Trutankless's Q1 Loss Widens Dramatically Amid Soaring Professional Fees

TL;DR

**TKLS is burning cash at an alarming rate with massive losses and dwindling liquidity; avoid this stock.**

AI Summary

Trutankless, Inc. (TKLS) reported a significant net loss of $1,595,881 for the three months ended March 31, 2025, a substantial increase from the $405,152 net loss in the prior-year period. Despite generating net sales of $430,087 in Q1 2025, compared to zero in Q1 2024, the company's gross profit of $104,289 was overshadowed by soaring operating expenses. Professional fees dramatically increased to $1,145,362 in Q1 2025 from $27,565 in Q1 2024, contributing heavily to the operating loss of $1,380,413. Cash and cash equivalents plummeted from $1,004,190 at December 31, 2024, to $11,404 by March 31, 2025, indicating severe liquidity issues. The company's total liabilities grew to $10,859,218 from $9,743,750, further deepening its stockholders' deficit to $(7,400,034). Research and development expenses decreased to $59,971 from $177,626, while inventory increased by $261,548, suggesting potential overstocking or slow sales. The company continues to rely on related-party financing, with notes payable to related parties totaling $3,700,810.

Why It Matters

Trutankless's escalating net loss and dwindling cash reserves paint a grim picture for investors, signaling severe financial distress and potential going concern issues. The massive increase in professional fees, without a corresponding boost in profitability, raises questions about operational efficiency and strategic spending. For employees, this financial instability could lead to job insecurity, while customers might face concerns about long-term product support and warranty fulfillment. In the competitive home automation and water heater market, TKLS's struggles could allow larger, more financially stable competitors to gain market share, further marginalizing Trutankless's 'smart electric tankless water heater' product.

Risk Assessment

Risk Level: high — The company's cash balance plummeted from $1,004,190 to $11,404 in just three months, representing a 98.8% decrease. This, coupled with a net loss of $1,595,881 and a stockholders' deficit of $(7,400,034), indicates severe liquidity constraints and a significant risk to its ability to continue as a going concern.

Analyst Insight

Investors should exercise extreme caution and consider divesting any holdings in TKLS. The company's rapid cash burn and increasing liabilities suggest a high probability of further dilution or potential bankruptcy. Focus on companies with stronger financial health and clear paths to profitability.

Financial Highlights

debt To Equity

N/A

revenue

$430,087

operating Margin

N/A

total Assets

N/A

total Debt

$10,859,218

net Income

-$1,595,881

eps

N/A

gross Margin

24.2%

cash Position

$11,404

revenue Growth

N/A

Revenue Breakdown

Key Numbers

• $1,595,881 — Net Loss (Increased from $405,152 in Q1 2024, indicating worsening financial performance.)
• $11,404 — Cash and Cash Equivalents (A 98.8% decrease from $1,004,190 at December 31, 2024, highlighting severe liquidity issues.)
• $430,087 — Net Sales (First reported sales for the period, but insufficient to cover expenses.)
• $1,145,362 — Professional Fees (A significant increase from $27,565 in Q1 2024, driving up operating expenses.)
• $7,400,034 — Stockholders' Deficit (Deepened from $6,346,640 at December 31, 2024, reflecting accumulated losses.)
• 130,773,178 — Common Shares Outstanding (Increased from 128,608,178 at December 31, 2024, indicating dilution.)
• $3,700,810 — Notes Payable - Related Parties (Significant reliance on related-party financing, indicating limited access to traditional capital.)
• $261,548 — Increase in Inventory (Suggests potential overstocking or slow sales relative to production.)

