TKLS 10-Q
Trutankless, Inc. (TKLS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
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(Registrant’s telephone number, including area code)
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
(Do not check if a smaller reporting company) | Emerging growth company | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of Common Stock, $0.001 par value, outstanding on November 14, 2024, was
TRUTANKLESS, INC.
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
Index to Report on Form 10-Q
PART I - FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. Quantitative and Qualitative Disclosure About Market Risk |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
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| 2 |
| Table of Contents |
TRUTANKLESS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
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| September 30, 2024 |
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| December 31, 2023 |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable |
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Prepaid expenses |
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Inventory |
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Vendor deposits |
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Total current assets |
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Other assets |
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Right-to-use asset |
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Trademarks |
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Other assets |
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Total other assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Accounts payable and accrued liabilities - related parties |
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Advances payable - related parties |
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Lease liability |
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Accrued interest payable |
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Accrued interest payable - related parties |
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Royalty liabilities payable |
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Notes payable, net of discounts |
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Notes payable, net of discounts - related parties |
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Convertible notes payable, net of discounts |
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Convertible notes payable, net of discounts - related parties |
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Total current liabilities |
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Long-term liabilities |
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Deferred warranty revenue |
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Lease liability - long-term |
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Notes payable - net of discounts and current portion |
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Notes payable - net of discounts and current portion - related parties |
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Convertible notes payable, net of discounts and current portion |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Stockholders' deficit |
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Preferred stock, $ |
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Preferred stock - Series B, $ |
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Common stock, $ |
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Additional paid in capital |
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Subscriptions payable |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit |
| $ |
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| $ |
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See accompanying notes to the unaudited condensed consolidated financial statements.
| 3 |
| Table of Contents |
TRUTANKLESS, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| For the Three Months Ended |
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| For the Nine Months Ended |
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| September 30, 2024 |
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| September 30, 2023 |
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| September 30, 2024 |
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| September 30, 2023 |
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Net sales |
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| $ |
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Cost of sales |
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Gross profit |
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Operating expenses |
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General and administrative expenses |
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Research and development |
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Professional fees |
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Depreciation and amortization expense |
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Total operating expenses |
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Operating loss |
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Other income (expense) |
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Other income |
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Gain (loss) on extinguishment of debt |
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Interest expense |
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Financing incentive expense |
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Total other income (expense) |
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Net income (loss) |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per share - basic and diluted |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average number of common shares - basic |
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See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
TRUTANKLESS, INC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
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| Preferred Stock |
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| Common Stock |
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| Additional Paid-in |
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| Subscriptions |
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| Accumulated |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Payable |
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| Deficit |
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| Total |
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Balance, December 31, 2023 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||||
Stock issued for financing incentives |
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| - |
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Stock issued for conversion of notes payable |
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Stock issued for cash |
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Stock issued for services |
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Net loss for the Period |
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| - |
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| - |
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Balance, March 31, 2024 |
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Stock issued for conversion of notes payable |
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| - |
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Stock issued for services |
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| - |
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Net loss for the period |
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| - |
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| - |
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Balance, June 30, 2024 |
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Stock issued for financing incentives |
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| - |
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Stock issued for conversion of notes payable |
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| - |
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Stock issued for services |
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Stock issued for cash |
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Cancellation of common stock |
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| - |
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Cancellation of preferred stock |
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| - |
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Net loss for the period |
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| - |
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| - |
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Balance, September 30, 2024 |
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| - |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||||
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| Preferred Stock |
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| Common Stock |
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| Additional Paid-in |
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| Subscriptions |
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| Accumulated |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Payable |
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| Deficit |
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| Total |
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Balance, December 31, 2022 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
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Stock issued for services |
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Stock issued for debt restructuring |
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Net loss for the period |
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| - |
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| - |
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Balance, March 31, 2023 |
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Stock issued for services |
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Stock issued to extend notes |
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Net loss for the period |
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| - |
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Balance, June 30, 2023 |
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Stock issued for services |
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Stock issued to extend notes |
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Stock issued for the settlement of notes payable |
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Net loss for the period |
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| - |
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| - |
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Balance, September 30, 2023 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
| Table of Contents |
TRUTANKLESS, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| For the Nine Months Ended |
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| September 30, 2024 |
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| September 30, 2023 |
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Cash flows from operating activities: |
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Net income (loss) |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Amortization of debt discounts |
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Stock issued for services |
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Shares issued to extend notes |
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Common stock issued for financing incentives |
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Non-cash operating lease expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses |
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Inventory |
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Other assets |
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Accounts payable |
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Accounts payable - related parties |
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Accrued liabilities |
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Interest payable |
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Interest payable to related parties |
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Deferred warranty revenue |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Net cash flows from investing activities |
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Cash flows from financing activities: |
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Proceeds from convertible notes payable |
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Proceeds from convertible notes payable - related parties |
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Proceeds from notes payable |
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Proceeds from notes payable - related parties |
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Proceeds from royalty payable |
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Repayment of convertible notes payable |
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Repayment of convertible notes payable - related parties |
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Repayment of notes payable |
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Repayment of notes payable - related party |
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Proceeds from issuance of common stock |
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Net cash provided by financing activities |
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Net change in cash |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
| $ |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
| $ |
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| $ |
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Cash paid for income taxes |
| $ |
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| $ |
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Supplemental non-cash information |
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Conversion of notes payable into common stock |
| $ |
|
| $ |
| ||
Common stock issued per consulting agreements |
| $ |
|
| $ |
| ||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 6 |
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TRUTANKLESS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on March 7, 2008 under the laws of the State of Nevada, as Alcantara Brands Corporation. On October 5, 2010, the Company amended its articles of incorporation and changed its name to Bollente Companies, Inc. On June 4, 2018, the Company amended its articles of incorporation and changed its name to Trutankless, Inc.
