OMTK 10-Q
Omnitek Engineering Corp (OMTK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
Commission File Number
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer |
(Address of principal executive offices, Zip Code)
(
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbols(s) | Name of each exchange on which registered |
N/A |
|
|
As of August 14, 2024, the Registrant had
Page 1
TABLE OF CONTENTS | |
| Page |
PART I - FINANCIAL INFORMATION | |
|
|
3 | |
|
|
Condensed Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 | 3 |
|
|
4 | |
|
|
5 | |
|
|
6 | |
|
|
7 | |
|
|
Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations | 15 |
|
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 18 |
|
|
18 | |
|
|
PART II - OTHER INFORMATION | |
|
|
19 | |
|
|
19 | |
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
|
|
20 | |
|
|
20 | |
|
|
20 | |
|
|
21 | |
|
|
Page 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OMNITEK ENGINEERING CORP.
Condensed Balance Sheets
|
| June 30, |
| December 31, |
| 2023 |
| 2023 | |
|
| (Unaudited) |
|
|
ASSETS |
|
|
|
|
CURRENT ASSETS |
|
|
|
|
Cash |
| $ |
| $ |
Accounts receivable, net |
|
| ||
Accounts receivable – related parties |
|
| ||
Inventories, net |
|
| ||
Deposits |
|
| ||
Total Current Assets |
|
| ||
|
|
|
|
|
LONG-TERM ASSETS |
|
|
|
|
Property & Equipment, net |
|
| ||
Operating lease – right-of-use asset |
|
| ||
Long-term deposit |
|
| ||
Total Long-Term Assets |
|
| ||
|
|
|
|
|
TOTAL ASSETS |
| $ |
| $ |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
Accounts payable and accrued expenses |
| $ |
| $ |
Accrued management compensation |
|
| ||
Accounts payable - related parties |
|
| ||
Notes payable - related parties |
|
| ||
Convertible notes payable – related party |
|
| ||
Customer deposits |
|
| ||
Operating lease liabilities - current |
|
| ||
Total Current Liabilities |
|
| ||
LONG-TERM LIABILITIES |
|
|
|
|
Loans payable – SBA, net of current portion |
|
| ||
Operating lease liabilities – long-term |
|
| ||
Total Long-term Liabilities |
|
| ||
Total Liabilities |
|
| ||
|
|
|
|
|
STOCKHOLDERS' DEFICIT |
|
|
|
|
Common stock, |
|
| ||
Additional paid-in capital |
|
| ||
Accumulated deficit |
| ( |
| ( |
Total Stockholders' Deficit |
| ( |
| ( |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
| $ |
| $ |
The accompanying notes are an integral part of these condensed unaudited financial statements.
Page 3
OMNITEK ENGINEERING CORP.
Condensed Statements of Operations
(unaudited)
|
| For the Three |
| For the Three |
| For the Six |
| For the Six |
|
| Months Ended |
| Months Ended |
| Months Ended |
| Months Ended |
| June 30, 2024 |
| June 30, 2023 |
| June 30, 2024 |
| June 30, 2023 | |
|
|
|
|
|
|
|
|
|
REVENUES |
| $ |
| $ |
| $ |
| $ |
COST OF GOODS SOLD |
|
|
|
| ||||
GROSS MARGIN |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
| ||||
Research and development |
|
|
|
| ||||
Depreciation and amortization |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
| ( |
| ( |
| ( |
| ( |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Obsolete inventory |
| ( |
|
|
| ( |
|
|
Interest expense |
| ( |
| ( |
| ( |
| ( |
|
|
|
|
|
|
|
|
|
Total Other Expense |
| ( |
| ( |
| ( |
| ( |
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
| ( |
| ( |
| ( |
| ( |
INCOME TAX EXPENSE |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
NET LOSS |
| $( |
| $( |
| $( |
| $( |
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE |
| $( |
| $( |
| $( |
| $( |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -BASIC AND DILUTED |
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited financial statements.
Page 4
OMNITEK ENGINEERING CORP.
