TKLS.OTC.PinkTrutankless, INC
10-Q: TRUTANKLESS Reports Q1 2025 Loss Amid Revenue Growth
Sentiment:
Quarterly Report
TRUTANKLESS, Inc. reported a significant net loss of $1.6 million for Q1 2025 despite generating $430,087 in revenue, highlighting ongoing liquidity challenges and a substantial accumulated deficit.
Capital raiseManagement plans to raise additional capital over the next twelve months to fund operations and growth.The company has historically financed operations through the issuance of common stock and borrowings from stockholders and third-party debt.Future funding may involve a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.Issued 420,000 shares for $55,500 in cash during Q1 2025.Issued 185,000 shares of common stock as financing incentives on April 1, 2025.Issued 150,000 shares for $22,500 in cash on April 4, 2025.Issued 100,000 shares for $5,000 in cash on June 30, 2025.
Worse than expectedNet loss significantly widened to $1,595,881 in Q1 2025 from $405,152 in Q1 2024, indicating a deteriorating financial performance.Cash on hand plummeted from over $1 million to $11,404, signaling severe liquidity issues.The accumulated deficit grew substantially to $78,697,850, and the working capital deficiency increased to $7,130,342.Professional fees surged by over 4,000%, contributing significantly to the increased operating loss.Net cash used in operating activities increased, and net cash from financing activities turned negative, indicating an unsustainable cash burn rate.
Summary
- Net sales for the three months ended March 31, 2025, were $430,087, a significant increase from $0 in the prior year, attributed to sales of new Gen 3 residential products.
- The company reported a net loss of $1,595,881 for Q1 2025, substantially wider than the $405,152 net loss in Q1 2024.
- Cash on hand decreased drastically to $11,404 as of March 31, 2025, from $1,004,190 at December 31, 2024.
- The accumulated deficit grew to $78,697,850 as of March 31, 2025, and the company had a working capital deficiency of $7,130,342.
- Professional fees surged by 4,055.1% to $1,145,362 in Q1 2025, primarily due to consulting expenses related to production readiness.
- Research and development expenses decreased by 66.2% to $59,971, attributed to the ramp-up of production and sales for Gen 3 products.
- The company's ability to continue as a going concern is in substantial doubt, dependent on generating sufficient revenues and raising additional capital.
- Issued 1,745,000 shares for services and 420,000 shares for $55,500 in cash during the three months ended March 31, 2025.
- Made payments totaling $325,000 to a related party lender towards principal and accrued interest on outstanding promissory notes during the 2025 fiscal year-to-date.
Sentiment
Score: 2
Explanation: Despite a notable increase in revenue, the company experienced a substantially wider net loss, a drastic reduction in cash reserves, and a growing accumulated deficit, raising significant going concern doubts. The surge in professional fees and increased cash burn from operations and investing activities, coupled with a negative financing cash flow, indicate severe financial distress.
Positives
- Generated $430,087 in net sales for Q1 2025, compared to $0 in Q1 2024, driven by sales of new Gen 3 residential products.
- General and administrative expenses decreased by 12.5% to $266,666 for Q1 2025.
- Research and development expenses decreased by 66.2% to $59,971, attributed to the sales start for Gen 3 products and production ramp-up.
Negatives
- Net loss significantly widened to $1,595,881 in Q1 2025 from $405,152 in Q1 2024.
- Cash on hand drastically reduced to $11,404 as of March 31, 2025, from $1,004,190 at December 31, 2024.
- Accumulated deficit increased to $78,697,850 and working capital deficiency reached $7,130,342.
- Professional fees increased by 4,055.1% to $1,145,362, primarily due to consulting expenses for production readiness.
- Substantial doubt exists about the company's ability to continue as a going concern.
- Net cash used in operating activities increased to $707,142 for Q1 2025 from $402,780 in Q1 2024.
- Net cash used in investing activities was $203,514 for Q1 2025, up from $0 in Q1 2024, due to equipment and leasehold improvements.
- Net cash provided by financing activities turned into a net cash used of $82,130 for Q1 2025, compared to $382,400 provided in Q1 2024.
- Outstanding SEC civil penalties of $20,000 remain unpaid as of March 31, 2025.
- A default judgment of $38,768 in a Florida lawsuit remains unpaid as of March 31, 2025.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern, dependent on generating sufficient revenues and raising capital.
- Inability to raise additional financing for working capital.
- Accounting policies and methods require management to make estimates about inherently uncertain matters.
- Inability to attract 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.
- 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.
- Dilution of existing stockholders' ownership interests if additional capital is raised through equity or convertible debt securities.
- Debt financing, if available, may involve agreements with covenants limiting or restricting the company's ability to take specific actions.
- Relinquishing valuable rights to technologies, future revenue streams, research programs, or product candidates if funds are raised through collaborations, strategic alliances, or licensing arrangements.
- Risk of delaying, limiting, reducing, or terminating product development or future commercialization efforts if unable to raise additional funds.
