Omnitek Engineering Corp - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2022

Commission File Number: 000-53955

OMNITEK ENGINEERING CORP.

(Exact name of Registrant as specified in its charter)

California		33-0984450
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1345 Specialty Dr. #E, Vista, California 92081

(Address of principal executive offices, Zip Code)

(760) 591-0089

(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. Yes ☒ No ☐

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). Yes ☒ No ☐

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	☐
Non-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 ☐ No ☒

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 May 11 , 2022, the Registrant had 21,948,091 shares of its no par value Common Stock outstanding.

Page 1

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION

`Item 1.`Financial Statements	3

Condensed Balance Sheets as of March 31, 2022 (unaudited) and December 31, 202 1	3

Condensed Statements of Operations for the three months ended March 31, 2022 and March 31, 2021 (unaudited)	4

Condensed Statements of Cash Flows for the three months ended March 31, 2022 and March 31, 2021 (unaudited)	5

Condensed Statements of Stockholders’ Deficit as of March 31, 2022 and March 31, 2021 (unaudited)	6

Notes to the Unaudited Condensed Financial Statements	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	19

`Item 4.`Controls and Procedures	19

PART II - OTHER INFORMATION

`Item 1.`Legal Proceedings	20

`Item 1A.` Risk Factors	20

`Item 2.`Unregistered Sales of Equity Securities and Use of Proceeds	20

`Item 3.`Defaults Upon Senior Securities	20

`Item 5.`Other Information	20

`Item 6.`Exhibits	21

Page 2

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OMNITEK ENGINEERING CORP.

Condensed Balance Sheets

	March 31,	December 31,
	2022 (Unaudited)	2021
ASSETS
CURRENT ASSETS
Cash	`$40,604`	`$59,674`
Accounts receivable, net	`12,563`	`9,555`
Inventories, net	`678,239`	`717,044`
Contract assets	`13,221`	`13,221`
Deposits	`21,200`	`4,230`
Total Current Assets	`765,827`	`803,724`

PROPERTY & EQUIPMENT, net	`13,621`	`14,373`

OTHER ASSETS
Operating lease – Right-of-use asset	`563,846`	`593,697`
Long-term deposit	`13,514`	`13,514`
Total Other Assets	`577,360`	`607,211`

TOTAL ASSETS	`$1,356,808`	`$1,425,308`
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	`$396,486`	`$373,221`
Accrued management compensation	`628,812`	`620,735`
Accounts payable - related parties	`123,320`	`124,472`
Notes payable - related parties, current portion	`15,000`	`15,000`
Convertible notes payable – related party	`20,000`	`31,090`
Contract liabilities	`75,000`	`75,000`
Customer deposits	`170,870`	`170,870`
Operating lease liabilities - current	`109,242`	`106,149`
Total Current Liabilities	`1,538,730`	`1,516,537`
LONG-TERM LIABILITIES
Loans payable – SBA, net of current portion	`198,674`	`198,674`
Convertible notes payable – related party, net of current portion	`21,220`	`12,826`
Operating lease liabilities – long-term	`475,822`	`504,963`
Total Long-term Liabilities	`695,716`	`716,463`
Total Liabilities	`2,234,446`	`2,233,000`

STOCKHOLDERS' DEFICIT
Common stock, 125,000,000 shares authorized; no par value; 21,948,091 and 21,600,189 shares, respectively issued and outstanding	`8,607,086`	`8,607,086`
Additional paid-in capital	`12,036,016`	`12,033,454`
Accumulated deficit	`(21,520,740)`	`(21,448,232)`
Total Stockholders' Deficit	`(877,638)`	`(807,692)`

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	`$1,356,808`	`$1,425,308`

The accompanying notes are an integral part of these financial statements.

Page 3

OMNITEK ENGINEERING CORP.