Condensed Statements of Cash Flows
(unaudited)
|
| For the Six |
| For the Six |
|
| Months Ended |
| Months Ended |
| June 30, 2024 |
| June 30, 2023 | |
OPERATING ACTIVITIES |
|
|
|
|
Net income (loss) |
| $( |
| $( |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Amortization and depreciation expense |
|
| ||
Stock option expense |
|
| ||
Amortization of ROU asset |
|
| ||
Change in Inventory reserve |
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
| ( |
| ( |
Accounts receivable–related parties |
|
| ||
Deposits |
| ( |
| ( |
Inventory |
|
| ||
Accounts payable and accrued expenses |
| ( |
| |
Customer deposits |
|
| ( | |
Contract liabilities |
|
| ||
Operating lease liability |
| ( |
| ( |
Accounts payable-related parties |
|
| ||
Net cash provided by (used in) operating activities |
| ( |
| ( |
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
Purchase of fixed assets |
| ( |
| |
Net Cash Used in Investing Activities |
| ( |
| |
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
Proceeds from (payments on) notes payable-related party |
|
| ||
Net Cash (Used in) Provided by Financing Activities |
|
| ||
|
|
|
|
|
NET CHANGE IN CASH |
| ( |
| ( |
CASH AT BEGINNING OF YEAR |
|
| ||
|
|
|
|
|
CASH AT END OF PERIOD |
| $ |
| $ |
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS |
|
|
|
|
CASH PAID FOR: |
|
|
|
|
Interest |
|
| ||
Income taxes |
| $ |
| $ |
The accompanying notes are an integral part of these condensed unaudited financial statements.
Page 5
OMNITEK ENGINEERING CORP.
Condensed Statements of Stockholders’ Deficit
(unaudited)
|
|
|
|
|
| Additional |
|
|
| Total | |||||||
| Common Stock |
| Paid-In |
| Accumulated |
| Stockholders’ | ||||||||||
Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, December 31, 2023 |
| $ |
| $ |
| $ | ( |
| $ | ( | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Value of options and warrants issued for services |
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss for the three months ended March 31, 2024 |
|
|
|
|
|
| ( |
|
| ( | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, March 31, 2024 |
| $ |
| $ |
| $ | ( |
| $ | ( | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Value of options and warrants |
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss for three months ended June 30, 2024 |
|
|
|
|
| ( |
| ( | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, June 30, 2024 |
| $ |
| $ |
| $ | ( |
| $ | ( | |||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
| Additional |
|
|
| Total | ||||||
| Common Stock |
| Paid-In |
| Accumulated |
| Stockholders' | ||||||
Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
| $ |
| $ |
| $ | ( |
| $ | ( | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of options and warrants |
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended March 31, 2023 |
|
|
|
|
|
| ( |
|
| ( | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2023 |
| $ |
| $ |
| $ | ( |
| $ | ( | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of options and warrants |
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended June 30, 2023 |
|
|
|
|
|
| ( |
|
| ( | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2023 |
| $ |
| $ |
| $ | ( |
| $ | ( | |||
The accompanying notes are an integral part of these condensed unaudited financial statements.
Page 6
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2024 and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2023 audited financial statements. The results of operations for the periods ended June 30, 2024 and June 30, 2023 are not necessarily indicative of the operating results for the full years.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
In general, revenue is recognized when control of the promised goods is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for the goods or services. In order to achieve that core principle, a five-step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when we satisfy the performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.
We recognize revenue on various products and services as follows:
Products - The Company recognizes revenue from the sale of products as performance obligations are satisfied. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership and risks transfer (i.e., the performance obligation has been satisfied). In general, ownership and risk passes FOB shipping point, or as negotiated.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of Omnitek’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
Assurance-type warranties are the only warranties provided by the Company and, as such, Omnitek does not recognize revenue on warranty-related work. Omnitek generally provides a one-year warranty for products that it sells. Warranty claims historically have been insignificant.
Page 7
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Assurance-type warranties are the only warranties provided by the Company and, as such, Omnitek does not recognize revenue on warranty-related work. Omnitek generally provides a one-year warranty for products that it sells. Warranty claims historically have been insignificant.