- Ongoing legal proceedings, including unpaid SEC civil penalties of $20,000 and an unpaid default judgment of $38,768 in a Florida lawsuit.
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. The company expects to launch new apps for its smart electric water heaters, available on Apple iOS and Google Play stores, which will integrate with other Smart Home devices. It anticipates that its new line of water heaters will receive industry accolades and continue to lead the market in tankless water heating technology, driven by industry professionals. The company intends to continue selling its products through plumbing wholesale distributors and dealers, leveraging relationships in primary growth markets like Florida, Texas, Arizona, and the Sunbelt region with its redesigned trutankless brand whole home tankless water heaters.
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."
- "Management anticipates the new line of water heaters will garner similar accolades once the product has been launched with proprietary improvements which will continue to lead the market in the tankless water heating technology which we expect will continue to be driven, in large part, through industry professionals in their local markets."
- "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, Inc. operates in the home automation sector, specifically focusing on smart electric tankless water heaters. The company aims to differentiate its products through improved design, greater energy efficiency, and enhanced longevity compared to conventional tank systems and competitive tankless units. Its primary markets are identified as growth centers in the U.S. construction industry, including Florida, Texas, Arizona, and the broader Sunbelt region, where it plans to leverage existing relationships for distribution. The development of Wi-Fi enabled products and proprietary apps positions the company within the broader trend of connected smart home devices.
Comparison to Industry Standards
- Products are designed for improved efficiency and reduced operating costs compared to conventional tank systems, as they only use energy when hot water is demanded.
- The company intends to improve manufacturing and life-cycle costs with a design conceived to increase efficiency and longevity of its products versus competitive units.
- The company believes its products have several new features and design innovations in the electric tankless water heater market that will provide a sustainable competitive advantage over rivals.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Disclosure Controls and Procedures | Management concluded that the company's disclosure controls and procedures are not effective. | 2025-03-31 | Indicates potential weaknesses in the processes designed to ensure timely and accurate disclosure of material information. |
| 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 most recent fiscal quarter. | 2025-03-31 | Suggests stability in the internal control environment, but does not address the overall effectiveness of controls. |
Legal Proceedings
- SEC civil penalties of $25,000 agreed on April 29, 2021, with $20,000 remaining due as of March 31, 2025.
- Default judgment of $38,768 entered on June 8, 2023, in a Florida lawsuit for strict liability, negligence, and breach of implied warranty, with the balance unpaid as of March 31, 2025.
Related Party Transactions
- Advances from a related party of $7,500 as of March 31, 2025 and December 31, 2024.
- Notes payable to related parties totaling $4,036,010 as of March 31, 2025, including a $175,000 note entered into on March 31, 2025, with a director.
- Convertible notes payable to related parties totaling $750,000 as of March 31, 2025.
- Interest expense associated with related party notes for Q1 2025 was $112,838.
- Interest expense on related party convertible notes for Q1 2025 was $25,980.
- Payments totaling $325,000 made to a related party lender towards principal and accrued interest during the 2025 fiscal year-to-date.
Stakeholder Impact
- Shareholders face significant dilution risk from potential equity raises and continued erosion of shareholder value due to substantial accumulated deficit and ongoing losses.
- Creditors, particularly related parties, bear significant risk due to high levels of notes and convertible notes payable, coupled with the company's severe liquidity issues and going concern doubt.
- Employees and consultants receiving equity compensation may see the value of their compensation negatively impacted by the company's financial performance and stock price.
- Customers may benefit from continued product development, including new Gen 3 products and upcoming app integrations, but the company's financial instability could pose long-term risks to product support and availability.
Next Steps
- Raise additional capital to fund operations and growth.
- Invest working capital resources in sales and marketing to increase product distribution and demand.
- Launch new apps for smart electric water heaters on Apple iOS and Google Play stores, integrating with other Smart Home devices.
- Continue selling products to plumbing wholesale distributors and dealers.
- Launch totally redesigned trutankless brand whole home tankless water heaters.