The Company is involved in sales, marketing, research and development of a high quality, whole-house, smart electric tankless water heater that is more energy efficient than conventional products. 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.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in the consolidated financial statements for the six months ended June 30, 2024 should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the Company’s fiscal year ended December 31, 2023, as filed with the SEC.
The consolidated balance sheet as of December 31, 2023, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.
The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the year ending December 31, 2024.
Principles of consolidation
The consolidated financial statements include the accounts of Trutankless, Inc. and its wholly owned subsidiaries. On May 16, 2010, the Company acquired
Spinoff - On January 24, 2022, the Company completed the previously announced spin-off of its subsidiary Notation Labs Inc into a stand-alone company. The historical results of Notation Labs Inc that were contributed to Trutankless Inc in the spinoff have been reflected as discontinued operations in our condensed consolidated financial statements through the date of the spinoff and in the prior year periods as the spinoff represents a strategic shift in our business that has a major effect on operations and financial results. As of December 31, 2022, the assets and liabilities associated with these Notation Labs Inc. are classified as assets and liabilities of discontinued operations in the condensed consolidated balance sheet. The disclosures presented in our notes to the consolidated financial statements are presented on a continuing operations basis.
On July 15, 2023, the Company announced its intention to spin-off its wholly-owned subsidiary, Tankless365, Inc. On a date determined by the Board of Directors of the Company, each Shareholder having common stock as of the Distribution Date will be entitled to receive shares of the common stock of Tankless365, Inc. pro rata based on a 4:1 ratio. Subsequent to this announcement, the Company’s management decided that the subsidiary, Tankless 365, Inc. will not be spun-off but will remain as a subsidiary of the Company.
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Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Stock-based compensation
The Company follows ASC 718-10, “Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
Income Taxes
The Company’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate of whether it is more likely than not that additional taxes will be required. The Company had no uncertain tax positions as of September 30, 2024.
Deferred income taxes are recognized in the consolidated financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in depreciation methods of archived images, and property and equipment, stock-based and other compensation, and other accrued expenses. A valuation allowance is established when it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Interest and penalties are included in tax expense.
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of September 30, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions.
Earnings per share
The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Accounts receivable
Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms. The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivables are presented net of an allowance for doubtful accounts of $
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Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expenses of $
Research and development costs
The Company charges research and development costs to expense when incurred in accordance with FASB ASC 730, “Research and Development”. These research and development expenses are not related to the patent that the Company has, but are focused on future product developments. Research and development costs were $
Revenue recognition
Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Revenue recognition occurs at the time product is shipped to customers, when control transfers to customers, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance.
Fair value of financial instruments
The Company measures fair value in accordance with ASC 820 - Fair Value Measurements. ASC 820 defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurements. ASC 820 establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by ASC 820 are:
Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 - Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
As defined by ASC 820, 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 or liquidation sale, which was further clarified as the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in an orderly transaction between market participants at the measurement date.
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The reported fair values for financial instruments that use Level 2 and Level 3 inputs to determine fair value are based on a variety of factors and assumptions. Accordingly, certain fair values may not represent actual values of the Company’s financial instruments that could have been realized as of September 30, 2024 or that will be recognized in the future, and do not include expenses that could be incurred in an actual settlement. The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, receivables from related parties, prepaid expenses and other, accounts payable, accrued liabilities, and related party and third-party notes payables approximate fair value due to their relatively short maturities. The Company’s notes payable to related parties approximates the fair value of such instrument based upon management’s best estimate of terms that would be available to the Company for similar financial arrangements at September 30, 2024 and December 31, 2023.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has not generated sufficient revenues from product sales to provide sufficient cash flows to enable the Company to finance its operations internally. As of September 30, 2024, the Company had $