Disaggregation of Revenue
The following table presents Omnitek’s revenues disaggregated by region and product type:
|
|
| For the three months ended June 30, 2024 |
|
| For the three months ended June 30, 2023 | |||||
|
|
|
|
|
|
|
|
|
|
| |
Segments |
|
| Products |
| Total |
|
| Products |
| Total | |
Domestic |
| $ |
|
| $ |
| |||||
International |
|
|
|
|
|
| |||||
| $ |
|
| $ |
| ||||||
|
|
|
|
|
|
|
|
|
|
| |
Filters |
| $ |
|
| $ |
| |||||
Components |
|
|
|
|
|
| |||||
Engineering Services |
|
|
|
|
|
| |||||
| $ |
|
| $ |
| ||||||
The following table presents Omnitek’s revenues disaggregated by region and product type:
|
|
| For the six months ended June 30, 2024 |
|
| For the six months ended June 30, 2023 | ||||
|
|
|
|
|
|
|
|
|
|
|
Segments |
|
| Products |
| Total |
|
| Products |
| Total |
Domestic |
| $ |
|
| $ |
| ||||
International |
|
|
|
|
|
| ||||
| $ |
|
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
Filters |
| $ |
|
| $ |
| ||||
Components |
|
|
|
|
|
| ||||
Engineering Services |
|
|
|
|
|
| ||||
| $ |
|
| $ |
| |||||
Inventory
Inventory is stated at the lower of cost or market. The Company’s inventory consists of finished goods and raw material and is located in Vista, California, consisting of the following:
Location: Vista, CA |
|
| June 30, |
|
| December 31, |
|
|
| 2024 |
|
| 2023 |
Raw materials |
| $ |
| $ | ||
Finished goods |
|
|
|
| ||
Total |
| $ |
| $ | ||
|
|
|
|
|
|
|
Allowance for obsolete inventory |
|
|
|
| ||
|
|
|
|
|
|
|
Total |
| $ |
| $ |
Page 8
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment at June 30, 2024 and December 31, 2023 consisted of the following:
| June 30, |
| December 31, | ||
2024 |
| 2023 | |||
Production/Office equipment | $ | |
| $ | |
Leasehold Improvements |
| |
|
| |
Less: accumulated depreciation |
| ( |
|
| ( |
Total | $ | |
| $ | |
Depreciation expense for the periods ended June 30, 2024 and June 30, 2023 was $
Basic and Diluted Loss per Share
The computation of basic earnings per share of common stock is based on the weighted average number of shares outstanding during the periods presented. The computation of fully diluted earnings per share includes common stock equivalents outstanding at the balance sheet date. The Company had
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codifi
cation Topic 740, Income Taxes ("Topic 740"), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.
Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of June 30, 2024 and December 31, 2023 the Company had no accrued interest or penalties related to uncertain tax positions. The Company files an income tax return in the U.S. federal jurisdiction and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2012.
Liquidity and Going Concern
Historically, the Company has incurred net losses and negative cash flows from operations. As of June 30, 2024, the Company had an accumulated deficit of $
Page 9
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
relating to the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities should we be unable to continue as a going concern.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.
NOTE 3 – CUSTOMER DEPOSITS
The customers deposit account relates to payments received from customers before product has been shipped. When the product is shipped the Company recognizes the associated revenue by reclassifying the customer deposit to the appropriate revenue account. By contrast, the Contract Liabilities account relates to long-term contracts where revenue is recognized over the term of the contract. For the periods ended June 30, 2024 and December 31, 2023, the balance due under customer deposits was $
NOTE 4 – OPERATING LEASE
The Company’s lease consists of an operating lease for general office space and warehouse facilities. The Company recognizes rent expense for this lease on a straight-line basis over the lease term. Because the lease does not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease Commencement Date in determining the present value of future lease payments.
