10-Q: TRUTANKLESS Q2 2025: Revenue Up, Losses Widen

Sentiment:

Quarterly Report 31 October 2025 5:25 PM

TRUTANKLESS, Inc. reported increased revenues for the six months ended June 30, 2025, driven by new product sales, but also saw a significant rise in net losses and a substantial doubt about its ability to continue as a going concern.

Capital raiseManagement plans to raise additional capital over the next twelve months to fund operations and invest in sales and marketing.The company intends to finance its cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.Proceeds from notes payable related parties amounted to $1,379,380 for the six months ended June 30, 2025.Proceeds from the issuance of common stock for cash totaled $83,000 for the six months ended June 30, 2025.The company issued 185,000 shares of common stock as financing incentives on April 1, 2025, to encourage a lender to enter a new note agreement.

Worse than expectedNet loss for the six months ended June 30, 2025, more than doubled to $(2,840,602) from $(1,488,753) in the prior year.Cash on hand plummeted by over 98% to $12,047 from $1,004,190 at the end of the previous fiscal year.Cash used in operating activities increased by nearly 98% to $(1,628,341) from $(824,269), indicating an accelerated cash burn.The accumulated deficit grew to $79,942,571, and a working capital deficiency of $9,025,202 highlights severe liquidity issues.Management explicitly stated 'substantial doubt' about the company's ability to continue as a going concern.Professional fees surged by over 5,500% to $1,964,218, contributing significantly to the increased operating expenses.

Summary

Net sales for the six months ended June 30, 2025, increased significantly to $524,541, compared to $11,584 for the same period in 2024, primarily due to sales of new Gen 3 residential products.
The company reported a net loss of $(2,840,602) for the six months ended June 30, 2025, a substantial increase from the net loss of $(1,488,753) in the prior year.
Cash on hand drastically decreased to $12,047 as of June 30, 2025, from $1,004,190 at December 31, 2024.
An accumulated deficit of $79,942,571 was reported as of June 30, 2025.
The company has a working capital deficiency of $9,025,202 as of June 30, 2025.
Management has determined that substantial doubt exists about the company's ability to continue as a going concern within one year from the filing date.
Operating expenses for the six months ended June 30, 2025, totaled $2,484,523, up from $1,296,608 in the prior year, largely driven by a significant increase in professional fees.
Total liabilities increased to $12,057,176 as of June 30, 2025, from $9,743,750 at December 31, 2024, with related party notes payable being a major component.
Inventory increased to $1,200,319 as of June 30, 2025, from $350,866 at December 31, 2024.

Sentiment

Score: 2

Explanation: While revenue growth is a positive sign, the company's financial health is severely distressed. The substantial increase in net losses, drastic depletion of cash, significant accumulated deficit, and explicit 'going concern' doubt indicate a highly precarious situation. The reliance on future capital raises and related-party debt, coupled with ineffective disclosure controls and outstanding legal liabilities, points to fundamental operational and financial instability, outweighing any positive revenue trends.

Positives

Net sales for the six months ended June 30, 2025, increased significantly to $524,541 from $11,584 in the prior year, attributed to sales of new Gen 3 residential products.
Gross profit increased to $122,292 for the six months ended June 30, 2025, from $11,584 in the prior year.
General and administrative expenses decreased by 49.2% to $427,466 for the six months ended June 30, 2025, from $841,986 in the prior year, due to efforts to control overall expenses.
Research and development expenses decreased by 85.5% to $60,760 for the six months ended June 30, 2025, from $419,557 in the prior year, attributed to the commencement of Gen 3 product sales and production ramp-up.
Inventory increased to $1,200,319 from $350,866, potentially indicating readiness for increased sales volume.

Negatives

Net loss for the six months ended June 30, 2025, increased significantly to $(2,840,602) from $(1,488,753) in the prior year.
Cash on hand drastically decreased to $12,047 as of June 30, 2025, from $1,004,190 at December 31, 2024.
The company reported an accumulated deficit of $79,942,571 as of June 30, 2025.
A working capital deficiency of $9,025,202 was reported at June 30, 2025.
Management has identified substantial doubt about the company's ability to continue as a going concern.
Professional fees increased by 5,501.6% to $1,964,218 for the six months ended June 30, 2025, from $35,065 in the prior year, primarily due to consulting expenses for production readiness.
Total liabilities increased to $12,057,176 from $9,743,750, with a significant portion being related party notes payable.
Disclosure controls and procedures were deemed not effective.
Outstanding legal liabilities include $20,000 in SEC civil penalties and a $38,768 default judgment in Florida, neither of which has been paid as of June 30, 2025.

