TKLS 10-K & 10-Q changes, risk factors and insider trading

Due to our very recent start-up nature, we will have to incur the costs of product development, import expenses, advertising, in addition to hiring new employees and commencing additional marketing activities for product sales and distribution. To fully implement our business planplan, we will require substantial additional funding.

We have twothree individuals performing the functions of all officers and directors. Mr. Newman, our president and CEO, Mr. Sperry , our CFO and Mr. Orr, our secretary and treasurer, have developed our internal control procedures and are responsible for monitoring and ensuring compliance with those procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low pricedlow-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low pricedlow-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

In the year ended December 31, 20242025 we generated $242,350$1,082,887 in revenues, as compared to $3,549$242,350 in revenues in the prior year. The increase in sales was attributable to the initial launchon-goings of the next generation of our trutankless® residential and light commercial products. Cost of goods sold was $279,356,$1,040,865, as compared to $0$279,356 in the prior year.

Operating expenses totaled $5,220,044$3,612,548 during the year ended December 31, 20242025 as compared to $1,345,917$5,183,038 in the prior year. In the year ended December 31, 2024,2025, our expenses primarily consisted of General and Administrative of $783,359,$908,833, Research and Development of $432,847,$163,541, ProfessionalConsulting Fees of $3,960,987$2,217,207, Legal and Accounting Fees of $157,500, Audit Fees of $85,000 and Depreciation Expense of $3,845.$80,467.

ProfessionalGeneral and administrative fees increased $3,511,421by $123,474 from the year ended December 31, 20232024 to the year ended December 31, 2024.2025. ProfessionalGeneral and administrative fees increased due to an increase in stock-basedrent consultingexpense fees.of $252,240 offset by decreases in many other general and administrative expenses.

Other expense increaseddecreased by $4,157,952$3,785,874 to $4,966,058$1,180,184 in the year ended December 31, 20242025 from $808,106$4,966,058 for the year ended December 31, 2023.2025. The increasedecrease was the result of ana increasedecrease in financing incentive expense.

In the year ended December 31, 2024,2025, we generated a net loss of $10,186,102,$4,750,710, ana increasedecrease of $8,035,628$5,435,392 from $2,150,474$10,186,102 for the year ended December 31, 2023.2024. This decrease was attributable to the factors discussed above.

Net cash used in operating activities was $2,315,411$1,483,173 for the year ended December 31, 2024,2025, as compared to $1,990,470$2,315,411 used in operating activities for the same period in 2023.2024. The decrease in net cash used in operating activities was primarily due to the decrease stock issued for services and financing incentives, increase in inventory, decrease in prepaid expenses and the overall decrease in net loss during the year ended December 31, 2024.2025.

Net cash provided by financing activities for the year ended December 31, 20242025 was $3,490,066,$798,293, as compared to $1,926,118$3,490,066 for the same period of 2023.2024. The decrease of net cash provided by financing activities was mainly due to aan increase in debtnotes financingpayable to related parties offset by an increase in payments made on notes payable to related parties during the year ended December 31, 2024.2025.

The risk factors listed in our 20242025 Form 10-K, filed with the Securities Exchange Commission on AugustMay 28,22, 2025,2026, are hereby incorporated by reference.

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'sCompany’s trutankless water heater, with Wi-Fi capability and trutankless'trutankless’ proprietary apps offered in the iOS and Android store, will augment existing products in the hopehome automation space.

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 December 31, 2023, we generated $3,549 in revenue. As of December 31, 2024, we generated $242,350 in revenue. As of December 31, 2025, we generated $1,082,887 in revenue. As of the threesix months ended MarchJune 31,30, 2026, we generated $940,466$1,479,139 in revenue.

Results of Operations for the three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025.

In the three months ended MarchJune 31,30, 2026, we generated $940,466$538,673 in revenues, as compared to $430,087$94,454 in revenues in the prior year. The increase in sales was attributable to increased efforts for sales of our new Gen 3 trutankless® residential products.

Operating expenses totaled $1,567,426$2,582,937 during the three months ended MarchJune 31,30, 2026 as compared to $1,484,702$999,821 in the prior year. In the three-month period ended MarchJune 31,30, 2026, our expenses primarily consisted of General and Administrative of $404,867,$310,578, Research and Development of $50,352,$73,213, Consulting Fees of $1,038,589,$2,152,497, Legal and Accounting Fees of $33,001,$5,774, Audit Fees of $17,500 and Depreciation of $23,117.$23,375.