On June 3, 2021, the Company entered into a lease for the premises located at 1345 Specialty Drive, Vista, CA, containing approximately 11,751 square feet of rentable area. The lease commenced on July 1, 2021 and expires on June 30, 2026. The monthly base rent under the lease is $
During the quarter ended June 30, 2024, cash paid for amounts included in the measurement of operating lease liabilities was $
Future minimum payments for monthly base rent due under the initial lease term are currently estimated to be as follows:
Years ending December 31, |
|
2024 (remaining) | $ |
2025 | |
2026 | |
Total lease payments | $ |
Less: Imputed interest | ( |
Total lease liability | |
Less: current lease liability | ( |
Long-term lease liability | $ |
Weighted average discount rate: |
|
Operating leases |
Page 10
NOTE 5 - RELATED PARTY TRANSACTIONS
Accounts Payable – Related Parties
The Company regularly incurs expenses that are paid to related parties for purchases of goods and services from related parties. As of June 30, 2024 and December 31, 2023, the Company owed related parties for such goods and services in the amounts of $
Accounts Receivable – Related Parties
As of June 30, 2024, and December 31, 2023, the Company was owed $1,279 and $1,304, respectively, by an entity controlled by the Company’s CEO for the purchase of products and services.
Accrued Management Compensation
For the periods ended June 30, 2024 and December 31, 2023, the Company’s president was due amounts for services performed for the Company.
As of June 30, 2024, and December 31, 2023, the accrued amounts consisted of the following:
| June 30, |
| December 31, | ||||
2024 |
| 2023 | |||||
Amounts due to the president |
| $ |
|
| $ | ||
Total |
| $ |
|
| $ | ||
NOTE 6 – NOTES PAYABLE - RELATED PARTIES
Convertible Notes – Related Parties
On June 4, 2021, the Company issued an unsecured convertible promissory note for $
On June 4, 2021, the Company issued a convertible promissory note for $
As of June 30, 2024 and December 31, 2023 Convertible Notes – Related Party consisted of the following:
June 30, 2024 |
| December 31, 2023 | |||
Convertible Note payable, related parties | $ |
| $ | ||
Less current portion |
| ( |
| $ | ( |
Total | $ |
| $ | ||
Page 11
NOTE 6 – NOTES PAYABLE - RELATED PARTIES (Continued)
Notes Payable – Related Parties
On January 19, 2017, the Company issued a promissory note for $
On March 23, 2023, the Company issued a Working Capital Promissory Note, in favor of its CEO, evidencing the additional loans to the Company by the CEO, with an Initial Principal Balance of $20,000, and to evidence any future additional loans by the CEO to the Company thereafter. Pursuant to the terms of the note, the unpaid principal and accrued simple interest at the rate of 8.0% per annum (“Applicable Rate”) shall be due and payable on or before March 22, 2024, (the “Maturity Date”). The principal amount of the note shall be increased by the amount of any additional advances of funds made by the CEO to the Company, from time-to-time, with interest thereon at the applicable Rate, from the date of such advance. On March 22, 2024 the Maturity Date of the Working Capital Promissory Note was extended to March 23, 2026.
As of June 30, 2024, and December 31, 2023, Note Payable – Related Party consisted of the following:
|
| June 30, |
|
| December 31, |
| 2024 |
|
| 2023 | |
Note payable, related party | $ |
| $ | ||
Total | $ |
| $ |
NOTE 7 – DEBT
Loans payable – SBA Economic Injury Disaster Loan
On April 21, 2020, the Company obtained a loan (the “SBA EIDL Loan”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) adminitstered by the U.S. Small Business Administration. The Company received total proceeds of $
As of June 30, 2024 and December 31, 2023 Debt consisted of the following:
| June 30, |
| December 31, | ||
2024 |
| 2023 | |||
Loan payable – SBA EIDL | $ |
| $ | ||
Less current portion |
|
|
| ||
Total | $ |
| $ | ||
Page 12
NOTE 8 – STOCKHOLDERS’ DEFICIT
Options and Warrants
The Company has no warrants outstanding.