Condensed Statements of Operations (unaudited)

	For the Three Months Ended March 31, 2022	For the Three Months Ended March 31, 2021

REVENUES	`$258,851`	`$218,113`
COST OF GOODS SOLD	`170,605`	`104,410`
INVENTORY RESERVE ADJUSTMENT	`-`	`24,901`
Total Cost of Goods Sold	`170,605`	`129,311`
GROSS MARGIN	`88,246`	`88,802`

OPERATING EXPENSES

General and administrative	`138,696`	`166,453`
Research and development	`16,252`	`16,456`
Depreciation and amortization	`752`	`135`

Total Operating Expenses	`155,700`	`183,044`

LOSS FROM OPERATIONS	`(67,454)`	`(94,242)`

OTHER INCOME (EXPENSE)

Interest expense	`(5,054)`	`(6,808)`
Forgiveness of debt	`-`	`100,655`

Total Other Income (Expense)	`(5,054)`	`93,847`

LOSS BEFORE INCOME TAXES	`(72,508)`	`(395)`
INCOME TAX EXPENSE	`-`	`-`

NET LOSS	`$(72,508)`	`$(395)`

BASIC AND DILUTED LOSS PER SHARE	`$(0.00)`	`$(0.00)`

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED	`21,600,189`	`21,600,189`

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 Three Months Ended March 31, 2022	For the Three Months Ended March 31, 2021

OPERATING ACTIVITIES
Net loss	`$(72,508)`	`$(395)`
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization and depreciation expense	`752`	`135`
Obsolete inventory adjustment	`-`	`24,901`
Stock option expense	`2,562`	`11,283`
Amortization of ROU asset	`29,850`	`-`
Extinguishment of liability	`-`	`(100,655)`
Changes in operating assets and liabilities:
Accounts receivable	`(3,008)`	`5,072`
Operating lease liability	`(26,048)`	`-`
Accounts receivable–related parties	`-`	`(4,980)`
Deposits	`(16,970)`	`(11,022)`
Inventory	`38,805`	`14,621`
Accounts payable and accrued expenses	`23,266`	`(6,273)`
Customer deposits	`-`	`(43,436)`
Accounts payable-related parties	`(1,152)`	`1,833`
Accrued management compensation	`8,077`	`8,077`
Net Cash Used in Operating Activities	`(16,374)`	`(100,839)`

INVESTING ACTIVITIES
Net cash from Investing Activities	`-`	`-`

FINANCING ACTIVITIES
Payments on Related Party Notes Payable	`(2,696)`	`-`
Proceeds from notes payable	`-`	`100,000`
Net cash Provided by Financing Activities	`(2,696)`	`100,000`

NET CHANGE IN CASH	`(19,070)`	`(839)`
CASH AT BEGINNING OF YEAR	`59,674`	`60,729`

CASH AT END OF PERIOD	`$40,604`	`$59,890`

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS CASH PAID FOR:
Interest	`$2,491`	`$3,183`

The accompanying notes are an integral part of these condensed unaudited financial statements.

Page 5

OMNITEK ENGINEERING CORP.

Condensed Statements of Stockholders’ Deficit (unaudited)

	Common Stock		Additional Paid-In	Accumulated	Total Stockholders'
	Shares	Amount	Capital	Deficit	Deficit
Balance, December 31, 2021	`21,948,091`	`$8,607,086`	`$12,033,454`	`$(21,448,232)`	`$(807,692)`

Value of options and warrants
issued for services	`-`	`-`	`2,562`		`2,562`

Net loss for the three months ended
March 31, 2022	`-`	`-`		`(72,508)`	`(72,508)`

Balance, March 31, 2022	`21,948,091`	`$8,607,086`	`$12,036,016`	`$(21,520,740)`	`$(877,638)`

	Common Stock		Additional Paid-In	Accumulated	Total Stockholders'
	Shares	Amount	Capital	Deficit	Deficit

Balance, December 31, 2020	`21,600,189`	`$8,578,210`	`$12,013,298`	`$(21,465,641)`	`$(874,133)`

Value of options and warrants
issued for services	`-`	`-`	`11,283`	`-`	`11,283`

Net loss for the three months ended
March 31, 2021	`-`	`-`	`-`	`(395)`	`(395)`

Balance, March 31, 2021	`21,600,189`	`$8,578,210`	`$12,024,581`	`$(21,466,036)`	`$(863,245)`

The accompanying notes are an integral part of these condensed unaudited financial statements.

