferences as may be determined
      from
      time to time by the Board of Directors. As of March 31, 2008, there are
      12,940,065 shares issued and outstanding.




**Preferred
      stock**




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




The
      Company issued 1,000 shares of Series A Convertible Preferred stock, $0.001
      par
      value with such designations, rights and preferences as may be determined from
      time to time by the Board of Directors. Between February 1, 2006 and June 30,
      2006, the Company sold 28.3 Units to accredited investors. Each unit consists
      of
      one share of our Series A Convertible Preferred Stock, par value $.001 per
      share, and a detachable, transferable Series A Warrant to purchase 20,000 shares
      of our common stock, at a purchase price of $3.00 per share. Between August
      11,
      2006 and March 31, 2008, 26.3 shares of Series A Convertible Preferred Stock
      were converted into 526,667 shares of common stock leaving 2 Series A
      Convertible Preferred Stock outstanding as of March 31, 2008.





The
      Company is authorized to issue 1,250 shares of Series B Convertible Preferred
      stock, $0.001 par value with such designations, rights and preferences as may
      be
      determined from time to time by the Board of Directors. On September 28, 2007,
      200 shares of Series B convertible preferred stock were issued in connection
      with the September Securities Purchase Agreement. On January 18, 2008, 50 shares
      of Series B convertible preferred stock were issued in connection with the
      January Securities Purchase Agreement. On March 31, 2008, 750 shares of Series
      B
      convertible preferred stock shares were issued in connection with the March
      Securities Purchase Agreement. As of March 31, 2008, there are 1,000 issued
      and
      outstanding shares of Series B convertible preferred stock.




**Common
      stock options**




A
      summary
      of the status of the Company's outstanding stock options as of March 31, 2008
      and changes during the period ending on that date is as follows:





**Shares**
            
            
            **Weighted
                Average**
              **Exercise
                Price**
            
            
            **Aggregate**
              **Intrinsic
                Value**Outstanding
                at December 31, 2007
            
            
            3,514,250
            
            $
            2.57
            
            $
            0Granted
            
            
            —
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —
            
            
            —Outstanding
                at March 31, 2008
            
            
            3,514,250
            
            $
            2.57
            
            $
            291,410Options
                exercisable at end of period
            
            
            2,220,083
            
            $
            2.80
            
            $
            258,827Weighted-average
                fair value of options granted during the period
            
            
            —
            
            
            —
            
            
            —




20




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**




**NOTE
      6 — STOCKHOLDERS’ EQUITY**


**Common
      stock options (continued)**




The
      following information applies to options outstanding at March 31,
      2008:




**Options
                Outstanding**
            
            **Options
                Exercisable****Range
                of Exercise Prices**
            
            **Shares**
            
            **Weighted
                Average**
              **Remaining**
              **Contractual**
              **Life
                (Years)**
            
            **Weighted
                Average**
              **Exercise
                Price**
            
            **Shares**
            
            **Weighted
                Average**
              **Exercise
                Price**$0.38
            
            
            483,000
            
            
            9.75
            
            $
            0.38
            
            
            483,000
            
            $
            0.38$0.67
            
            
            175,000
            
            
            9.50
            
            $
            0.67
            
            
            33,333
            
            $
            0.67$1.39
            
            
            105,000
            
            
            9.00
            
            $
            1.39
            
            
            95,000
            
            $
            1.39$2.25
            
            
            1,025,000
            
            
            8.75
            
            $
            2.25
            
            
            683,333
            
            $
            2.25$3.25
            
            
            190,000
            
            
            7.75
            
            $
            3.25
            
            
            126,667
            
            $
            3.25$3.40
            
            
            860,000
            
            
            7.75
            
            $
            3.40
            
            
            573,333
            
            $
            3.40$4.00
                - 4.25
            
            
            676,250
            
            
            8.25
            
            $
            4.03
            
            
            225,417
            
            $
            4.033,514,250
            
            
            
            
            $
            2.57
            
            
            2,220,083
            
            $
            2.80




In
      connection with previously granted stock options, the Company recognized
      stock-based compensation expense of $381,504 for the three months ended March
      31, 2008 and $910,653 for the three months ended March 31, 2007.




As
      of
      March 31, 2008, the total future compensation expense related to non-vested
      options not yet recognized in the consolidated statement of operations is
      approximately $945,000, which will be recognized through September
      2010.