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. However, there is no guarantee the Company will generate sufficient revenues or raise capital to continue operations. If the Company fails to generate sufficient revenue and obtain additional capital to continue at its expected level of operations, the Company may be forced to scale back or discontinue its sales and marketing efforts. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following at:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Accounts receivable |
|
|
|
|
|
| ||
Allowance for doubtful accounts |
|
| ( | ) |
|
| ( | ) |
Total |
| $ |
|
| $ |
| ||
| 10 |
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NOTE 4 – INVENTORY
Inventories consist of the following at:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Parts |
| $ |
|
| $ |
| ||
Total Inventory |
| $ |
|
| $ |
| ||
NOTE 5 – ROYALTY LIABILITIES
Starting November 2023, the Company issued 16 royalty agreements to investors for a total of $
NOTE 6 - RELATED PARTY
Accounts payable and accrued liabilities – related party
During the nine months ended September 30, 2024 and 2023, the Company received $
Notes payable - related party consist of the following at:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Note payable, secured, 5% interest, due on demand |
| $ |
|
| $ |
| ||
Note payable, secured, 12% interest, due April 26, 2026 |
|
|
|
|
|
| ||
Note payable, secured, 12% interest, due April 30, 2026 |
|
|
|
|
|
| ||
Note payable, secured, 18% interest, due July 25, 2024 |
|
|
|
|
|
| ||
Notes payable, secured, 18% interest, due August 31, 2025 |
|
|
|
|
|
| ||
Total notes payable - related party |
| $ |
|
| $ |
| ||
Less current portion |
|
| ( | ) |
|
| ( | ) |
Total notes payable - related party - long term |
| $ |
|
| $ |
| ||
During the nine months ended September 30, 2024, the Company received $0 under a note payable from a director of the Company. As of September 30, 2024 and December 31, 2023, the Company had one note payable due to a director of the Company in the amount of $
As of September 30, 2024 and December 31, 2023, the Company had one note payable due to an officer of the Company in the amount of $
On April 30, 2021, the Company entered into a $
On January 8, 2021, the Company entered into a $
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On July 23, 2023, the Company entered into a $
Interest expense associated with the related party notes for the nine months ended September 30, 2024 and 2023 was $
Convertible notes payable - related party consist of the following at:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Convertible note payable, 8% interest, due December 2024 |
| $ |
|
| $ |
| ||
Convertible note payable, 12% interest, due December 2023 |
|
|
|
|
|
| ||
Convertible note payable, 12% interest, due December 2024 |
|
|
|
|
|
| ||
Convertible note payable, 12% interest, due December 2024 |
|
|
|
|
|
| ||
Convertible note payable, 12% interest, due March 2025 |
|
|
|
|
|
| ||
Convertible note payable, 15% interest, due July 2025 |
|
|
|
|
|
| ||
Total convertible notes payable - related party |
| $ |
|
| $ |
| ||
Less current portion |
|
| ( | ) |
|
| ( | ) |
Total convertible notes payable - related party - long-term |
| $ |
|
| $ |
| ||
On September 1, 2022, the Company entered into a $
On July 26, 2022, the Company issued a $
On June 15, 2023, the Company issued a $
On July 25, 2023, the Company issued a $
On March 25, 2024, the Company issued a $
| 12 |
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On July 25, 2024, the Company issued a $
Interest expense on all of the above convertible notes for the nine months ended September 30, 2024 and 2023 was $
NOTE 7 - NOTES PAYABLE
Notes payable consist of the following at:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Note payable, secured, 12% interest, due June 2024 |
| $ |
|
| $ |
| ||
Note payable, secured, 12% interest, due April 2026 |
|
|
|
|
|
| ||
Notes payable, secured, 12% interest, due December 2023 |
|
|
|
|
|
| ||
Notes payable, 12% interest, due starting August 2024 |
|
|
|
|
|
| ||
Notes payable, 18% interest, due starting August 2024 |
|
|
|
|
|
| ||
Note payable, 18% interest, due January 2025 |
|
|
|
|
|
| ||
Note payable, 18% interest, due January 2025 |
|
|
|
|
|
| ||
Note payable, 24% interest, due February 2025 |
|
|
|
|
|
| ||
Total notes payable |
| $ |
|
| $ |
| ||
Less current portion |
|
| ( | ) |
|
| ( | ) |
Total Notes Payable - long term |
| $ |
|
| $ |
| ||
On January 1, 2020, the Company entered into an agreement to consolidate three notes payable above dated September 2, 2016 and February 2, 2018 into one $
On April 26, 2021, the Company entered into a $
On August 18, 2021, the Company entered into a $
On August 3, 2023 the Company’s wholly owned subsidiary initiated an offering of
On October 19, 2023 the Company’s wholly owned subsidiary initiated an offering of
| 13 |
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On July 24, 2024, the Company entered into a $
On July 25, 2024, the Company entered into a $
On August 5, 2024, the Company entered into a $
Interest expense including amortization of the associated debt discount for the nine months ended September 30, 2024 and 2023 was $
Convertible notes payable, net of debt discount consist of the following:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Convertible note payable, secured, 12% interest, due August 31, 2019, in default |
| $ |
|
| $ |
| ||
Convertible note payable, secured, 10% interest, due February 2024 |
|
|
|
|
|
| ||
Convertible note payable, secured, 12% interest, due Feb 15, 2026 |
|
|
|
|
|
| ||
Convertible notes payable, secured, 4% interest, due October 14, 2020, in default |
|
|
|
|
|
| ||
Convertible note payable ,12% interest, due May 2020, in default |
|
|
|
|
|
| ||
Convertible note payable, secured, 10% interest, due May 1, 2024 |
|
|
|
|
|
| ||
Convertible notes payable, secured, 4% interest, due March 3, 2021, in default |
|
|
|
|
|
| ||
Convertible notes payable, 8% interest, due December 2023 |
|
|
|
|
|
| ||
Convertible note payable, 12% interest, due May 25 |
|
|
|
|
|
| ||
Convertible notes payable, 8% interest, due March 2025 |
|
|
|
|
|
| ||
Convertible notes payable, 12% interest, due April 2026 |
|
|
|
|
|
| ||