Page 6

OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying 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 March 31, 2022 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, 2021 audited financial statements. The results of operations for the periods ended March 31, 2022 and 2021 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 (e.g., filters and engine components) as performance obligations are satisfied. This type of revenue is primarily generated from the sale of finished product 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 (i.e., the performance obligation has been satisfied).

Contracts – Revenues are recognized as performance obligations are satisfied over time (also known as percentage-of-completion method), measured by either achievement of milestones or the ratio of costs incurred up to a given date to estimated total costs for each contract. Contract costs include all direct material, labor, subcontract and other costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability and associated change orders and claims, including those changes arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

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.

Page 7

OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Performance Obligations Satisfied Over Time

Revenues for Omnitek’s long-term contracts that satisfy the criteria for over time recognition (formerly known as percentage-of-completion method) is recognized as the work progresses. The majority of the revenue is derived from long-term engine development agreements that typically span between 12 to 24 months. Omnitek’s long-term contracts will continue to be recognized over time because our typical contract is for a customized asset with no alternative use and generally the Company has a right to payment for work completed to date. Under the new revenue standard, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as the Company incurs costs. Contract costs include labor and material. Revenue from products and services transferred to customers over time accounted for 0% and 0% of revenue for the periods ended March 31, 2022 and 2021, respectively.

Performance Obligations Satisfied at a Point in Time

Revenue from product sales is recognized at a point in time. These sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risk and rewards transfer. Upon fulfilment of the performance obligation, the customer is provided an invoice demonstrating transfer of control to the customer. Revenue from goods and services transferred to customers at a point in time accounted for 100% and 100% of revenue for the periods ended March 31, 2022 and 2021, respectively.

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.

Pre-contract costs are generally not incurred by the Company.

Contract Estimates

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, Omnitek estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognizes that profit over the life of the contract.

Variable Consideration

The transaction price for contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. Variable consideration historically has been insignificant.

Disaggregation of Revenue

The following table presents Omnitek’s revenues disaggregated by region and product type:

	For the three months ended March 31,			For the three months ended March 31,
	2022			2021
Segments	Consumer Products	Long-term Contract	Total	Consumer Products	Long-term Contract	Total
Domestic	`$115,368`	`-`	`115,368`	`$132,782`	`-`	`132,782`
International	`143,483`	`-`	`143,483`	`85,331`	`-`	`85,331`
	`$258,851`	`-`	`258,851`	`$218,113`	`-`	`218,113`

Filters	`$147,518`	`-`	`147,518`	`$104,356`	`-`	`104,356`
Components	`111,333`	`-`	`111,333`	`105,287`	`-`	`105,287`
Engineering Services	`-`	`-`	`-`	`8,470`	`-`	`8,470`
	`$258,851`	`-`	`258,851`	`$218,113`	`-`	`218,113`

Page 8

OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

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		March 31, 2022		December 31, 2021
Raw materials	$	857,257	$	846,499
Finished goods		752,717		802,280
Allowance for obsolete inventory		(931,735)		(931,735)
Total	$	678,239	$	717,044

The Company has established an allowance for obsolete inventory. Expense for obsolete inventory was $-0- and $24,901, for the periods ended March 31, 2022 and March 31, 2021, respectively.

Property and Equipment

Property and equipment at March 31, 2022 and December 31, 2021 consisted of the following:

	March 31,		December 31,
	2022		2021
Production equipment	$	68,456	$	68,456
Leasehold Improvements		10,627		10,627
Less: accumulated depreciation		(65,462)		(64,710)
Total	$	13,621	$	14,373

Depreciation expense for the periods ended March 31, 2022 and March 31, 2021 was $752 and $135, respectively.

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 3,173,889 and 2,998,889 stock options and warrants that would have been included in the fully diluted earnings per share as of March 31, 2022 and March 31, 2021, respectively. However, the common stock equivalents were not included in the computation of the loss per share computation because they are anti dilutive.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification 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 March 31, 2022 and December 31, 2021 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.