**Common
      stock warrants**




A
      summary
      of the status of the Company's outstanding stock warrants granted as of March
      31, 2008 and changes during the period is as follows:





**Shares**
            
            **Weighted**
              **Average**
              **Exercise
                Price**Outstanding
                at December 31, 2007
            
            
            5,733,012
            
            $
            2.42Granted
            
            
            54,333,334
            
            
            0.75Exercised
            
            
            —
            
            
            —Forfeited
            
            
            (2,500,000
            )
            
            (2.35
            )Outstanding
                at March 31, 2008
            
            
            57,566,346
            
            $
            0.85Common
                stock issuable upon exercise of warrants
            
            
            57,566,346
            
            $
            0.85


21




**MDWERKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





**NOTE
      6 — STOCKHOLDERS’ EQUITY**


**Common
      stock warrants (continued)**





**Common
                Stock issuable upon**
              **exercise
                of warrants outstanding**
            
            **Common
                Stock issuable upon**
              **Warrants
                Exercisable****Range
                of****Exercise
                Price**
            
            **Number**
              **Outstanding**
              **at
                March 31, 2008**
            
            **Weighted
                Average**
              **Remaining**
              **Contractual**
              **Life
                (Years)**
            
            **Weighted
                Average**
              **Exercise
                Price**
            
            **Number**
              **Exercisable**
              **at
                March 31, 2008**
            
            **Weighted
                Average**
              **Exercise
                Price**$0.75
            
            
            54,333,334
            
            
            9.91
            
            $
            0.75
            
            
            54,333,334
            
            $
            0.75$1.25
            
            
            199,000
            
            
            2.22
            
            $
            1.25
            
            
            199,000
            
            $
            1.25$1.50
            
            
            56,667
            
            
            3.24
            
            $
            1.50
            
            
            56,667
            
            $
            1.50$2.25
            
            
            1,527,778
            
            
            3.89
            
            $
            2.25
            
            
            1,527,778
            
            $
            2.25$2.50
            
            
            640,400
            
            
            0.63
            
            $
            2.50
            
            
            640,400
            
            $
            2.50$3.00
            
            
            579,167
            
            
            1.12
            
            $
            3.00
            
            
            579,167
            
            $
            3.00$3.76
            
            
            225,000
            
            
            1.55
            
            $
            3.76
            
            
            225,000
            
            $
            3.76$4.00
            
            
            5,000
            
            
            1.55
            
            $
            4.00
            
            
            5,000
            
            $
            4.0057,566,346
            
            
            
            
            $
            0.85
            
            
            57,566,346
            
            $
            0.85







**NOTE
      7 — COMMITMENTS**




**Lease
      agreements**




The
      Company sub-leased its facility, on a month-to-month basis, under a master
      lease
      expiring July 2008. Rent expense for the three months ended March 31, 2008
      was
      $21,936. On February 1, 2008, the Company was assigned the master lease and
      a
      5-year lease option was exercised which extends the master lease until June
      2013.





22




**Item
      2.****MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.**




**Overview**




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




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




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




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




There
      is
      no major hardware or software investment required to use the Company’s Web-based
      systems. All transactions are designed to comply with the Health Insurance
      Portability and Accountability Act of 1996 (‘‘HIPAA’’).




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




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




23




**Critical
      Accounting Policies**




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




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




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




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




**Results
      of Operations**




***For
      the Three Months Ended March 31, 2008 Versus the Three Months Ended March 31,
      2007***




*Revenue*




For
      the
      three months ended March 31, 2008, we recorded total revenue of $203,461. Of
      this total, we recorded service fee revenue of $162,242, accounting for 79.7%
      of
      total revenue, and financing income of $41,219, accounting for 20.3% of total
      revenue. For the three months ended March 31, 2007, we recorded total revenue
      of
      $133,885 of total revenue. Of this total, we recorded service fee revenue of
      $119,908, accounting for 89.6% of total revenue and financing income of $13,977,
      accounting for 10.4% of total revenue.




*Operating
      Expenses*




Our
      operating expenses significantly decreased for the three months ended March
      31,
      2008 from the three months ended March 31, 2007 principally as a result of
      decreased stock option compensation.




For
      the
      three months ended March 31, 2008, total operating expenses were $1,423,161
      as
      compared to $2,114,584 for the three months ended March 31, 2007, a decrease
      of
      $691,423 or 32.7%. Included in this decrease for the three months ended March
      31, 2008 is the following:




1.
            We
                recorded compensation expense of $902,102 as compared to $1,417,321
                for
                the three months ended March 31, 2007. This $515,219 or 36.4% decrease
                was
                attributable to non-cash compensation expense for stock option grants
                during 2007; and




24




2.
            Consulting
                expense amounted to $65,481 as compared to $162,697 for the three
                months
                ended March 31, 2007, a decrease of $97,216, or 59.8%. This decrease
                resulted from lower financing costs and outside business development
                an
                information technology consultants expense.;
                and




3.
            Professional
                fees amounted to $164,688 as compared to $125,547 for the three months
                ended March 31, 2007, an increase of $39,141, or 31.2%. This expense
                was
                attributable to an increase in legal fees related to additional SEC
                filings, and Series B Convertible Preferred Stock offerings, higher
                accounting fees for SEC filings and other corporate matters;
                and




4.
            Selling,
                general and administrative expenses were $290,890 as compared to
                $409,019
                for the three months ended March 31, 2007, a decrease of $118,129,
                or
                28.9%. This decrease resulted from a reduction in advertising, sales
                travel and trade shows.