Convertible notes payable, 12% interest, due May 2026 |
|
|
|
|
|
| ||
Convertible note payable, 12% interest, due July 2026 |
|
|
|
|
|
| ||
Total convertible notes payable |
|
|
|
|
|
| ||
Less unamortized discounts |
|
|
|
|
| ( | ) | |
Total convertible notes payable, net of discounts |
|
|
|
|
|
| ||
Less current portion |
|
| ( | ) |
|
| ( | ) |
Total convertible notes payable, net of discounts - long-term |
| $ |
|
| $ |
| ||
On September 2, 2016, the Company issued $
| 14 |
| Table of Contents |
On May 2, 2017, the Company issued $
On February 15, 2018, the Company issued a $
On February 8, 2019, the Company issued a $
On November 19, 2019, the Company entered in to a $
On May 5, 2020, the Company issued a $
On March 3, 2021, the Company issued a $
On February 22, 2022 the Company entered into a $
| 15 |
| Table of Contents |
On July 18, 2022, the Company entered into a $
On April 23, 2024, the Company entered into a convertible note agreement for $150,000 for a 24-month period and interest rate of
On May 14, 2024, the Company entered into a convertible note agreement for $
On May 29, 2024, the Company entered into a convertible note agreement for $
On July 3, 2024, the Company entered into a convertible note agreement for $
Interest expense including financing cost and amortization of the associated debt discount on all of the above convertible notes for the nine months ended September 30, 2024 and 2023 was $
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Operating Lease Agreements
The Company determines whether or not a contract contains a lease based on whether or not it provides the Company with the use of a specifically identified asset for a period of time, as well as both the right to direct the use of that asset and receive the significant economic benefits of the asset. The Company elected the transition relief package of practical expedients, and as a result, we did not assess 1) whether existing or expired contracts contain embedded leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. We elected the short-term lease practical expedient by establishing an accounting policy to exclude leases with a term of 12 months or less.
The discount rate utilized for classification and measurement purposes as of the inception date of the lease is based on the Company’s collateralized incremental interest rate to borrow of
The Company has entered into lease agreements as a lessee for the use of office space. These lease agreements are classified as operating leases, and the liability and right-of-use asset are recognized on the balance sheet at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term.
During 2018, the Company executed a lease agreement. The lease term is 39 months at a rate of $
| 16 |
| Table of Contents |
On August 24, 2023, the Company executed a lease agreement. The lease term is
In early 2022, the Company spun-off a wholly owned subsidiary, Notation Labs, Inc. (“Notation Labs”). Notation Labs and the Company have continued to share office and warehouse spaces. The agreement is that Notation Labs pays portions of the leases based on agreements between the two companies for usage and other factors. The Company does not recognize rent expense on amounts paid by Notation Labs nor is it required to repay Notation Labs.
Undiscounted Cash Flows
As of September 30, 2024, the right of use asset and lease liability were shown on the consolidated balance sheet at $
Amounts due as of September 30, 2024 |
| Operating Leases |
| |
2024 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
Total minimum lease payments |
|
|
| |
Less: effect of discounting |
|
| ( | ) |
Present value of future minimum lease payments |
|
|
| |
Less: current obligations under leases |
|
| ( | ) |
Long-term lease obligations |
| $ |
| |
Legal Matters
On July 6, 2020, we received a letter from the staff of the Division of Enforcement of the Securities and Exchange Commission (the “Staff”) that indicated the Company may have violated certain rules and regulations regarding a late filing notification filed by the Company and that the Staff is conducting an informal inquiry into the matter. On April 29, 2021, the Company agreed to pay civil penalties of $
On April 6, 2023, the Company was served a Summons for an Amended Complaint filed in the state of Florida with claims for Strict Liability, Negligence and Breach of Implied Warranty. The complaint, filed by an insurance company, stems from its payments for claims filed by a policy holder on two separate occasions. The first insurance claim payment was due to a leak caused by improper installation in which the contractor failed to meet local codes. The second insurance claim payment followed the contractor’s failure to properly repair the improper installation. The complaint states that the contractor failed to follow basic installation guidelines supplied with the product in either incident, resulting in damages. On June 8, 2023, the Court of Duval County, FL entered a default judgement for $
| 17 |
| Table of Contents |
NOTE 9 - STOCK WARRANTS
The following is a summary of stock warrants activity during the period ended September 30, 2024:
|
| Number of Shares |
|
| Weighted Average Exercise Price |
| ||
Balance, December 31, 2023 |
|
|
|
| $ |
| ||
Warrants granted and assumed |
|
| - |
|
|
| - |
|
Warrants expired |
|
| ( | ) |
|
|
| |
Warrants canceled |
|
| - |
|
|
| - |
|
Warrants exercised |
|
| - |
|
|
| - |
|
Balance outstanding and exercisable, September 30, 2024 |
|
|
|
| $ |
| ||
NOTE 10 - STOCKHOLDERS’ EQUITY
The Company is authorized to issue
The Series B Preferred Stock does not pay a dividend, does not have any liquidation preference over other securities issued by the Company and are not convertible into shares of the Company’s common stock. For so long as any shares of the Series B Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, shall have voting power equal to a controlling 51% of the total vote on all shareholder matters of the Company. Upon or after the third anniversary of the initial issuance date, the Company shall have the right, at the Company’s option, to redeem all or a portion of the shares of Series B Preferred Stock, at a price per share equal to par value.