Page 9

OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Operating Lease Right-of-Use Assets and Liabilities

Operating lease right-of-use asset represents the Company’s right to use an underlying asset for the lease term and operating lease liability represents its obliation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized when the Company takes possession of the leased property (the Commencement Date) based on the present value of lease payments over the lease term. Rent expense on noncancellable leases containing known future scheduled rent increases is recorded on a straight-line basis over the term of the lease beginning on the Commencement Day.

Liquidity and Going Concern

Historically, the Company has incurred net losses and negative cash flows from operations. As of March 31, 2022, the Company had an accumulated deficit of $21,520,740 and total stockholders’ deficit of $877,638. At March 31, 2022, the Company had current assets of $765,827 including cash of $40,604, and current liabilities of $1,538,730, resulting in negative working capital of $(772,903). For the three months ended March 31, 2022, the Company reported a net loss of $72,508 and net cash used in operating activities of $16,374. Management believes that based on its operating plan, the projected sales for 2022, combined with funds available from its working capital will be sufficient to fund operations for the next twelve months. However, there can be no assurance that operations and operating cash flows will continue at the current levels or improve in the near future. Whether, and when, the Company can attain profitability and positive cash flows from operations is uncertain. The Company is also uncertain whether it can raise additional capital. These uncertainties cast substantial doubt upon the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Our financial statements have been prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. The financial statements do not include any adjustments 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 – CONTRACT ASSETS AND LIABILITIES

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) on the balance sheet. For Omnitek’s long-term contracts, amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, Omnitek sometimes receives advances or deposits from its customers, before revenue is recognized, resulting in billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities).

The table below reconciles the net excess billings to the amounts included in the balance sheets at those dates:

	March 31,		December 31,
	2022		2021
Contract assets	$	13,221	$	13,221
Contract liabilities	$	(75,000)	$	(75,000)
Net amount of contract liabilities in excess of Contract assets	$	(61,779)	$	(61,779)

Page 10

OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 4 – LEASES

The Company’s leases consist 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 $9,988 per month and monthly operating expenses during the term of the lease, subject to adjustment under the lease, is $1,175 per month.

In agreement with the Company’s former landlord, the Company vacated the previous leasehold effective July 15, 2021. As of March 31, 2022 the outstanding balance of back rent, included in accounts payable, was $23,374.

During the quarter ended March 31, 2022, cash paid for amounts included in the measurement of operating lease liabilities was $33,489 and the Company recorded operating lease expenses included in operating expenses of $37,290.

Future minimum payments for monthly base rent due under the initial lease term are currently estimated to be as follows:

Years ending December 31,
2022 (remaining)	$	100,467
2023		141,036
2024		148,074
2025		176,268
2026		88,134
Total lease payments	$	653,979
Less: Imputed interest		(68,915)
Total lease liability		585,064
Less: current lease liability		(109,242)
Long-term lease liability	$	475,822

Weighted average discount rate:
Operating leases		4.94%

NOTE 5 - RELATED PARTY TRANSACTIONS

Accounts Payable – Related Parties

The Company regularly incurs expenses that are paid to related parties and purchases goods and services from related parties. As of March 31, 2022 and December 31, 2021, the Company owed a board member’s company for such services in the amounts of $123,320 and $124,472, respectively.

Accrued Management Compensation

For the periods ended March 31, 2022 and December 31, 2021, the Company’s president was due amounts for services performed for the Company.

As of March 31, 2022 and December 31, 2021 the accrued management fees consisted of the following:

	March 31,			December 31,
	2022			2021
Amounts due to the president		$	628,812		$	620,735
Total		$	628,812		$	620,735

Page 11

OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 6 – NOTES PAYABLE - RELATED PARTY

Convertible Notes – Related Parties

On June 4, 2021 the Company issued a convertible promissory note for $30,000 to its CEO. The note has an annual interest rate of 8% and is unsecured. The note calls for monthly installment payments of $1,050 commencing on July 4, 2021. The unpaid principal amount of the note and all unpaid accrued interest is due and payable on or before June 4, 2023. The note has a conversion feature, wherein, at the maturity date the lender may convert the remaining principal balance and any unpaid accrued interest into shares of the Company’s common stock. The number of shares of common stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the remaining unpaid principal balance and any unpaid accrued interest of this note by (ii) 90% of the average closing price of the common stock of the Company, for the five (5) trading days (between days 15 and 10 days) before the maturity date. Due to this provision, the Company considered whether the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging.” As the note isn’t convertible until maturity, no derivative liability was recognized as of March 31, 2022.