For
      the
      three months ended March 31, 2008 and 2007, selling, general and administrative
      expenses consisted of the following:





**March
                31,**
              **2008**
            
            **March
                31,**
              **2007**Sales
                commissions
            
            $
            5,120
            
            $
            27,585Advertising
                and promotion
            
            
            2,001
            
            
            34,293Employee
                benefits and payroll taxes
            
            
            111,625
            
            
            108,927Other
                selling, general and administrative
            
            
            172,144
            
            
            238,214$
            290,890
            
            $
            409,019




*Other
      Income (Expenses)*




For
      the
      three months ended March 31, 2008, interest income was $1,924 as compared to
      $28,239 for the three months ended March 31, 2007, a decrease of $26,315. This
      decrease was principally due to a decrease in interest-bearing cash
      deposits.




For
      the
      three months ended March 31, 2008, interest expense was $766,639 as compared
      to
      $517,498 for the three months ended March 31, 2007, an increase of $249,141.
      This increase was due to an increase in borrowings and amortization of debt
      discount and deferred fees in connection with our notes payable.





On
      March
      31, 2008, the Company received net proceeds of $6,809,794 in connection with
      a
      financing provided by Vicis. Along with this financing, the Mandatory Redeemable
      Convertible Series B Preferred Stock issued in connection with the September
      28,
      2007 financing of $2,000,000 and the January 18, 2008 financing of $500,000
      were
      returned and considered debt extinguishment and a new Notes Payable to Vicis
      for
      $10,000,000 was recorded. The loss on extinguishment of this debt was $660,880.





*Net
      Loss Attributable to Common Shareholders*




We
      reported a net loss attributable to common shareholders of $2,644,388 for the
      three months ended March 31, 2008 as compared to net loss attributable to common
      shareholders of $2,469,958 for the three months ended March 31, 2007. This
      translates to an overall per share loss available to shareholders of ($.20)
      for
      the three months ended March 31, 2008 as compared to a per share loss of ($.20)
      for three months ended March 31, 2007.




25




*Liquidity
      and Capital Resources*




We
      used
      the proceeds from the sales of preferred stock through March 31, 2008 and
      proceeds from notes and loans payable for working capital purposes and to fund
      our notes receivable of which we have $1,636,091 owed to us at March 31, 2008.
      We will continue to advance funds under note agreements to providers that
      subscribe to our financial services lending solutions.




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





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





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





On
      September 28, 2007 we received gross proceeds of $2,000,000 (net proceeds of
      $1,691,445 less repayment of the $250,000 August 31, 2007 Vicis Convertible
      Note, interest and closing expenses) in connection with a financing provided
      by
      Vicis .





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





26




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





On
      March
      31, 2008, we received net proceeds of $6,809,794 in connection with a financing
      provided by Vicis. In connection with the financing, we and Vicis entered into
      a
      Securities Purchase Agreement, dated March 31, 2008 (the “March Securities
      Purchase Agreement”), pursuant to which we issued 750 shares of Series B
      Convertible Preferred Stock, par value $0.001 ( “Series B Preferred Stock”), a
      ten year Series H Warrant to purchase 53,333,334 shares of our common stock
      at a
      price of $0.75 per share (the “Series H Warrant”), and pursuant to which Vicis
      surrendered for cancellation all Series F Warrants and all Series G Warrants
      held by Vicis, which warrants were exercisable in the aggregate for 3,125,000
      shares of our common stock **.**





We
      believe we have sufficient funds to conduct our business and operations as
      they
      are currently undertaken for the balance of the fiscal year.





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




We
      currently have no material commitments for capital expenditures.




*Cash
      flows*




At
      March
      31, 2008, we had cash of $6,928,582.




Net
      cash
      used in operating activities was $583,605 for the three months ended March
      31,
      2008 as compared to $1,286,390 for the three months ended March 31, 2007, a
      decrease of $702,785. This decrease is primarily attributable to the net effect
      of an increase in our net loss and:




1.
            Gottbetter
                debt offering costs of $73,698 and Gottbetter debt discount costs
                of
                $1,264,742, compared to debt related costs during the three months
                ended
                March 31, 2007 of $461,268;




2.
            Stock-based
                compensation of $381,505 versus stock-based compensation expense
                of
                $910,653 for the three months ended March 31, 2007 primarily related
                to
                issuance of stock options in 2007 to
                employees;


27




3.
            A
                net decrease in notes receivable, accounts receivable and prepaid
                expenses
                aggregating $15,078 principally related to the reduction in notes
                receivables from providers that subscribe to our MDwerks financial
                services solution;




4.
            An
                increase in accounts payable, accrued expenses, and deferred revenue
                related to an increase in operating activities aggregating
                $168,796.