On January 18, 2024, the Company issued
On January 19, 2024, the Company issued
On February 15, 2024, the Company issued
On February 19, 2024, the Company issued
On February 19, 2024, the Company issued
On April 2, 2024 the Company issued
On April 3, 2024, the Company issued
On April 4, 2024, the Company issued
On April 14, 2024 the Company issued
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On April 22, 2024, the Company entered into a consulting agreement with an individual for a six-month period. As compensation, the Company will issue
On May 3, 2024, the Company issued
On May 7, 2024, the Company issued
On July 7, 2024, the Company issued
On July 10, 2024, the Company issued
On July 14, 2024, the Company issued
On July 24, 2024, the Company issued
On July 25, 2024, the Company issued
On July 25, 2024, the Company issued
On July 26, 2024, the Company issued
On July 26, 2024, the Company issued 600,000 shares of common stock valued at $
On August 5, 2024, the Company issued
On August 5, 2024, the Company issued
On August 5, 2024, the Company issued
On August 6, 2024, the Company issued
On August 8, 2024, the Company issued
On August 9, 2024, the Company issued
On August 19, 2024, the Company cancelled
On August 29, 2024, the Company issued
On August 29, 2024, the Company issued
On September 3, 2024, the Company reached a settlement agreement for
On September 24, 2024, the Company issued
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| Table of Contents |
NOTE 11 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements other than as set forth below.
On October 1, 2024, the Company issued
On October 17, 2024, the Company issued
On October 24, 2024, the Company issued
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not historical fact may deem to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. These statements include, among other things, statements regarding:
| · | our ability to diversify our operations; |
| · | inability to raise additional financing for working capital; |
| · | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain; |
| · | our ability to attract key personnel; |
| · | our ability to operate profitably; |
| · | deterioration in general or regional economic conditions; |
| · | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
| · | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; |
| · | the inability of management to effectively implement our strategies and business plan; |
| · | inability to achieve future sales levels or other operating results; |
| · | the unavailability of funds for capital expenditures; |
| · | other risks and uncertainties detailed in this report; |
as well as other statements regarding our future operations, financial condition and prospects, and business strategies. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed under the heading “Risk Factors” in Part II, Item 1A and those discussed in other documents we file with the Securities and Exchange Commission. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
References in the following discussion and throughout this Quarterly Report to “we”, “our”, “us”, “TKLS”, “Trutankless”, “Bollente”, “the Company”, and similar terms refer to Trutankless, Inc. unless otherwise expressly stated or the context otherwise requires.
AVAILABLE INFORMATION
The Company’s stock symbol is TKLS, and is presently traded on the OTCQB maintained by OTC Markets Group, Inc. We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov or on our website at www.trutanklessinc.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt of a written request to us at Trutankless, Inc., 15900 North 88th Street, Suite 200, Scottsdale, Arizona 85260.
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General
Trutankless Inc. was incorporated in the state of Nevada on March 7, 2008. The Company is headquartered in Scottsdale, Arizona and currently operates through its wholly-owned subsidiary, Bollente, Inc., a Nevada corporation incorporated on December 3, 2009.
Trutankless is involved in research and development of a high quality, whole-house, smart electric tankless water heater that is more energy efficient than conventional products. 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 hope automation space.
The Company spun off its wholly owned subsidiary, Notation Labs, Inc. with shareholders of the Company to receive pro rata ownership of the spun off company in the form of an equity dividend distribution. Common shares of Notation Labs, Inc. were issued to shareholders of record December 10th, 2021 and the spin off occurred on January 24th, 2022, with each shareholder of record receiving 1 share in the subsidiary for every 4 shares in the Company held as of the Record Date.
Trutankless® Products
Our trutankless® water heaters were designed to provide an endless hot water supply because they are designed to heat water as it flows through the system. 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. In addition, 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 have several features and design innovations which are new to the electric tankless water heater market that we believe will give our products a sustainable competitive advantage over our rivals in the market.
Our trutankless® water heaters will be available through wholesale plumbing distributors, including Home Depot Pro, Ferguson, Hajoca, WinSupply locations, Morrison Supply, and several regional distributors. A partial listing of wholesalers may be found on our website (www.trutankless.com).
We created a custom heat exchanger for our trutankless® product line that utilizes our patented technology to heat water as it flows through the system, which means customers need not worry about running out of hot water. 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.
Our trutankless® water heaters were officially launched in the first quarter of 2014 and is sold throughout the wholesale plumbing distribution channel. We began generating revenue in the first quarter of 2014. As of the fiscal year ended December 31, 2014, we generated $238,912 in revenue. As of the fiscal year ended December 31, 2015, we generated $265,504 in revenue. As of the fiscal year ended December 31, 2016, we generated $429,582 in revenue. As of the fiscal year ended December 31, 2017, we generated $695,857 in revenue. As of the fiscal year ended December 31, 2018, we generated $1,537,958 in revenue. 1, 2019, we generated $1,908,708. As of December 31, 2020, we generated $1,661,278. As of the fiscal year ended December 31, 2021, we generated $246,032 in revenue. As of the fiscal year ended December 31, 2022, we generated $77,009 in revenue. As of the fiscal year ended December 31, 2023, we generated $3,549 in revenue. For the six months ended June 30, 2024, we generated $11,584 in revenue.