On June 4, 2021 the Company issued a convertible promissory note for $20,000 to a board member. The note has an annual interest rate of 8% and is unsecured. The principal amount of the note and all accrued interest is due and payable on or before December 4, 2021. The note has a conversion feature, wherein, at the maturity date the lender may convert the remaining principal balance and any unpaid accrued interest into shares of the Company’s common stock. The number of shares of common stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the remaining unpaid principal balance and any unpaid accrued interest of this note by (ii) 90% of the average closing price of the common stock of the Company, for the five (5) trading days (between days 15 and 10 days) before the maturity date. Due to this provision, the Company considered whether the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging.” As the note isn’t convertible until maturity, no derivative liability was recognized as of March 31, 2022. On December 14, 2021, the Convertible Promissory Note dated June 4, 2021, in the original principal amount of $20,000, with an original Maturity Date of December 4, 2021, was extended for an additional period of 3 months until March 4, 2022. On March 4, 2022, the Note was extended for an additional period of 3 months until June 4, 2022.

As of March 31, 2022 and December 31, 2021 Convertible Notes – Related Party consisted of the following:

	March 31,		December 31,
	2022		2021
Convertible Note payable, related parties	$	41,220	$	43,916
Less current portion		(20,000)	$	(31,090)
Total	$	21,220	$	12,826

Notes Payable – Related Party

On January 19, 2017 the Company issued a promissory note for $15,000 to a related party. The note has an annual interest rate of 5% and is unsecured. The principal amount of the note and all accrued interest is due and payable on or before January 19, 2023.

As of March 31, 2022, and December 31, 2021 Note Payable – Related Party consisted of the following:

	March 31,			December 31,
	2022			2021
Note payable, related party, current portion		$	15,000		$	15,000
Total		$	15,000		$	15,000

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OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

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 recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) adminitstered by the U.S. Small Business Administration. The Company received total proceeds of $199,000 from the SBA EIDL loan. The SBA EIDL Loan is evidenced by a Loan Authorization and Agreement, a Secured Promissory Note (the “Note” and Security Agreement. Interest on the unpaid principal balance of the Note shall accrue at the rate of three and 75/100 percent (3.75%) per annum. Pursuant to the terms of the Note, commencing May 21, 2022 (i.e., twenty-four (24) months from the Note date), the Company shall make principal and interest payments in the amount of $970 every month, with any unpaid principal and accrued interest due and payable on April 21, 2050. The obligations under the Loan Authorization and Agreement, and the Note shall be secured pursuant to the Security Agreement and a first position lien and security interest in the Collateral (as defined in the Security Agreement). The collateral in which the security interest is granted includes all tangible and intangible personal property, including, but not limited to: (a) inventory, and (b) equipment.

As of March 31, 2022 and December 31, 2021 Debt consisted of the following:

	March 31,		December 31,
	2022		2021
Loan payable – SBA EIDL	$	198,674	$	198,674
Less current portion		-		-
Total	$	198,674	$	198,674

NOTE 8 - STOCK OPTIONS AND WARRANTS

During the three months ended March 31, 2022 and 2021, the Company granted -0- and 400,000 options for services, respectively. During the three months ended March 31, 2022 and 2021, the Company recognized expense of $2,562 and $11,283, respectively, for options that vested during the periods pursuant to ASC Topic 718. As of March 31, 2022 total remaining amount of compensation expense to be recognized in future periods is

$20,182.