Net
      cash
      used in investing activities was $0 for the three months ended March 31, 2008
      as
      compared to $1,716 for the three months ended March 31, 2007.




Net
      cash
      provided by financing activities was $7,191,284 due to the proceeds from the
      sale of Series B Preferred Stock for the three months ended March 31, 2008
      as
      compared to net cash used by financing activities of $127,545 due to repayments
      of notes and loan payable for the three months ended March 31,
      2007.




***Off
      Balance Sheet Arrangements***




We
      had no
      off balance sheet arrangements as of March 31, 2008.




***Cautionary
      Language Regarding Forward-Looking Statements and Industry
      Data***




This
      report contains ‘‘forward-looking statements’’ within the meaning of the Private
      Securities Litigation Reform Act of 1995 that involve risks and uncertainties,
      many of which are beyond our control. Our actual results could differ materially
      and adversely from those anticipated in such forward-looking statements as
      a
      result of certain factors, including those set forth below and elsewhere in
      this
      report. Important factors that may cause actual results to differ from
      projections include, but are not limited to, for example:




· adverse
      economic conditions;




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




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




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




· adverse
      results of any legal proceedings;




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




· the
      volatility of our operating results and financial condition;




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




· other
      specific risks that may be alluded to in this report.




All
      statements, other than statements of historical facts, included in this report
      regarding our strategy, future operations, financial position, estimated revenue
      or losses, projected costs, prospects and plans and objectives of management
      are
      forward-looking statements. When used in this report, the words ‘‘will,’’
‘‘may,’’ ‘‘believe,’’ ‘‘anticipate,’’ ‘‘intend,’’ ‘‘estimate,’’ ‘‘expect,’’
‘‘project,’’ ‘‘plan’’ and similar expressions are intended to identify
      forward-looking statements, although not all forward-looking statements contain
      such identifying words. All forward-looking statements speak only as of the
      date
      of this report. We do not undertake any obligation to update any forward-looking
      statements or other information contained herein. Potential investors should
      not
      place undue reliance on these forward-looking statements. Although we believe
      that our plans, intentions and expectations reflected in or suggested by the
      forward-looking statements in this report are reasonable, no one can assure
      investors that these plans, intentions or expectations will be
      achieved.


28




Information
      regarding market and industry statistics contained in this report is included
      based on information available to us that we believe is accurate. It is
      generally based on academic and other publications that are not produced for
      purposes of securities offerings or economic analysis. We have not reviewed
      or
      included data from all sources, and we cannot assure investors of the accuracy
      or completeness of the data included in this report. Forecasts and other
      forward-looking information obtained from these sources are subject to the
      same
      qualifications and the additional uncertainties accompanying any estimates
      of
      future market size, revenue and market acceptance of products and services.
      We
      have no obligation to update forward-looking information to reflect actual
      results or changes in assumptions or other factors that could affect those
      statements.





**ITEM
      3.****QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Our
      Company has financial instruments that are subject to interest rate risk,
      principally fixed-rate debt obligations and customer financing assets.
      Historically, we have not experienced material gains or losses on these
      instruments due to interest rate changes.





**ITEM
      4.**  **CONTROLS
      AND PROCEDURES**




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




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




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




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




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


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




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





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





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





29





**PART
      II — OTHER INFORMATION**





**Item
      1 — Legal Proceedings**




None





**Item
      2 — Unregistered Sales of Equity Securities and Use of
      Proceeds**




None




**Item
      3 — Defaults Upon Senior Securities**




None.





**Item
      4 — Submissions of Matters to a Vote of Security Holders**




None.





**Item
      5.**  **Other
      Information**




None





**Item
      6.**  **Exhibits**




31.1
        Section 302 Certification of Principal Executive Officer




31.2
        Section 302 Certification of Principal Financial Officer




32.1
        Section 906 Certification of Principal Executive Officer




32.2
        Section 906 Certification of Principal Financial Officer




30





**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


**MDWERKS,
                INC.**May
                15, 2008
            
            /s/
                Howard B.
                KatzHoward
                B. KatzChief
                Executive OfficerMay
                15, 2008
            
            /s/
                Vincent
                ColangeloVincent
                ColangeloChief
                Financial Officer




31