We are developing a new, customizable app and control panel for our smart electric water heaters. Using our app, residential and commercial users will be able to obtain real-time status reports, adjust unit temperature settings, view water usage data, and change notification settings from anywhere in the world on their mobile device.
Our primary markets, Florida, Texas, Arizona, and the rest of the Sunbelt region are centers of growth in the U.S. construction and we plan to continue intend to take advantage of our relationships as we launch our totally redesigned trutankless® brand whole home tankless water heaters.
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Www.trutankless.com is available as a service to consumers of trutankless® water heaters. We expect to have new apps available for download from the Apple iOS and Goggle Play stores, which will integrate with other devices in the Smart Home market.
Industry Recognition and Awards
Leading home improvement website, houzz.com, honored the company with 4 consecutive “Best of Houzz” honors from 2014 through 2018.
We expect our 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.
Customers and Markets
We intend to continue selling our products to plumbing wholesale distributors and dealers.
Approximately 100% of our sales in 2022 and 2021, were to wholesale plumbing equipment distributors for commercial and residential repair and replace applications. Additionally, our products have historically been sold to various home builders throughout the United States in both single family and multi-family applications.
Manufacturing and Logistics
We have a Manufacturing Services Agreement establishing our financial and payment arrangements, warranty, shipping, and delivery terms with a large US based contract manufacturer with vertically integrated capabilities for electro-mechanical box builds. Finished product are to be generally shipped Freight on Board (FOB) via standard LTL freight and are to be either drop-shipped to customers directly with some inventory to be warehoused at Associated Global Systems located in Phoenix, Arizona. Merchandise is typically shipped using common carriers or freight companies which are selected at the time of shipment based on order volume and the best available rates.
RESULTS OF OPERATIONS
Results of Operations for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023.
Revenues
In the nine months ended September 30, 2024, we generated $191,285 in revenues, as compared to $3,469 in revenues in the prior year. The increase in sales was attributable to sales of parts for our Gen 1 trutankless® residential and light commercial products and the start of sales of our new Gen 3 trutankless® residential products.
Cost of goods sold was $115,480 in the nine months ended September 30, 2024, as compared to $10,225 in the nine months ended September 30, 2023.
To the knowledge of management, the Company is unaware of any trends or uncertainties in the sales or costs of our products and services for the periods discussed.
Expenses
Operating expenses totaled $3,416,851 during the nine months ended September 30, 2024 as compared to $1,465,624 in the prior year. In the nine months ended September 30, 2024, our expenses primarily consisted of General and Administrative of $965,564, Research and development of $555,681 and Professional fees of $1,895,606.
General and administrative expenses decreased by $144,308, or approximately 13.0% to $965,564 for the nine months ended September 30, 2024 from $1,109,872 for the nine months ended September 30, 2023. This decrease was primarily the result of watching overall expenses of the Company.
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Research and development expenses increased by $328,128, or approximately 144,2% to $555,681 for the nine months ended September 30, 2024 from $227,553 for the nine months ended September 30, 2023. This increase is attributed primarily to the increased efforts getting Gen 3 products ready for production.
Professional fees increased by $1,767,407, or approximately 1,378.6% to $1,895,606 for the nine months ended September 30, 2024 from $128,199 for the nine months ended September 30, 2023. Professional fees increased due to the increase in production efforts and financing efforts getting ready for production.
Other Income (Expenses)
Other income (expenses) increased by $1,081,372 to ($1,567,819) in the nine months ended September 30, 2024 from ($486,447) in the nine months ended September 30, 2023. The increase was primarily financing incentive related expenses.
Net Loss
In the nine months ended September 30, 2024, we generated a net loss of $4,908,865, an increase of $2,950,038 from $1,958,827 for the nine months ended September 30, 2023. This increase was attributable to the overall expenditures discussed above.
Results of Operations for the three months ended September 30, 2024 compared with the three months ended September 30, 2023.
Revenues
In the three months ended September 30, 2024, we generated $179,701 in revenues, as compared to $2,704 in revenues in the prior year. The increase in sales was attributable to sales of parts for our Gen 1 trutankless® residential and light commercial products and the start of sales of our new Gen 3 trutankless® residential products.
Cost of goods sold was $115,480 in the three months ended September 30, 2024, as compared to $10,225 in the three months ended September 30, 2023.
To the knowledge of management, the Company is unaware of any trends or uncertainties in the sales or costs of our products and services for the periods discussed.
Expenses
Operating expenses totaled $2,120,243 during the three months ended September 30, 2024 as compared to $589,820 in the prior year. In the three-month period ended September 30, 2024, our expenses primarily consisted of General and Administrative of $123,578, Research and Development of $136,124 and Professional Fees of $1,860,541.
General and administrative expenses decreased by $252,168, or approximately 22.7% to $123,578 for the three months ended September 30, 2024 from $375,746for the three months ended September 30, 2023. This decrease was primarily the result of watching overall expenses of the Company.