During the six months ended June 30, 2024, and June 30, 2023, the Company granted
On September 11, 2015, the Board of Directors adopted the Omnitek Engineering Corp. 2015, Long Term Incentive Plan (the “2015 Plan”), under which
On October 2017, the Company’s shareholders approved its 2017 Long-Term Incentive Plan (the “2017 Plan”). Under the 2017 plan, the Company may issue up to
The Company recognizes compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of the award based on their grant date fair value. The Company estimates the fair value of stock options using a Black-Scholes option pricing model which requires management to make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of stock and expected dividend yield of stock. When determining expected volatility, the Company considers the historical performance of the Company’s stock, as well as implied volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant, based on the options’ expected term. The expected term of the options is based on the Company’s evaluation of option holders’ exercise patterns and represents the period of time that options are expected to remain unexercised. The Company uses historical data to estimate the timing and amount of forfeitures.
The following table presents the assumptions used to estimate the fair values of the stock options granted:
June 30, 2024 |
| June 30, 2023 | |
Expected volatility |
| ||
Expected dividends |
| ||
Expected term |
| ||
Risk-free interest rate |
|
A summary of the status of the options granted at June 30, 2024, and December 31, 2023, and changes during the periods then ended is presented below:
| June 30, 2024 |
| December 31, 2023 | ||||||
|
|
|
| Weighted-Average |
|
|
|
| Weighted-Average |
| Shares |
|
| Exercise Price |
| Shares |
|
| Exercise Price |
Outstanding at beginning of year |
| $ |
|
| $ | ||||
Granted |
|
|
|
|
| ||||
Exercised |
|
|
|
|
| ||||
Expired or cancelled | ( |
|
|
| ( |
|
| ||
Outstanding at end of period |
|
|
|
|
| ||||
Exercisable |
|
|
|
|
| ||||
Page 13
NOTE 8 – STOCKHOLDERS’ DEFICIT (Continued)
A summary of the status of the options and warrants outstanding at June 30, 2024 is presented below:
Range of Exercise Prices |
| Number Outstanding |
| Weighted-Average Remaining Contractual Life |
| Number Exercisable |
| Weighted-Average Exercise Price |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
NOTE 9 - SUBSEQUENT EVENTS
On July 29, 2024, the court stayed the case Olson-Ecologic Engine Testing Laboratories, LLC -v- Michael Naylor, Omnitek Engineering Corp., and Moto Concerto, Inc., filed in the Superior Court of the State of California, County of Orange, Central Justice Center, Case No. 30-2020-01171344, until January 27, 2025.
Page 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed financial statements and related notes to the condensed financial statements included elsewhere in this periodic report. Some of the statements under “Management’s Discussion and Analysis,” “Description of Business” and elsewhere herein may include forward-looking statements which reflect our current views with respect to future events and financial performance. These statements include forward-looking statements both with respect to us specifically and the alternative fuels engines industry in general. Statements which include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. The safe harbor provisions of the federal securities laws do not apply to any forward-looking statements contained in this registration statement.
All forward-looking statements address such matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read herein reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our written and oral forward-looking statements attributable to us or individuals acting on our behalf and such statements are expressly qualified in their entirety by this paragraph.
Results of Operations
For the three months ended June 30, 2024 and June 30, 2023
Revenues were $266,971 for the three months period ended June 30, 2024 compared with $251,719 for the three months period ended June 30, 2023, an increase of $15,252. The increase in sales related primarily to the sale of higher margin products.
Total cost of goods sold was $156,170 for the three months period ended June 30, 2024 compared with $150,258 for the three months period ended June 30, 2023, an increase of $5,912. Gross margin as a percentage of sales was 41% for the three months period ended June 30, 2024, compared with 40% for the three months period ended June 30, 2023.
Operating expenses for the three months period ended June 30, 2024 were $175,546 compared with $171,550 for the three months period ended June 30, 2023, a decrease of $3,996. General and administrative expense for the three months period ended June 30, 2024 were $156,953 compared with $155,917 for the three months period ended June 30, 2023. Major components of general and administrative expenses for the three months period ended June 30, 2024 were professional fees of $39,922, rent expense of $10,825, and salaries and wages of $57,103. This compares with professional fees of $41,096, rent expense of $10,959 and salaries and wages of $57,163 for the three months period ended June 30, 2023. For the three months period ended June 30, 2024 research and development outlays were $17,629 compared with $15,197 for the three months period ended June 30, 2023.