On August 3, 2011 the Board of Directors adopted the Omnitek Engineering Corp. 2011 Long-term Incentive Plan (the “2011 Plan”), under which 1,000,000 shares of Company’s Common Stock were reserved for issuance of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion. As of March 31, 2022 the Company has a total of 75,000 options issued under the 2011 Plan. On September 11, 2015 the Board of Directors adopted the Omnitek Engineering Corp. 2015 Long Term Incentive Plan (the “2015 Plan”), under which 2,500,000 shares of the Company’s Common Stock were reserved for issuance of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion. As of March 31, 2022 the Company has a total of 1,915,556 options issued under the 2015 Plan. In 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 5,000,000 shares of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion. As of March 31, 2022, the Company has a total of 1,300,000 options issued under the 2017 Plan. During the three months ended March 31, 2022 and 2021 the Company issued -0- and -0- warrants, respectively.

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

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OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2022
(unaudited)

NOTE 8 - STOCK OPTIONS AND WARRANTS (Continued)

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:

	March 31, 2022	March 31, 2021
Expected volatility	N/A	201 %
Expected dividends	N/A	0 %
Expected term	N/A	7 Years
Risk-free interest rate	N/A	1.2 %

A summary of the status of the options and warrants granted at March 31, 2022 and December 31, 2021 and changes during the periods then ended is presented below:

	March 31,			December 31,
	2022			2021
			Weighted-Average			Weighted-Average
	Shares		Exercise Price	Shares		Exercise Price
Outstanding at beginning of year	3,290,556	$	0.19	2,890,556	$	0.20
Granted	-		-	400,000		0.11
Exercised	-		-	-		-
Expired or cancelled	-		-	-		-
Outstanding at end of period	3,290,556		0.19	3,290,556		0.19
Exercisable	3,173,889		0.19	3,065,556	$	0.19

A summary of the status of the options and warrants outstanding at March 31, 2022 is presented below:

Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Number Exercisable	Weighted-Average Exercise Price

$0.01-0.99	3,290,556	2.71 years	3,173,889	0.19

NOTE 9 SUBSEQUENT EVENT

On April 18, 2022, 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 $0.0531, representing 100% of the closing price of the common stock of the Corporation as of such date. 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 18, 2022, 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 $0.05841, representing 110% of the closing price of the common stock of the Corporation as of such date. Said Options shall vest and be exercisable immediately and shall be exercisable for a period of seven years from the date of grant.

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.

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ITEM 2MANAGEMENT'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 financial statements and related notes to the 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 March 31, 2022 and 2021

Revenues were $258,851 for the three months ended March 31, 2022 compared with $218,113 for the three months ended March 31, 2021, an increase of $40,738. The increase in sales relates primarily to filter sales quarter over quarter.

Our total cost of sales was $170,605 for the three months ended March 31, 2022 compared with $129,311 for the three months ended March 31, 2021, an increase of $41,294. For both periods our total cost of goods sold consisted of two line items: cost of goods sold on revenues and a non-cash inventory reserve adjustment. Our cost of goods sold on revenues increased to $170,605 for the three months ended March 31, 2022 (resulting in adjusted gross margin of 34%) from $104,410 for the three months ended March 31, 2021 (resulting in gross margin of 52%), an increase of $66,195.

Operating expenses for the three months ended March 31, 2022 were $155,700 compared with $183,044 for the three months ended March 31, 2021 a decrease of $27,344 or 15%. General and administrative expense for the three months ended March 31, 2022 was $138,696 compared with $166,453 for the three months ended March 31, 2021. Major components of general and administrative expenses for the three months ended March 31, 2022 were professional fees of $32,980, rent expense of $10,959, and salary and wages of $56,352. This compares to professional fees of $27,973, rent expense of $32,797, and salary and wages of $51,226 for the three months ended March 31, 2021. For the three months ended March 31, 2022 research and development outlays were decreased to $16,252, compared with $16,456 for the three months ended March 31, 2021.

Our net loss for the three months ended March 31, 2022 was $72,508, or ($0.00) per share, compared with a net loss of $395, or ($0.00) per share, for the three months ended March 31, 2021. The increased net loss was primarily due to extinguishment of liability income realized during the three months ended March 31, 2021.