Key Dates
| Date | Description |
|---|---|
| 2008-03-07 | Company incorporated as Alcantara Brands Corporation. |
| 2010-05-16 | Company acquired 100% of Bollente, Inc. |
| 2010-10-05 | Company changed its name to Bollente Companies, Inc. |
| 2018-06-04 | Company changed its name to Trutankless, Inc. |
| 2020-08-20 | Company formed wholly owned subsidiary, Notation Labs, Inc. |
| 2020-10-26 | Board of Directors authorized amendment to Articles of Incorporation to increase authorized capital stock and a reverse stock split. |
| 2021-01-11 | Company entered into a $125,000, 30% note payable due June 8, 2021. |
| 2021-04-26 | Company entered into a $95,000, 12% note payable due April 26, 2022. |
| 2021-04-29 | Company agreed to pay civil penalties of $25,000 to the Securities and Exchange Commission. |
| 2021-04-30 | Company entered into a $150,000, 12% grid note payable with a company controlled by the former CEO. |
| 2021-08-18 | Company entered into a $10,000, 12% note payable due August 18, 2022. |
| 2021-09-27 | FINRA approved a 1-for-8 reverse stock split of the Company's common stock. |
| 2021-10-20 | Company formed wholly owned subsidiary, Tankless 365, Inc. |
| 2021-12-10 | Record date for Notation Labs, Inc. spin-off. |
| 2022-01-24 | Completed the spin-off of Notation Labs Inc. into a stand-alone company. |
| 2022-09-01 | Company entered into a $2,500,000 8% convertible grid note with Notation Labs, Inc. |
| 2023-04-06 | Company was 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 against the Company. |
| 2023-07-15 | Company announced its intention to spin-off its wholly-owned subsidiary, Tankless365, Inc. (later reversed). |
| 2023-08-03 | Company's 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 | Company's wholly owned subsidiary issued a $125,000 18% promissory note. |
| 2024-03-26 | Company issued a $250,000 12% convertible promissory note to a trust controlled by a shareholder. |
| 2024-04-04 | Company's wholly owned subsidiary issued a $100,000 18% promissory note. |
| 2024-04-10 | Company's wholly owned subsidiary issued a $75,000 12% promissory note (converted to Royalty Program on January 1, 2025). |
| 2024-04-23 | Company issued a $100,000 12% convertible promissory note. |
| 2024-05-14 | Company issued a $25,000 12% convertible promissory note. |
| 2024-05-29 | Company issued a $100,000 12% convertible promissory note. |
| 2024-06-03 | Company issued a $50,000 12% convertible promissory note. |
| 2024-07-24 | Company issued a $50,000 18% promissory note. |
| 2024-07-25 | Company issued a $500,000 15% convertible promissory note to a company commonly controlled by a shareholder. |
| 2024-07-26 | Company issued a $100,000 18% promissory note. |
| 2024-08-05 | Company issued a $100,000 24% promissory note. |
| 2024-09-01 | Company executed a lease agreement. |
| 2024-09-03 | Company negotiated a consolidated 12% secured convertible promissory note with a lender. |
| 2024-11-05 | Company issued a $100,000 24% promissory note. |
| 2024-12-01 | Company issued a $60,000 0% convertible promissory note. |
| 2024-12-16 | Company entered into a $1,500,000, 18% note payable with an entity under common control of a related party. |
| 2025-01-01 | Company issued 200,000 shares for services; $75,000 note converted to Royalty Program. |
| 2025-01-19 | Company issued 150,000 shares for $15,000 in cash. |
| 2025-01-28 | Company issued 100,000 shares for services. |
| 2025-01-30 | Company issued 100,000 shares for $15,000 in cash. |
| 2025-01-31 | Company was released from the remaining lease as a new tenant was located. |
| 2025-02-01 | Company issued 200,000 shares for services; executed a new lease agreement. |
| 2025-02-04 | Company issued 100,000 shares for $15,000 in cash; issued 120,000 shares for services. |
| 2025-02-10 | Company issued 1,000,000 shares for services. |
| 2025-02-17 | Company issued 25,000 shares for services. |
| 2025-02-19 | Company 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 | Company issued 100,000 shares for services. |
| 2025-03-31 | End of quarterly period; Company entered into a $175,000, 12% note payable with a director. |
| 2025-04-01 | Company received $10,000 additional funds under a note payable from a director; issued 185,000 shares of common stock as financing incentives; issued 200,000 shares for services. |
| 2025-04-04 | Company issued 150,000 shares for $22,500 in cash. |
| 2025-05-01 | Company issued 200,000 shares for services. |
| 2025-06-03 | Company made a payment of $150,000 to a lender towards principal and accrued interest. |
| 2025-06-07 | Company issued 100,000 shares for services. |
| 2025-06-30 | Company issued 100,000 shares for $5,000 in cash. |
| 2025-07-01 | Company issued 200,000 shares for services. |
| 2025-07-03 | Company made a payment of $125,000 to a lender towards principal and accrued interest. |
| 2025-08-01 | Company issued 200,000 shares for services. |
| 2025-10-08 | Date of filing of the Quarterly Report on Form 10-Q. |
Recommendation
strong sellThe company faces severe financial distress, evidenced by a drastically widened net loss, near-depleted cash reserves, and a substantial accumulated deficit. The 'going concern' warning is a critical red flag. While revenue growth is positive, it is overshadowed by an unsustainable burn rate and a massive increase in professional fees. The company's reliance on debt and equity financing, coupled with existing legal liabilities and ineffective internal controls, presents an extremely high-risk profile. The current financial trajectory suggests a high probability of further value erosion and potential insolvency without a significant, immediate, and successful capital infusion, which is not guaranteed.
Keywords
tankless water heater, smart home, energy efficiency, home automation, SEC filing, 10-Q, financial results, liquidity, going concern, debt financing, equity financing, TRUTANKLESS
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