General and administrative expenses increased by $138,201,$149,778, or approximately 51.8%93.1% to $404,867$310,578 for the three months ended MarchJune 31,30, 2026 from $266,666$160,800 for the three months ended MarchJune 31,30, 2025. This increase was primarily the result of efforts to increase sales and increase in sales people and office staff.

Research and development expenses decreasedincreased by $9,619,$72,424, or approximately 16.0%9,179.2% to $50,352$73,213 for the three months ended MarchJune 31,30, 2026 from $59,971$789 for the three months ended MarchJune 31,30, 2025. This decreaseincrease is attributed primarily to theimprovements sales starting forto the Gen 3 products and on-going developments havefor sloweda down.new controller card and wireless connectivity.

Consulting fees decreasedincreased by $72,886,$1,424,950, or approximately 6.6%195.9% to $1,038,589$2,152,497 for the three months ended MarchJune 31,30, 2026 from $1,111,475$727,547 for the three months ended MarchJune 31,30, 2025. Consulting fees decreasedincreased due to thetwo decreasenew inlarger consulting expenses as consulting agreements are running through their terms.agreements.

Legal and accounting fees decreased by $886,$58,035, or approximately 2.6%91.0% to $33,001$5,774 for the three months ended MarchJune 31,30, 2026 from $33,887$63,809 for the three months ended MarchJune 31,30, 2025. Legal and accounting fees decreased due to the normal fluctuations in time and costs of accounting.

Audit fees increaseddecreased by $17,500,$10,000, or approximately 100.0%36.4% to $17,500 for the three months ended MarchJune 31,30, 2026 from $0$27,500 for the three months ended MarchJune 31,30, 2025. Audit fees increaseddecreased due to some of the audit fees fromfor the 2025 audit being delayed to later inincluded the year.first three months of 2026.

Other expenses increased by $539,812$892,583 to ($755,280$1,155,486) in the three months ended MarchJune 31,30, 2026 from other expenses of ($215,468$262,903) in the three months ended MarchJune 31,30, 2025. The increase was due to the loss on extinguishment of debt in the current period.year.

In the three months ended MarchJune 31,30, 2026, we generated a net loss of $1,877,955,$3,438,208, an increase of $282,074$2,193,487 from net loss of $1,595,881$1,244,721 for the three months ended MarchJune 31,30, 2025. This increase was attributable to the overall expenditures discussed above.

The accompanying condensed 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 condensed 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 MarchJune 31,30, 2026, the Company had $16,097$13,133 cash on hand. On MarchJune 31,30, 2026, the Company had an accumulated deficit of $83,730,634.$87,168,842. For the threesix months ended MarchJune 31,30, 2026, the Company had a net loss of $1,877,955,$5,316,163, and cash used in operations of $49,503.$491,646. 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 condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At MarchJune 31,30, 2026, we had an accumulated deficit of $83,730,634.$87,168,842. Primarily because of our history of operating losses and the existing note payables, we have a working capital deficiency of $5,331,067$9,004,169 at MarchJune 31,30, 2026. Losses have been funded primarily through issuance of common stock and borrowings from our stockholders and third-party debt. As of MarchJune 31,30, 2026, we had $16,097$13,133 in cash, $427,169$344,190 in accounts receivable, and $1,056,031$1,503,779 in inventory.prepaid expenses. We used net cash in operating activities of $49,503.$491,646.

The following table sets forth a summary of our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025:

Operating activities -activities- Net cash used in operating activities was $49,503$491,646 for the threesix months ended MarchJune 31,30, 2026, as compared to $707,142$1,628,341 used in operating activities for the same period in 2025. The decrease in net cash used in operating activities was primarily due to increased revenues for 2026..2026.

Investing activities - Net cash used in investing activities was $0 for the threesix months ended MarchJune 31,30, 2026, as compared to $203,514$253,250 used in investing activities for the same period in 2025. This decrease in net cash used in investing activities was primarily due to no additional equipment and leasehold improvements needed for production.

Financing activities - Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 was $43,981$483,160 as compared to ($82,130)$889,448 usedprovided inby financing activities for the same period of 2025. The increasedecrease of net cash provided by financing activities was mainly attributable to increased stock sales, increased repayment of related party notes and less proceeds from related party notes payable and less related party note repayments in the current period.2026.

As of MarchJune 31,30, 2026, 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.