Risks

Inability to raise additional financing for working capital.
Reliance on management estimates for accounting policies and methods, which are inherently uncertain.
Challenges in attracting and retaining key personnel.
Inability to operate profitably.
Deterioration in general or regional economic conditions.
Adverse state or federal legislation or regulation that increases compliance costs, or adverse findings by a regulator.
Changes in U.S. GAAP or in the legal, regulatory, and legislative environments in the markets of operation.
Inability of management to effectively implement strategies and business plan.
Inability to achieve future sales levels or other operating results.
Unavailability of funds for capital expenditures.
Substantial doubt about the company's ability to continue as a going concern within one year.
If unable to raise additional funds, the company may be required to delay, limit, reduce, or terminate product development or future commercialization efforts, abandon its growth strategy, or grant rights to develop and market product candidates on unfavorable terms.

Future Outlook

Management plans to raise additional capital and invest working capital resources in sales and marketing to increase product distribution and demand. The company expects to have new apps available for download from Apple iOS and Google Play stores, which will integrate with other devices in the Smart Home market. It anticipates its new line of water heaters will garner similar accolades to previous products and continue to lead the market in tankless water heating technology. However, there is no guarantee of generating sufficient revenues or raising capital, which could force the company to scale back or discontinue sales and marketing efforts.

Management Comments

Anticipate the company's trutankless water heater, with Wi-Fi capability and proprietary apps, will augment existing products in the home automation space.
Believe products have an improved design and greater efficiency, saving energy and reducing operating costs compared to tank systems, as no energy is used without hot water demand.
Intend to improve manufacturing and life-cycle costs with an improved design to increase efficiency and longevity versus competitive units.
Believe several new features and design innovations in the electric tankless water heater market will provide a sustainable competitive advantage.
Unaware of any trends or uncertainties in the sales or costs of products and services for the periods discussed.
The decrease in general and administrative expenses was primarily the result of watching overall expenses of the Company.
The decrease in research and development expenses is attributed primarily to the sales starting for the Gen 3 products and ramp up of production.
Professional fees increased due to the increase in consulting expenses getting ready for production.
Evaluated all relevant conditions and events and determined that substantial doubt exists about the Company's ability to continue as a going concern.
Over the next twelve months, plan to raise additional capital and invest working capital resources in sales and marketing to increase distribution and demand for products.

Industry Context

The company operates in the home automation and tankless water heater markets, focusing on energy-efficient, smart electric water heaters. Its primary markets, including Florida, Texas, Arizona, and the Sunbelt region, are experiencing growth in U.S. construction, which could provide a favorable environment for product sales. The company distributes its products through major wholesale plumbing distributors, aligning with established industry channels. The development of new apps for smart home integration reflects a trend towards connected devices and energy management in the residential and commercial sectors.

Comparison to Industry Standards

The company claims its trutankless water heaters offer an improved design and greater efficiency, leading to energy savings and reduced operating costs compared to conventional tank systems.
Management believes its products have several new features and design innovations that provide a sustainable competitive advantage over rivals in the electric tankless water heater market.
The company aims to improve manufacturing and life-cycle costs to increase efficiency and longevity of its products versus competitive units.
No specific comparable companies, projects, or quantitative benchmarks are provided in the filing to substantiate these claims against industry standards.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Disclosure Controls and Procedures Assessment	The company's Chief Executive Officer and Principal Financial Officer concluded that the disclosure controls and procedures are not effective as of June 30, 2025.	2025-06-30	Indicates a material weakness in internal controls over financial reporting, potentially affecting the reliability and timeliness of financial disclosures.
Internal Control Over Financial Reporting	No change in the company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting during the last fiscal quarter.	2025-06-30	Suggests no new material changes to internal controls, but the existing ineffective disclosure controls remain a concern.

Legal Proceedings

As of June 30, 2025, $20,000 remained due from a $25,000 civil penalty settlement with the SEC, agreed upon on April 29, 2021, for a late filing notification.
A default judgment for $38,768 was entered on June 8, 2023, by the Court of Duval County, FL, against the company for claims of Strict Liability, Negligence, and Breach of Implied Warranty related to improper product installation. No payment has been made as of June 30, 2025.

Related Party Transactions

Advances payable to related parties totaled $7,500 as of June 30, 2025.
Accrued interest payable to related parties amounted to $803,560 as of June 30, 2025.
Notes payable to related parties, net of discounts, totaled $5,112,587 as of June 30, 2025, including a $3,165,049 8% convertible grid note with Notation Labs, Inc. (commonly controlled by a director) and a $1,452,388 18% note payable with an entity under common control of a related party.
Convertible notes payable to related parties, net of discounts, totaled $750,000 as of June 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 six months ended June 30, 2025, was $262,239.
Interest expense on related party convertible notes for the six months ended June 30, 2025, was $52,068.
Since June 30, 2025, payments totaling $120,000 have been made to a related party lender towards principal and accrued interest on an outstanding promissory note.

