TKLS.OTC.PinkTrutankless, INC
10-Q: TRUTANKLESS Faces Going Concern Amid Rising Debt, Cash Drain
Sentiment:
Quarterly Report
TRUTANKLESS, Inc. reported a substantial net loss and significant cash burn for the nine months ended September 30, 2025, raising substantial doubt about its ability to continue as a going concern.
Capital raiseManagement explicitly states plans to raise additional capital over the next twelve months to fund operations and sales/marketing efforts.The company has historically financed operations through issuance of common stock and borrowings from stockholders and third-party debt.The filing notes that there is no guarantee the company will generate sufficient revenues or raise capital to continue operations, implying a continuous need for funding.
Worse than expectedThe company's cash position significantly deteriorated, dropping from over $1 million to $32,622 in nine months.Cash used in operating activities increased substantially, indicating a higher burn rate despite revenue growth.Total liabilities and the accumulated deficit continued to grow, exacerbating the company's precarious financial position.The explicit 'going concern' warning highlights severe liquidity issues and dependence on future capital raises, which are not guaranteed.
Summary
- Net sales for the nine months ended September 30, 2025, increased significantly to $748,491, up from $191,285 in the prior year, driven by sales of new Gen 3 residential products.
- The company reported a net loss of $3,758,712 for the nine months ended September 30, 2025, an improvement from a net loss of $4,908,865 in the same period of 2024.
- Cash on hand decreased dramatically to $32,622 as of September 30, 2025, from $1,004,190 at December 31, 2024.
- Cash used in operating activities increased to $2,396,845 for the nine months ended September 30, 2025, compared to $1,668,634 in the prior year.
- Total liabilities surged to $12,668,576 as of September 30, 2025, from $9,743,750 at December 31, 2024.
- The company has an accumulated deficit of $80,860,681 and a working capital deficiency of $9,979,271 as of September 30, 2025.
- Substantial doubt exists about the company's ability to continue as a going concern, dependent on generating revenues and raising additional capital.
- Professional fees increased by 22.0% to $2,312,850 for the nine months ended September 30, 2025, primarily due to increased consulting expenses for production readiness.
- Inventory significantly increased to $1,693,218 as of September 30, 2025, from $350,866 at December 31, 2024, indicating ramp-up for production and sales.
Sentiment
Score: 2
Explanation: The company faces severe financial distress, evidenced by a critical cash shortage, substantial accumulated deficit, increasing liabilities, and an explicit 'going concern' warning. While revenue growth is positive, it is insufficient to offset the significant cash burn and debt burden, making the overall outlook highly negative.
Positives
- Net sales for the nine months ended September 30, 2025, increased by 291.3% to $748,491, compared to $191,285 in the prior year, driven by new Gen 3 residential products.
- The net loss for the nine months ended September 30, 2025, decreased by 23.4% to $3,758,712, from $4,908,865 in the same period of 2024.
- Operating expenses decreased by 5.9% to $3,212,834 for the nine months ended September 30, 2025, from $3,416,851 in the prior year, primarily due to lower payroll and R&D expenses.
Negatives
- Cash on hand plummeted to $32,622 as of September 30, 2025, from $1,004,190 at December 31, 2024.
- Cash used in operating activities increased by 43.6% to $2,396,845 for the nine months ended September 30, 2025, indicating higher cash burn.
- Total liabilities increased by 30.0% to $12,668,576 as of September 30, 2025, from $9,743,750 at December 31, 2024.
- The accumulated deficit grew to $80,860,681 as of September 30, 2025, from $77,101,969 at December 31, 2024.
- A working capital deficiency of $9,979,271 exists as of September 30, 2025.
- The company has outstanding legal liabilities, including $20,000 due for SEC civil penalties and a $38,768 default judgment in a Florida lawsuit, both unpaid as of September 30, 2025.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern due to insufficient revenues and dependence on external capital.
- Inability to raise additional financing for working capital could force the company to scale back or discontinue sales and marketing efforts.
- Accounting policies and methods require management to make estimates about inherently uncertain matters, which could lead to material differences in actual results.
- The company's ability to attract and retain key personnel is crucial for its operations and future growth.
- Deterioration in general or regional economic conditions could adversely impact product demand and financial performance.
- Adverse state or federal legislation or regulation, or adverse findings by regulators, could increase compliance costs.
- Changes in U.S. GAAP or in the legal, regulatory, and legislative environments could affect financial reporting and operations.
- Management's inability to effectively implement strategies and business plans poses a risk to achieving operational goals.
- The company faces risks related to achieving future sales levels or other operating results, which are essential for profitability.
- Unavailability of funds for capital expenditures could hinder product development and production capabilities.
- The company is subject to inherent uncertainties in legal proceedings, with adverse results potentially harming the business.
Future Outlook
Management plans to raise additional capital and invest working capital resources in sales and marketing over the next twelve months to increase product distribution and demand. However, there is no guarantee of generating sufficient revenues or raising capital to continue operations, which could lead to scaling back or discontinuing sales and marketing efforts.
