| NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES | 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 I We recognize revenue on various products and services
as follows: Products Contracts 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 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, 2021 and 2020, 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, 2021 and 2020, 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,
2021 2020
Segments Consumer Long-term Total Consumer Long-term Total
Domestic $ 132,782 - 132,782 $ 178,753 - 178,753
International 85,331 - 85,331 52,184 - 52,184
$ 218,113 - 218,113 $ 230,937 - 230,937
Filters $ 104,356 - 104,356 $ 112,042 - 112,042
Components 105,287 - 105,287 118,895 - 118,895
Engineering Services 8,470 - 8,470 - - -
$ 218,113 - 218,113 $ 230,937 - 230,937 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, December 31,
Raw materials $ 914,131 $ 917,567
Finished goods 951,423 962,608
Work in progress - -
Allowance for obsolete inventory (1,083,210) (1,058,309)
Total $ 782,344 $ 821,866 The Company has established an allowance for obsolete
inventory. Expense for obsolete inventory was $24,901 and $25,052, for the periods ended March 31, 2021 and March 31, 2020,
respectively. Property and Equipment Property and equipment at March 31, 2021 and December 31, 2020 consisted
of the following:
March 31, December 31,
2021 2020
Production equipment $ 64,673 $ 64,673
Computers/Office equipment 28,540 28,540
Tooling equipment 12,380 12,380
Leasehold Improvements 42,451 42,451
Less: accumulated depreciation (146,913) (146,778)
Total $ 1,131 $ 1,266 Depreciation expense for the periods ended March 31, 2021 and March 31,
2020 was $135 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 2,998,889 and 2,857,223 stock options and warrants that
would have been included in the fully diluted earnings per share as of March 31, 2021 and March 31, 2020, 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, 2021 and December 31, 2020 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 March 31, 2021, the Company had an accumulated deficit of $21,466,036 and total stockholders’ deficit
of $863,245. At March 31, 2021, the Company had current assets of $931,795 including cash of $59,890, and current liabilities of
$1,526,073, resulting in negative working capital of $(594,278). For the three months ended March 31, 2021, the Company reported
a net loss of $395 and net cash used in operating activities of $100,839. Management believes that based on its operating plan, the
projected sales for 2021, 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. 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. |