Our net loss for the three months period ended June 30, 2024 was $108,356, or ($0.00) per share, compared with a net loss of $76,906, or ($0.00) per share, for the three months period ended June 30, 2023.
Results for the three months period ended June 30, 2024 reflect the impact of non-cash expenses, including the value of options granted in the amount of $2,694 and depreciation and amortization of $964. For the three month period ended June 30, 2023, non-cash expenses included options granted in the amount of $7,976, depreciation and amortization of $436.
Page 15
For the six months ended June 30, 2024 and June 30, 2023
Revenues increased to $504,047 for the six months period ended June 30, 2024 from $476,925 for the six months period ended June 30, 2023, an increase of $6,364 or 6%.
Total cost of goods sold was $309,527 for the six months period ended June 30, 2024 and $280,675 for the six months period ended June 30, 2023, an increase of $28,852. Gross margin as a percentage of sales was 39% for the six months period ended June 30, 2024, and 41% for the six months period ended June 30, 2023.
Our operating expenses for the six months period ended June 30, 2024 were $320,498 compared to $320,658 the six months period ended June 30, 2023, a decrease of $160. General and administrative expense for the six months period ended June 30, 2024 were $282,997 compared with $286,649 for the six months period ended June 30, 2023. Major components of general and administrative expenses for the six months period ended June 30, 2024 were professional fees of $53,897, rent expense of $21,649 and salaries and wages of $114,133. This compares with professional fees of $62,971, rent expense of $21,918, and salaries and wages of $113,203 for the six months period ended June 30, 2023. Research and development outlays were $36,100 for the six months period ended June 30, 2024 compared to $33,136 for the six months period ended June 30, 2023.
Our net loss for the six months period ended June 30, 2024 was $174,814, or $0.01 per share, compared to a net loss of $136,756, or $0.01 per share, for the six months period ended June 30, 2023.
Results for the six months period ended June 30, 2024 reflect the impact of non-cash expenses, including the value of options granted in the amount of $4,657 and depreciation and amortization of $1,401. For the six-month period ended June 30, 2023, non-cash expenses included the value of options granted of $10,538 and depreciation and amortization of $873.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash provided by financing activities and available working capital. Additionally, from time to time we may raise funds from the equity capital markets to fund our research and development programs, expansion of our business and general operations.
At June 30, 2024, our current liabilities totaled $1,770,942 and our current assets totaled $481,833, resulting in negative working capital of $1,289,109.
We have no firm commitments or obligations for capital expenditures. However, substantial discretionary expenditures may be required to enable us to conduct existing and planned product research, design, development, manufacturing, marketing, and distribution of our products. We may need to raise additional capital to facilitate growth and support our long-term product development, manufacturing, and marketing programs. The Company has no established bank-financing arrangements. Therefore, it is possible that we may need to seek additional financing through subsequent future public or private sales of our securities, including equity securities. We may also seek funding for the development, manufacturing, and marketing of our products through strategic partnerships and other arrangements with corporate partners. There can be no assurance, however, that such collaborative arrangements or additional funds will be available when needed, or on terms acceptable to us, if at all. If adequate funds are not available, we may be required to curtail one or more of our research and development programs.
We have historically incurred significant losses, which have resulted in a total accumulated deficit of $22,035,161 at June 30, 2024.
Page 16
Operating Activities
We realized a negative cash flow from operations of $29,514 for the six months period ended June 30, 2024 compared with a negative operating cash flow of $61,891 during the six months period ended June 30, 2023.
Included in the operating loss of $125,978 for the six months period ended June 30, 2024 are non-cash expenses, which are not a drain on our capital resources. During the period, these non-cash expenses include the value of options granted in the amount of $4,657 and depreciation and amortization of $1,401. Additionally, the operating loss included general and administrative expenses of $282,997 and research and development expenses of $36,100.
Financing Activities
The cash flow from financing activities was $0.00 for the six month period ended June 30, 2024 compared with a positive cash flow of $15,113 for the six month period ended June 30, 2023.