Management Comments
- Management anticipates the Company's trutankless water heater, with Wi-Fi capability and Trutankless proprietary apps offered in the iOS and Android store, will augment existing products in the home automation space.
- We believe that our products have an improved design and greater efficiency thereby saving energy and offering reduction operating costs compared to tank systems because unlike tanks, if there is no hot water demand, no energy is being used.
- We intend to improve manufacturing and life-cycle costs with an improved design conceived not only to increase efficiency, but also the longevity of our products versus competitive units.
- We are developing systems using upgraded materials, electronics, and a collection of exclusive design elements and features to maximize capacity, minimize energy use, and provide a truly maintenance free experience.
- Over the next twelve months management plans to raise additional capital and to invest its working capital resources in sales and marketing in order to increase the distribution and demand for its products.
Industry Context
TRUTANKLESS operates in the smart electric tankless water heater market, aiming to leverage Wi-Fi capability and proprietary apps to integrate with the broader home automation space. The company targets growth centers in the U.S. construction market, such as Florida, Texas, and Arizona, and distributes through wholesale plumbing channels. Its focus on energy efficiency and smart features aligns with growing consumer demand for sustainable and connected home solutions.
Comparison to Industry Standards
- NA
Legal Proceedings
- As of September 30, 2025, $20,000 remained due for civil penalties agreed upon with the SEC on April 29, 2021, in settlement of a late filing notification inquiry.
- A default judgment for $38,768 was entered on June 8, 2023, in a Florida lawsuit claiming Strict Liability, Negligence, and Breach of Implied Warranty related to improper product installation; this balance remains unpaid as of September 30, 2025.
Related Party Transactions
- Advances payable to related parties remained at $7,500 as of September 30, 2025.
- Notes payable to related parties increased significantly to $6,076,887 as of September 30, 2025, from $4,173,639 at December 31, 2024, including a $4,259,049 8% convertible grid note with Notation Labs, Inc. (commonly controlled by a director).
- Convertible notes payable to related parties totaled $750,000 as of September 30, 2025, including a $250,000 12% note to a trust controlled by a shareholder and a $500,000 15% note to a company commonly controlled by a shareholder.
- Interest expense associated with related party notes for the nine months ended September 30, 2025, was $426,696, a substantial increase from $42,475 in the prior year.
- Interest expense on related party convertible notes for the nine months ended September 30, 2025, was $78,534, a decrease from $180,174 in the prior year.
- A $185,000, 12% note payable was entered into with a director of the company on March 31, 2025.
Stakeholder Impact
- Shareholders face significant dilution risk from potential future equity offerings and the existing large number of shares issued for services and financing incentives.
- Existing shareholders are experiencing a substantial increase in stockholders' deficit, indicating a decrease in the book value of their equity.
- Creditors, particularly related parties, hold a significant portion of the company's debt, increasing their exposure to the company's going concern risks.
- Customers may face uncertainty regarding long-term product support and warranty fulfillment given the company's financial instability.
- Employees may face job insecurity if the company is forced to scale back operations due to insufficient funding.
Next Steps
- Raise additional capital to fund operating expenses and capital expenditures.
- Invest working capital resources in sales and marketing to increase product distribution and demand.
- Continue development of new, customizable app and control panel for smart electric water heaters.
- Address outstanding legal liabilities, including $20,000 due to the SEC and a $38,768 default judgment in Florida.
Key Dates
| Date | Description |
|---|---|
| 2008-03-07 | Company incorporated as Alcantara Brands Corporation. |
| 2010-05-16 | Acquired 100% of the outstanding stock of Bollente, Inc. |
| 2010-10-05 | Company amended its articles of incorporation and changed its name to Bollente Companies, Inc. |
| 2018-06-04 | Company amended its articles of incorporation and changed its name to Trutankless, Inc. |
| 2019-11-19 | Entered into a $281,000 convertible note payable. |
| 2020-07-06 | Received a letter from the SEC Division of Enforcement regarding a late filing notification. |
| 2020-08-20 | Formed a wholly owned subsidiary, Notation Labs, Inc. |
| 2020-10-26 | Board of Directors authorized an increase in authorized capital stock and a reverse stock split. |
| 2021-01-11 | Entered into a $125,000, 30% note payable. |
| 2021-04-26 | Entered into a $95,000, 12% note payable. |
| 2021-04-29 | Agreed to pay civil penalties of $25,000 to the SEC in settlement of a matter. |