Research and development expenses increased by $6,750, or approximately 3.0% to $136,124 for the three months ended September 30, 2024 from $129,374 for the three months ended September 30, 2023. This increase is attributed primarily to the increased efforts getting Gen 3 products ready for production.
Professional fees increased by $1,775,841, or approximately 1,385.2% to $1,860,541 for the three months ended September 30, 2024 from $84,700 for the three months ended September 30, 2023. Professional fees increased due to the increase in production efforts and financing efforts getting ready for production.
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Other Expenses
Other expenses increased by $1,228,941 to ($1,364,090) in the three months ended September 30, 2024 from ($135,149) in the three months ended September 30, 2023. The increase was primarily financing incentive related expenses.
Net Loss
In the three months ended September 30, 2024, we generated a net loss of $3,420,112, an increase of $2,687,622 from $732,490 for the three months ended September 30, 2023. This increase was attributable to the overall expenditures discussed above.
Going Concern
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has not generated sufficient revenues from product sales to provide sufficient cash flows to enable the Company to finance its operations internally. As of September 30, 2024, the Company had $34,719 cash on hand. On September 30, 2024, the Company had an accumulated deficit of $71,574,778. For the nine months ended September 30, 2024, the Company had a net loss of $4,908,865, and cash used in operations of $1,668,634. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date of filing.
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. However, there is no guarantee the Company will generate sufficient revenues or raise capital to continue operations. If the Company fails to generate sufficient revenue and obtain additional capital to continue at its expected level of operations, the Company may be forced to scale back or discontinue its sales and marketing efforts. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Liquidity and Capital Resources
At September 30, 2024, we had an accumulated deficit of $71,574,778. Primarily because of our history of operating losses and our recording of note payables, we have a working capital deficiency of $4,483,190 at September 30, 2024. Losses have been funded primarily through issuance of common stock and borrowings from our stockholders and third-party debt. As of September 30, 2024, we had $34,719 in cash, $83,046 in accounts receivable, and $84,036 in inventory. We used net cash in operating activities of $1,668,634 for the nine months ended September 30, 2024.
Cash Flows from Operating, Investing and Financing Activities
The following table provides detailed information about our net cash flow for all financial statement periods presented in this Quarterly Report. To date, we have financed our operations through the issuance of stock and borrowings.
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The following table sets forth a summary of our cash flows for the nine months ended September 30, 2024 and 2023:
|
| Nine months ended |
| |||||
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||
Net cash used in operating activities |
| $ | (1,668,634 | ) |
| $ | (1,243,739 | ) |
Net cash used in investing activities |
|
| - |
|
|
| - |
|
Net cash provided by financing activities |
|
| 1,681,900 |
|
|
| 1,238,900 |
|
Net increase/(decrease) in cash |
|
| 13,266 |
|
|
| (4,839 | ) |
Cash, beginning |
|
| 21,453 |
|
|
| 84,034 |
|
Cash, ending |
| $ | 34,719 |
|
| $ | 79,195 |
|
Operating activities - Net cash used in operating activities was $1668,634 for the nine months ended September 30, 2024, as compared to $1,243,739 used in operating activities for the same period in 2023. The decrease in net cash used in operating activities was primarily due to an increase in operating expenses gearing up for production.
Financing activities - Net cash provided by financing activities for the nine months ended September 30, 2024 was $1,681,900 as compared to $1,238,900 for the same period of 2023. The increase of net cash provided by financing activities was mainly attributable to increased equity and debt financing.
Ongoing Funding Requirements
As of September 30, 2024, we continue to use traditional and/or debt financing to provide the capital we need to run the business. It is possible that we may need additional funding to enable us to fund our operating expenses and capital expenditures requirements.
Until such time, if ever, as we can generate substantial product revenues, we intend to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that any of those sources of funding will be available when needed on acceptable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or relationships with third parties when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts; abandon our business strategy of growth through acquisitions; or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions.
There have been no material changes to our critical accounting policies as compared to the critical accounting policies and significant judgements and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on June 26, 2024.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
This item in not applicable as we are currently considered a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
As required by Rule 13a-15 under the Exchange Act, as of the end of the Company’s last fiscal quarter, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s current management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), who concluded that the Company’s disclosure controls and procedures are not effective.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
Management reviews the Company’s system of internal control over financial reporting and makes changes to the Company’s processes and systems to improve controls and increase efficiency, while ensuring that the Company maintains an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities and migrating processes.
During the Company’s last fiscal quarter, there was 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.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On July 6, 2020, we received a letter from the staff of the Division of Enforcement of the Securities and Exchange Commission (the “Staff”) that indicated the Company may have violated certain rules and regulations regarding a late filing notification filed by the Company and that the Staff is conducting an informal inquiry into the matter. On April 29, 2021, the Company agreed to pay civil penalties of $25,000 to the Securities and Exchange Commission in settlement of the matter. Payment shall be made in the following four installments: (1) $5,000 within 14 days of entry of the order; (2) $7,500 within 180 days of entry of the order; (3) $6,250 within 270 days of entry of the order; and (4) $6,250 within 360 days of entry of the order. As of September 30, 2024, $20,000 remained due.