Investing Activities
There was a negative cash from investing activities of $6,336 for the six month period ended June 20, 2024 compared with $0.00 cash flow from investing activities for the six month period ended June 30, 2023.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
Accounting Method and Use of Estimates
The Company's financial statements are prepared using the accrual method of accounting. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas where significant estimates are required include the following:
Accounts Receivable
Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are
recorded when received.
Inventory
Inventories are stated at the lower of market or average cost basis. The Company reviews inventories on hand at least annually and records provisions for estimated excess, slow moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value. The regular and systematic inventory valuation reviews include a current assessment of future product demand, historical experience and product expiration. Accordingly, the Company has established an allowance for the cost of such obsolete inventory.
Long-lived assets
The Company assesses the recoverability of its long-lived assets annually and whenever circumstances indicate that there may be an impairment. The Company compares the estimated undiscounted future cash flows to the carrying value of the long-lived assets to determine if impairment has occurred. In the event that impairment has occurred, the Company recognizes the impairment immediately.
Page 17
Revenue Recognition
In general, revenue is recognized when control of the promised goods is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for the goods or services. In order to achieve that core principle, a five-step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when we satisfy the performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.
We recognize revenue on various products and services as follows:
Products - The Company recognizes revenue from the sale of products as performance obligations are satisfied. This type of revenue is primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Upon fulfilment of the performance obligation, the customer is provided an invoice demonstrating transfer of control to the customer. Control passes FOB shipping point.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed 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 by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management performed an evaluation, under the supervision and with the participation of our Principal Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer has concluded that our disclosure controls and procedures were not effective as of June 30, 2024. The material weakness, which relates to internal control over financial reporting, which was identified is: due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.
Changes in Internal Controls
There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Page 18
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
On September 16, 2022, the Company received a Summons and was named as a cross-defendant in the matter of Olson-Ecologic Engine Testing Laboratories, LLC -v- Michael Naylor, Omnitek Engineering Corp., and Moto Concerto, Inc., filed in the Superior Court of the State of California, County of Orange, Central Justice Center, Case No. 30-2020-01171344. Olson-Ecologic Engine Testing Laboratories, LLC filed the cross-complaint in response to the original complaint filed by Michael Naylor against Olson-Ecologic Engine Testing Laboratories. Omnitek served as a subcontractor to Olson-Ecologic who received a grant in May 2017 from the California Energy Commission. In October 2017, very early in the project and before completion of the project, which was to run into 2020, Olson-Ecologic advised Omnitek that the California Energy Commission had terminated the project. In the cross-complaint Olson-Ecologic alleges that Omnitek participated with Mr. Naylor in overcharging Olson-Ecologic, however, Olson-Ecologic does not provide a specific statement of facts or actions of what Omnitek allegedly did. Olson-Ecologic’s cross-complaint and allegations against Omnitek are without merit and Omnitek will vigorously defend the cross-complaint. As of the time of this report there are no new developments as the case was stayed by the court until January 27, 2025.
We are not a party to any other pending legal proceeding. No federal, state, or local governmental agency is presently contemplating any proceedings against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
ITEM 1A.RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2.UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
On April 25, 2024, in consideration for their services as independent directors, the Company granted to each of Messrs. Gary S. Maier and John M. Palumbo, a Non-Qualified Stock Option pursuant to the 2017 Long-Term Incentive Plan to purchase 50,000 shares of common stock at an exercise price of $0.0160, representing 100% of the closing price of the common stock of the Corporation as of April 24, 2024. Said Options shall vest and be exercisable immediately and shall be exercisable for a period of seven years from the date of grant.
Also on April 25, 2024, the Company granted to Werner Funk, President and CEO, a Non-qualified Stock Option pursuant to the 2017 Long-Term Incentive Plan, to purchase 50,000 shares of common stock at any exercise price of $0.0176, representing 110% of the closing price of the common stock of the Corporation as of April 24, 2024. Said Options shall vest and be exercisable immediately and shall be exercisable for a period of seven years from the date of grant.