| 2021-08-18 | Entered into a $10,000, 12% note payable. |
| 2021-09-27 | FINRA approved a 1-for-8 reverse stock split of the Company's common stock. |
| 2021-10-20 | Formed a wholly owned subsidiary, Tankless 365, Inc. |
| 2022-01-24 | Completed the spin-off of its subsidiary Notation Labs Inc. |
| 2022-09-01 | Entered into a $2,500,000 8% convertible grid note with Notation Labs, Inc. |
| 2023-04-06 | Served a Summons for an Amended Complaint in Florida for Strict Liability, Negligence and Breach of Implied Warranty. |
| 2023-06-08 | Court of Duval County, FL entered a default judgement for $38,768. |
| 2023-07-15 | Announced its intention to spin-off its wholly-owned subsidiary, Tankless365, Inc. (later reversed). |
| 2023-07-23 | Entered into a $40,000, 12% note payable with an entity under common control of a related party. |
| 2023-08-03 | Wholly owned subsidiary initiated an offering of 12% Notes. |
| 2024-01-25 | Wholly owned subsidiary issued a $125,000 18% promissory note. |
| 2024-03-26 | Issued a $250,000 12% convertible promissory note to a trust controlled by a shareholder. |
| 2024-04-04 | Wholly owned subsidiary issued a $100,000 18% promissory note. |
| 2024-04-10 | Wholly owned subsidiary issued a $75,000 12% promissory note (converted to Royalty Program on January 1, 2025). |
| 2024-04-23 | Issued a $150,000 12% convertible promissory note. |
| 2024-05-14 | Issued a $25,000 12% convertible promissory note. |
| 2024-05-29 | Issued a $100,000 12% convertible promissory note. |
| 2024-07-03 | Issued a $50,000 12% convertible promissory note. |
| 2024-07-24 | Issued a $50,000 18% promissory note. |
| 2024-07-25 | Issued a $500,000 15% convertible promissory note to a company commonly controlled by a shareholder. |
| 2024-07-26 | Issued a $100,000 18% promissory note. |
| 2024-08-05 | Issued a $100,000 24% promissory note. |
| 2024-09-01 | Executed a lease agreement. |
| 2024-09-03 | Negotiated a consolidated 12% secured convertible promissory note with a lender. |
| 2024-11-05 | Issued a $100,000 24% promissory note. |
| 2024-12-01 | Issued a $60,000 0% convertible promissory note. |
| 2024-12-16 | Entered into a $1,500,000, 18% note payable with an entity under common control of a related party. |
| 2025-01-01 | Issued 200,000 shares for services pursuant to a consulting agreement; $75,000 note converted to Royalty Program. |
| 2025-01-19 | Issued 150,000 shares for $15,000 in cash. |
| 2025-01-28 | Issued 100,000 shares for services pursuant to three consulting agreements. |
| 2025-01-30 | Issued 100,000 shares for $15,000 in cash. |
| 2025-01-31 | Released from remaining lease obligations for a previous office space. |
| 2025-02-01 | Executed a new lease agreement; issued 200,000 shares for services. |
| 2025-02-04 | Issued 100,000 shares for $15,000 in cash; issued 120,000 shares for services. |
| 2025-02-10 | Issued 1,000,000 shares for services pursuant to a consulting agreement. |
| 2025-02-17 | Issued 25,000 shares for services pursuant to a consulting agreement. |
| 2025-02-19 | Issued 70,000 shares for $10,500 in cash. |
| 2025-03-01 | Royalty obligation commenced after the 500th unit was produced and sold. |
| 2025-03-05 | Issued 100,000 shares for services pursuant to a consulting agreement. |
| 2025-03-31 | Entered into a $185,000, 12% note payable with a director of the Company. |
| 2025-04-01 | Issued 185,000 shares of common stock as financing incentives; issued 200,000 shares for services. |
| 2025-04-04 | Issued 150,000 shares for $22,500 in cash. |
| 2025-05-01 | Issued 200,000 shares for services pursuant to a consulting agreement. |
| 2025-06-07 | Issued 100,000 shares for services pursuant to a consulting agreement. |
| 2025-06-30 | Issued 100,000 shares for $5,000 in cash. |
| 2025-07-01 | Issued 200,000 shares for services pursuant to a consulting agreement. |
| 2025-07-03 | Made a payment of $125,000 on a note. |
| 2025-08-01 | Issued 200,000 shares for services pursuant to a consulting agreement. |
| 2025-09-30 | End of the quarterly reporting period. |
| 2025-11-19 | Number of shares of Common Stock outstanding was 132,108,178. |
| 2025-11-20 | Date of filing the Form 10-Q. |
Recommendation
strong sellTRUTANKLESS, Inc. is in severe financial distress, as explicitly stated by the 'going concern' warning. The company has minimal cash reserves ($32,622), a massive accumulated deficit ($80.86 million), and a significant working capital deficiency ($9.98 million). While revenue growth is noted, it is insufficient to cover operating expenses and debt obligations, leading to a substantial increase in cash used in operations. The reliance on related-party debt and the continuous need for capital raises, with no guarantee of success, present an extremely high risk. Unpaid legal judgments further compound the financial instability. A seasoned investor would view these factors as indicative of a company on the brink, making a 'strong sell' recommendation appropriate to mitigate further losses.
Keywords
Tankless water heater, Smart home, Energy efficient, SEC filing, Financial results, Going concern, Liquidity, Debt financing, Product development, Residential products, Home automation
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