Key Players & Entities

• Trutankless, Inc. (company) — registrant
• $1,595,881 (dollar_amount) — net loss for Q1 2025
• $430,087 (dollar_amount) — net sales for Q1 2025
• $1,145,362 (dollar_amount) — professional fees for Q1 2025
• $11,404 (dollar_amount) — cash and cash equivalents at March 31, 2025
• $1,004,190 (dollar_amount) — cash and cash equivalents at December 31, 2024
• $10,859,218 (dollar_amount) — total liabilities at March 31, 2025
• $7,400,034 (dollar_amount) — total stockholders' deficit at March 31, 2025
• Notation Labs Inc (company) — spun-off subsidiary
• Tankless 365, Inc. (company) — subsidiary not spun-off

FAQ

Risk Factors

• Severe Liquidity Constraints [high — financial]: Cash and cash equivalents have plummeted from $1,004,190 to $11,404, a decrease of 98.8%. This drastic reduction in liquidity poses a significant risk to the company's ability to meet its short-term obligations and fund ongoing operations.
• Increasing Debt and Stockholders' Deficit [high — financial]: Total liabilities have grown to $10,859,218, while the stockholders' deficit has deepened to $(7,400,034). This indicates a deteriorating financial position and increasing leverage, making it harder to secure traditional financing.
• Reliance on Related-Party Financing [high — financial]: The company has $3,700,810 in notes payable to related parties. This heavy reliance suggests limited access to external capital markets and potential conflicts of interest or unfavorable terms.
• Soaring Operating Expenses [high — operational]: Professional fees increased dramatically from $27,565 to $1,145,362, driving a substantial operating loss of $1,380,413. Uncontrolled operating expenses are a major impediment to profitability.
• Potential Inventory Overstocking [medium — operational]: An increase in inventory by $261,548, coupled with a significant net loss, suggests potential overstocking or slow sales, which could lead to write-downs and impact cash flow.
• Significant Net Loss [high — financial]: The company reported a net loss of $1,595,881 for Q1 2025, a substantial increase from $405,152 in the prior year. This trend indicates ongoing financial distress and an inability to generate profits.
• Share Dilution [medium — financial]: Common shares outstanding increased from 128,608,178 to 130,773,178. This dilution can negatively impact existing shareholders' ownership percentage and the value of their holdings.

Industry Context

The water heater industry is competitive, with established players offering a range of tank and tankless options. Trutankless, Inc. appears to be a newer entrant focusing on tankless technology. The market is influenced by energy efficiency trends and consumer demand for convenience and space-saving solutions.

Regulatory Implications

As a publicly traded company, Trutankless, Inc. is subject to SEC regulations and reporting requirements. Failure to manage its financial condition and disclose material information accurately could lead to regulatory scrutiny and penalties.

What Investors Should Do

1. Monitor cash burn rate closely: The drastic decrease in cash necessitates immediate attention to cash flow management and potential fundraising efforts.
2. Scrutinize professional fees: Investigate the reasons behind the massive increase in professional fees to understand if they are justified or indicative of unsustainable spending.
3. Assess path to profitability: Evaluate the company's strategy for generating sufficient revenue and controlling costs to achieve profitability, given the current net loss.
4. Understand related-party financing terms: Seek clarity on the terms and conditions of the significant related-party debt to assess potential risks and future repayment obligations.
5. Evaluate inventory levels: Determine the reasons for the inventory increase and assess the risk of obsolescence or write-downs.

Glossary

Stockholders' Deficit

This occurs when a company's total liabilities exceed its total assets, resulting in a negative equity value for shareholders. (Indicates the company has more debt than assets, a sign of severe financial distress.)

Cash and Cash Equivalents

Highly liquid short-term investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. (A critical measure of a company's ability to meet its immediate financial obligations.)

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. (Shows profitability from core operations before accounting for operating expenses.)

Operating Expenses

Costs incurred by a business in its normal course of operations, excluding the cost of goods sold. (High operating expenses, particularly professional fees, are significantly contributing to the company's net loss.)

Notes Payable - Related Parties

Money owed by a company to individuals or entities that have a close relationship with the company, such as founders, executives, or affiliated companies. (Highlights the company's reliance on internal or closely connected sources for funding, potentially indicating difficulty accessing external capital.)