On May 3, 2023 in conjunction with and pursuant to the terms of the Employment Agreement entered into between the Company and Mr. Funk, the Company granted to Mr. Funk a Non-Qualified Stock Option pursuant to the 2017 Long-Term Incentive Plan, to purchase 300,000 shares of common stock, at an exercise price of $0.015 per share representing 110% of the closing price of the common stock as reported on the OTCBB as of the date of grant (i.e. May 3, 2024). One-thirty sixth (1/36) of the total number of shares subject to the Option shall vest and become exercisable at the end of each month following the Date of Grant on the same day of each month as the Date of Grant, so that all shares subject to the Options will be fully vested on the third anniversary of the Date of Grant. The Options will be exercisable for a period of seven (7) years from the Date of Grant will be incentive stock options to the extent permitted by applicable law.
The securities were issued pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933. The individual receiving the options is intimately acquainted with the Company’s business plan and proposed activities at the time of issuance, and possessed information on the Company necessary to make an informed investment decision.
Page 19
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable
ITEM 5.OTHER INFORMATION
On May 3, 2024, the Company enter into new Employment Agreement with Mr. Funk. The term of the Employment Agreement shall be for a period of three (3) years which term would automatically renew for one additional year; Base Salary of $150,000 per year with such salary reviewed on an annual basis by the Board of Directors. In conjunction with and pursuant to the terms of the Employment Agreement, the Company granted to Mr. Funk a Non-Qualified Stock Option pursuant to the 2017 Long-Term Incentive Plan, to purchase 300,000 shares of common stock, at an exercise price of $0.015 per share representing 110% of the closing price of the common stock as reported on the OTCBB as of the date of grant (i.e. May 3, 2024). One-thirty sixth (1/36) of the total number of shares subject to the Option shall vest and become exercisable at the end of each month following the Date of Grant on the same day of each month as the Date of Grant, so that all shares subject to the Options will be fully vested on the third anniversary of the Date of Grant. The Options will be exercisable for a period of seven (7) years from the Date of Grant will be incentive stock options to the extent permitted by applicable law.
Subsequent Events
On July 29, 2024, the court stayed the case Olson-Ecologic Engine Testing Laboratories, LLC -v- Michael Naylor, Omnitek Engineering Corp., and Moto Concerto, Inc., filed in the Superior Court of the State of California, County of Orange, Central Justice Center, Case No. 30-2020-01171344, until January 27, 2025.
Page 20
ITEM 6. EXHIBITS
(a)Documents filed as part of this Report.
1. Financial Statements. The condensed unaudited Balance Sheet of Omnitek Engineering Corp. as of June 30, 2024 and the audited balance sheet as of December 31, 2023, the condensed unaudited Statements of Operations for the three and six month periods ended June 30, 2024 and 2023, the condensed unaudited Statements of Cash Flows for the six month periods ended June 30, 2024 and 2023, and the condensed unaudited Statements of Stockholders’ Deficit as of June 30, 2024 and 2023, together with the notes thereto, are included in this Quarterly Report on Form 10-Q.
3. Exhibits. The following exhibits are either filed as a part hereof or are incorporated by reference. Exhibit numbers correspond to the numbering system in Item 601 of Regulation S-K.
Exhibit |
| Description of Exhibit |
|
|
|
3.1 |
| |
3.2 |
| |
10.1 |
| |
31.1 |
| CEO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3) |
31.2 |
| CFO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3) |
32.1 |
| CEO and CFO certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3) |
101 |
| The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 formatted in Extensible Business Reporting Language ("XBRL"): (i) the balance sheets (unaudited); (ii) the statements of operations (unaudited); (iii) the statements of cash flows (unaudited); and, (iv) related notes. |
(1)Previously filed on Form 10 on April 27, 2010
(2)Previously filed on Form 8-K on August 2, 2012
(3)Previously filed on Form 8-K on May 9, 2024
(4)Filed herewith.
Page 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Omnitek Engineering Corp. |
|
|
|
|
Dated: August 14, 2024 | /s/ Werner Funk |
| By: Werner Funk |
| Its: Chief Executive Officer |
|
|
|
|
Dated: August 14, 2024 | /s/ Werner Funk |
| By: Werner Funk |
| Its: Chief Financial Officer |
| Principal Financial Officer |
Page 22