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Results for the three months ended March 31, 2022 reflect the impact of non-cash expenses, including the value of options and warrants granted in the amount of $2,562, and depreciation and amortization of $752. For the three month period ended March 31, 2021 non-cash expenses included options and warrants granted in the amount of $11,283, depreciation and amortization of $135, the inventory reserve adjustment of $24,901 and extinguishment of liability revenue of $100,655.

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 March 31, 2022, our current liabilities totaled $1,538,730 and our current assets totaled $765,827, resulting in negative working capital of $772,903.

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. (See Note 7 to the Financial Statements regarding the loan the Company obtained from the Small Business Administration). Therefore, it is possible that we 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 $21,520,740 at March 31, 2022, of which $5,604,135 is a direct result of derivative expense and change in fair value of derivative liability and is unrelated to our operations or cash flow. Management believes that based on its operating plan, the projected sales for 2022, combined with funds available from its working capital will be sufficient to fund operations for the next twelve months. However, there can be no assurance that operations and operating cash flows will continue at the current levels or improve in the near future. Whether, and when, the Company can attain profitability and positive cash flows from operations is uncertain. The Company is also uncertain whether it can raise additional capital. These uncertainties cast substantial doubt upon the Company’s ability to continue as a going concern.

Operating Activities

We realized a negative cash flow from operations of $16,374 for the three months ended March 31, 2022 compared with a negative cash flow of $100,839 during the three months ended March 31, 2021.

Included in the operating loss of $67,454 for the three months ended March 31, 2022 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 and warrants granted in the amount of $2,562 and depreciation and amortization of $752. Additionally, the operating loss included general and administrative expenses of $138,696 and research and development expenses of $16,252.

Financing Activities

We realized a negative cash flow from financing activities of $2,696 for the three months ended March 31, 2022 compared with positive cash flow of $100,000 for the three months ended March 31, 2021. The negative cash flow for the three months ended March 31, 2022 relates to payments on related party notes payable. The positive cash flow for the three months ended March 31, 2021 relates to proceeds from notes payable.

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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.

Inventory

Inventory is stated at the lower of cost or market. The Company’s inventory consists of finished goods and raw materials. The Company identifies items in its inventory that have not been sold in a timely manner. 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 would 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 an impairment has occurred. In the event that an impairment has occurred, the Company recognizes the impairment immediately.

Contract assets and liabilities

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.

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We recognize revenue on various products and services as follows:

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.

Performance Obligations Satisfied Over Time

Performance Obligations Satisfied at a Point in Time

Pre-contract costs are generally not incurred by the Company.

Contract Estimates

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Variable Consideration

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 carried out 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 March 31, 2022. The material weakness, which relates to internal control over financial reporting, that 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 March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any pending legal proceeding. No federal, state or local governmental agency is presently contemplating any proceeding 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 March 10, 2021, the Company granted to Werner Funk, President and CEO, 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 $0.1155, representing 110% of the closing price (i.e., $0.1050) of the common stock of the Corporation as of such date. Said Options shall vest and be exercisable at the rate of 1/36 per month and shall be exercisable for a period of seven years from the date of grant.

On March 10, 2021, 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 $0.1050, representing 100% of the closing price (i.e., $0.1050) of the common stock of the Corporation as of such date. Said Options shall vest and be exercisable immediately and shall be exercisable for a period of seven years from the date of grant.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 5. OTHER INFORMATION

Subsequent Events

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 March 31,

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2022 and the audited balance sheet as of December 31, 2021, the condensed unaudited Statements of Operations for the three month periods ended March 31, 2022 and 2021, the condensed unaudited Statements of Cash Flows for the three month periods ended March 31, 2022 and 2021 and the condensed unaudited Statements of Stockholders’ Equity (Deficit) as of March 31, 2022 and 2021, 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
Number		Description of Exhibit

3(i)		Amended and Restated Articles of Incorporation(1)
3(ii)		Amended and Restated By-Laws Adopted July 12, 2012 (2)
31(i)		CEO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3)
31(ii)		CFO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3)
32		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 March 31, 2022 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)Filed herewith

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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: May 13, 2022
	By:	Werner Funk
	Its:	Chief Executive Officer Principal Executive Officer

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