Year-Over-Year Comparison

Compared to the prior year's Q1, Trutankless, Inc. has begun generating revenue ($430,087 vs. $0), but this has been overshadowed by a dramatic increase in operating expenses, particularly professional fees ($1,145,362 vs. $27,565), leading to a significantly wider net loss ($1,595,881 vs. $405,152). Liquidity has severely deteriorated, with cash falling from over $1 million to just over $11,000. The company's financial position has weakened, evidenced by a growing stockholders' deficit and increased total liabilities.

Key Financial Figures

• $0.001 — The number of shares of Common Stock, $0.001 par value, outstanding on October 8, 20
• $0 — f an allowance for doubtful accounts of $0 at March 31, 2025 and December 31, 2024
• $50 — ements require the Company to pay up to $50 per unit sold in royalties to these inv

Filing Documents

• tkls_10q.htm (10-Q) — 717KB
• tkls_ex311.htm (EX-31.1) — 12KB
• tkls_ex321.htm (EX-32.1) — 6KB
• 0001477932-25-007445.txt ( ) — 4033KB
• tkls-20250331.xsd (EX-101.SCH) — 55KB
• tkls-20250331_lab.xml (EX-101.LAB) — 291KB
• tkls-20250331_cal.xml (EX-101.CAL) — 46KB
• tkls-20250331_pre.xml (EX-101.PRE) — 231KB
• tkls-20250331_def.xml (EX-101.DEF) — 128KB
• tkls_10q_htm.xml (XML) — 547KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 19

Quantitative and Qualitative Disclosure About Market Risk

Item 3. Quantitative and Qualitative Disclosure About Market Risk 24

Controls and Procedures

Item 4. Controls and Procedures 24

- OTHER INFORMATION

PART II - OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings. 25

Risk Factors

Item 1A. Risk Factors 25

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 25

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities. 26

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 26

Other Information

Item 5. Other Information. 26

Exhibits

Item 6. Exhibits. 27

SIGNATURES

SIGNATURES 28 2 Table of Contents TRUTANKLESS, INC CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2025 December 31, 2024 (Unaudited) ASSETS Current assets Cash $ 11,404 $ 1,004,190 Accounts receivable 107,665 43,523 Prepaid expenses 708,750 1,232,930 Inventory 612,414 350,866 Vendor deposits 613,598 375,652 Total current assets 2,053,831 3,007,161 Other assets Property, plant and equipment, net 378,882 188,072 Right-to-use asset 951,245 171,016 Trademarks 11,914 11,914 Other assets 63,312 18,947 Total other assets 1,405,353 389,949 Total assets $ 3,459,184 $ 3,397,110 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable and accrued liabilities $ 1,565,696 $ 1,232,483 Advances payable - related parties 7,500 7,500 Lease liability 172,478 72,799 Accrued interest payable 417,586 373,998 Accrued interest payable - related parties 727,258 637,365 Royalty liabilities payable 614,345 547,500 Notes payable, net of discounts 920,000 995,000 Notes payable, net of discounts - related parties 3,700,810 4,013,439 Convertible notes payable, net of discounts 308,500 308,500 Convertible notes payable, net of discounts - related parties 750,000 750,000 Total current liabilities 9,184,173 8,938,584 Long-term liabilities Deferred warranty revenue 2,490 249 Lease liability - long-term 790,855 98,217 Notes payable, net of discounts and current portion 95,000 95,000 Notes payable, net of discounts and current portion - related parties 335,200 160,200 Convertible notes payable, net of discounts and current portion 451,500 451,500 Total long-term liabilities 1,675,045 805,166 Total liabilities 10,859,218 9,743,750 Commitments and contingencies (Note 8) - - Stockholders' deficit Preferred stock, $ 0.001 par value, 9,990,000 shares authorized Preferred stock - Series B, $ 0.001 par val

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View this 10-Q filing on SEC EDGAR