Stakeholder Impact

Shareholders face significant risk of further dilution due to ongoing stock issuances for services and financing incentives, coupled with a substantial accumulated deficit and explicit going concern doubt.
Creditors, particularly related-party lenders, are exposed to high credit risk given the company's severe liquidity issues, working capital deficiency, and inability to generate sufficient cash from operations.
Customers may experience uncertainty regarding long-term product support, warranty fulfillment, or future product availability if the company's financial distress escalates.
Employees may face job insecurity and uncertainty about the company's future operations given the substantial doubt about its ability to continue as a going concern.

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.
Develop new, customizable apps and control panels for smart electric water heaters.
Launch the new line of water heaters, expecting to garner industry accolades and lead the market.

Key Dates

Date	Description
2008-03-07	Company incorporated as Alcantara Brands Corporation.
2010-05-16	Acquired 100% of Bollente, Inc.
2010-10-05	Name changed to Bollente Companies, Inc.
2016-09-02	Issued $50,000 of principal amount of 12% secured convertible promissory notes.
2017-05-02	Issued $50,000 of principal amount of 10% secured convertible promissory notes.
2018-02-15	Issued a $75,000 12% secured convertible promissory note.
2018-06-04	Name changed 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 wholly owned subsidiary, Notation Labs, Inc.
2020-10-26	Board authorized increase in capital stock and 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.
2021-04-30	Entered into a $150,000, 12% grid note payable with a company controlled by the former CEO.
2021-08-18	Entered into a $10,000, 12% note payable.
2021-09-27	FINRA approved a 1-for-8 reverse stock split.
2021-10-20	Formed 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.
2023-01-01	Executed a lease agreement.
2023-04-06	Served a Summons for an Amended Complaint filed in Florida.
2023-06-08	Court of Duval County, FL entered a default judgment for $38,768.
2023-07-15	Announced its intention to spin-off its wholly-owned subsidiary, Tankless365, Inc. (later decided against).
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.
2023-11-01	Starting November 2023, the Company issued 18 royalty agreements to investors for a total of $622,500.
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 $100,000 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.
2024-06-03	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.
2024-12-31	Fiscal year end for comparative balance sheet data.
2025-01-01	Issued 200,000 shares for services; $75,000 note converted to Royalty Program.
2025-01-19	Issued 150,000 shares for cash at $0.10 per share.
2025-01-28	Issued 100,000 shares for services pursuant to three consulting agreements.
2025-01-30	Issued 100,000 shares for cash at $0.15 per share.
2025-01-31	Company was released from a lease agreement.
2025-02-01	Issued 200,000 shares for services; executed a new lease agreement.
2025-02-04	Issued 100,000 shares for cash at $0.15 per share; issued 120,000 shares for services.
2025-02-10	Issued 1,000,000 shares for services.
2025-02-17	Issued 25,000 shares for services.
2025-02-19	Issued 70,000 shares for cash at $0.15 per share.
2025-03-01	Royalty obligation commenced after the 500th unit was produced and sold.
2025-03-05	Issued 100,000 shares for services.
2025-03-31	Entered into a $185,000, 12% note payable with a director.
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 cash at $0.15 per share.
2025-05-01	Issued 200,000 shares for services.
2025-06-07	Issued 100,000 shares for services.
2025-06-30	End of the quarterly reporting period; issued 100,000 shares for cash at $0.05 per share.
2025-07-01	Issued 200,000 shares for services pursuant to a consulting agreement.
2025-07-03	Made a payment of $125,000 to a lender towards principal and accrued interest of promissory notes.
2025-08-01	Issued 200,000 shares for services pursuant to a consulting agreement.
2025-10-31	Date of filing of the Form 10-Q.

Recommendation

strong sell

The company is in a highly distressed financial state, characterized by a substantial accumulated deficit of nearly $80 million, a severe working capital deficiency of over $9 million, and a drastic reduction in cash on hand to just $12,047. Despite a significant increase in revenue, net losses more than doubled, and cash used in operating activities nearly doubled, indicating an unsustainable cash burn. Management explicitly states 'substantial doubt' about the company's ability to continue as a going concern. The heavy reliance on related-party debt, continuous equity dilution for financing, ineffective disclosure controls, and outstanding legal liabilities further compound the risks. Without a clear and immediate path to sustainable profitability and positive cash flow, the investment carries extreme risk, making a 'strong sell' recommendation appropriate for any investor.

Keywords

Trutankless, tankless water heater, smart home, energy efficiency, SEC 10-Q, financial results, going concern, liquidity, corporate governance, related party debt, product development, Q2 2025 earnings

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