On April 6, 2023, the Company was served a Summons for an Amended Complaint filed in the state of Florida with claims for Strict Liability, Negligence and Breach of Implied Warranty. The complaint, filed by an insurance company, stems from its payments for claims filed by a policy holder on two separate occasions. The first insurance claim payment was due to a leak caused by improper installation in which the contractor failed to meet local codes. The second insurance claim payment followed the contractor’s failure to properly repair the improper installation. The complaint states that the contractor failed to follow basic installation guidelines supplied with the product in either incident, resulting in damages. On June 8, 2023, the Court of Duval County, FL entered a default judgement for $38,768. As of September 30, 2024, the Company has not paid any of this balance.
Item 1A. Risk Factors
The risk factors listed in our 2023 Form 10-K, filed with the Securities Exchange Commission on June 26, 2024, are hereby incorporated by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 18, 2024, the Company issued 1,050,000 shares pursuant to amendments to a related party promissory note which were made on October 20, 2021.
On January 19, 2024, the Company issued 3,000,000 shares for a notice of conversion of a promissory note.
On February 15, 2024, the Company issued 200,000 shares for cash at $0.05 per share for a total of $10,000.
On February 19, 2024, the Company issued 750,000 shares for services pursuant to two consulting agreements.
On February 19, 2024, the Company issued 100,000 shares for cash at $0.05 per share for a total of $5,000.
On April 2, 2024 the Company issued 1,000,000 shares for services pursuant to a consulting agreement.
On April 3, 2024, the Company issued 3,857,143 shares pursuant to a promissory note amendment and conversion dated April 3, 2023.
On April 4, 2024, the Company issued 36,893,398 shares to convert certain related party convertible notes dated July 26, 2022, June 15, 2023 and July 25, 2023.
On April 14, 2024 the Company issued 100,000 shares for services pursuant to a consulting agreement.
On April 22, 2024, the Company entered into a consulting agreement with an individual for a six-month period. As compensation, the Company will issue 300,000 shares of common stock to the consultant immediately upon signing the agreement.
On May 3, 2024, the Company issued 7,002,740 shares of common stock for the conversion of $350,000 in principal and $140,192 in accrued interest on a convertible note.
On May 7, 2024, the Company issued 100,000 shares of common stock valued at $47,835, which was recorded in the prior year in Stock payable as an incentive to enter into a certain note payable.
On July 7, 2024, the Company issued 25,000 shares for services pursuant to two consulting agreements.
On July 10, 2024, the Company issued 200,000 shares for services pursuant to two consulting agreements.
On July 14, 2024, the Company issued 100,000 shares for services pursuant to a consulting agreement.
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On July 24, 2024, the Company issued 300,000 shares of common stock valued at $21,000 as an incentive to enter into a certain note payable.
On July 25, 2024, the Company issued 2,500,000 shares of common stock valued at $175,000 as an incentive to enter into a certain note payable.
On July 25, 2024, the Company issued 2,500,000 shares for services pursuant to a consulting agreement.
On July 26, 2024, the Company issued 600,000 shares for services pursuant to six consulting agreements.
On July 26, 2024, the Company issued 600,000 shares of common stock valued at $42,000 as an incentive to enter into a certain note payable.
On August 5, 2024, the Company issued 200,000 shares of common stock valued at $80,000 as an incentive to enter into a certain note payable.
On August 5, 2024, the Company issued 2,500,000 shares for services pursuant to an amendment to a consulting agreement.
On August 5, 2024, the Company issued 2,500,000 shares for services pursuant to a consulting agreement.
On August 6, 2024, the Company issued 600,000 shares of common stock, which was recorded in the prior year in Stock payable pursuant to a consulting agreement.
On August 8, 2024, the Company issued 150,000 shares for cash at $0.05 per share for a total of $7,500.
On August 9, 2024, the Company issued 2,000,000 shares for services pursuant to a consulting agreement.
On August 19, 2024, the Company cancelled 1,000,000 shares of common stock valued that had previously been issued as an incentive to enter into a certain note payable.
On August 29, 2024, the Company issued 2,200,000 shares of common stock valued at $836,000 as an incentive to enter into a standby letter of credit.
On August 29, 2024, the Company issued 2,550,000 shares for services pursuant to three consulting agreements.
On September 3, 2024, the Company issued 156,667 shares of common stock for the conversion of $23,500 of advances payable.
On September 24, 2024, the Company issued 1,000,000 shares for cash at $0.10 per share for a total of $100,000.
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We believe that the above issuances and sale of the securities was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule. The securities were sold directly by us and did not involve a public offering or general solicitation. The recipients of the securities were afforded an opportunity for effective access to files and records of the Registrant that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports. We reasonably believed that the recipients, immediately prior to the sale of the securities, were accredited investors and had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The management of the recipients had the opportunity to speak with our management on several occasions prior to their investment decision. There were no commissions paid on the issuance and sale of the securities.
Issuer Purchases of Equity Securities
The Company did not repurchase any of its equity securities during the period ended March 31, 2024.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibit No. |
| Description |
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101.INS |
| Inline XBRL Instance Document |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase |
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104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRUTANKLESS, INC.
(Registrant)
By: | /s/ Guy Newman |
|
| Guy Newman, CEO, Principal Financial Officer and Principal Executive Officer |
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| Date: November 14, 2024 |
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