Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 07, 2018 | |
Details | ||
Registrant Name | OMNITEK ENGINEERING CORP. | |
Registrant CIK | 1,404,804 | |
SEC Form | 10-Q | |
Period End date | Jun. 30, 2018 | |
Fiscal Year End | --12-31 | |
Trading Symbol | omtk | |
Tax Identification Number (TIN) | 330,984,450 | |
Number of common stock shares outstanding | 20,420,402 | |
Filer Category | Smaller Reporting Company | |
Current with reporting | Yes | |
Voluntary filer | No | |
Well-known Seasoned Issuer | No | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Contained File Information, File Number | 000-53955 | |
Entity Incorporation, State Country Name | California | |
Entity Address, Address Line One | 1333 Keystone Way, #101 | |
Entity Address, City or Town | Vista | |
Entity Address, State or Province | California | |
Entity Address, Postal Zip Code | 92,081 | |
City Area Code | 760 | |
Local Phone Number | 591-0089 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash | $ 41,182 | $ 23,279 |
Accounts receivable, net | 30,722 | 7,984 |
Accounts receivable - related parties | 5,771 | 3,440 |
Inventory, net | 1,443,217 | 1,554,656 |
Deposits | 22,451 | 17,385 |
Total Current Assets | 1,543,343 | 1,606,744 |
FIXED ASSETS, net | 4,240 | 7,253 |
OTHER ASSETS | ||
Total Other Assets | 14,280 | 14,280 |
TOTAL ASSETS | 1,561,863 | 1,628,277 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 350,255 | 358,032 |
Accrued management compensation | 465,738 | 406,841 |
Accounts payable - related parties | 134,617 | 114,321 |
Notes payable - related parties | 15,000 | 15,000 |
Convertible notes payable - related parties | 15,000 | 15,000 |
Convertible notes payable, current portion | 30,000 | 0 |
Billings in excess of costs and estimated earnings | 0 | 30,000 |
Customer deposits | 152,027 | 212,410 |
Total Current Liabilities | 1,162,637 | 1,151,604 |
LONG-TERM LIABILITIES | ||
Convertible notes payable, net of current portion | 70,000 | 0 |
Total Liabilities | 1,232,637 | 1,151,604 |
STOCKHOLDERS' EQUITY | ||
Common stock, 125,000,000 shares authorized no par value 20,281,082 shares issued and outstanding, respectively | 8,411,411 | 8,411,411 |
Additional paid-in capital | 11,879,549 | 11,852,363 |
Accumulated deficit | (19,961,734) | (19,787,101) |
Total Stockholders' Equity | 329,226 | 476,673 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,561,863 | $ 1,628,277 |
Condensed Balance Sheets - Pare
Condensed Balance Sheets - Parenthetical - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Common Stock, Shares Authorized | 125,000,000 | 125,000,000 |
Common Stock, No Par Value | $ 0 | $ 0 |
Common Stock, Shares, Issued | 20,281,082 | 20,281,082 |
Common Stock, Shares, Outstanding | 20,281,082 | 20,281,082 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||||
REVENUES | $ 369,555 | $ 242,021 | $ 729,085 | $ 531,445 |
REVENUES, related parties | 0 | 4,293 | 0 | 6,523 |
Total revenues | 369,555 | 246,314 | 729,085 | 537,968 |
COST OF GOODS SOLD | 200,488 | 145,794 | 404,980 | 298,407 |
GROSS MARGIN | 169,067 | 100,520 | 324,105 | 239,561 |
OPERATING EXPENSES | ||||
General and administrative | 213,776 | 249,017 | 434,306 | 549,139 |
Research and development | 25,767 | 33,805 | 52,569 | 73,689 |
Depreciation and amortization | 1,745 | 6,224 | 5,726 | 12,448 |
Total Operating Expenses | 241,288 | 289,046 | 492,601 | 635,276 |
LOSS FROM OPERATIONS | (72,221) | (188,526) | (168,496) | (395,715) |
OTHER INCOME (EXPENSE) | ||||
Other income | 0 | 0 | 950 | 0 |
Interest expense | (3,522) | (2,263) | (6,287) | (4,115) |
Total Other Income (Expense) | (3,522) | (2,263) | (5,337) | (4,115) |
LOSS BEFORE INCOME TAXES | (75,743) | (190,789) | (173,833) | (399,830) |
INCOME TAX EXPENSE | 800 | 800 | 800 | 800 |
NET LOSS | $ (76,543) | $ (191,589) | $ (174,633) | $ (400,630) |
BASIC AND DILUTED LOSS PER SHARE | $ 0 | $ (0.01) | $ (0.01) | $ (0.02) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -BASIC AND DILUTED | 20,281,082 | 20,281,082 | 20,281,082 | 20,281,082 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
OPERATING ACTIVITIES | ||
Net loss | $ (174,633) | $ (400,630) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Amortization and depreciation expense | 5,726 | 12,448 |
Options and warrants | 27,186 | 94,733 |
Inventory reserve | 50,000 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (22,738) | (48,068) |
Accounts receivable-related parties | (2,331) | (508) |
Costs and estimated earnings in excess of billings | 0 | 371 |
Deposits | (5,065) | (14,028) |
Prepaid expense | 0 | 5,324 |
Inventory | 61,439 | (6,570) |
Accounts payable and accrued expenses | (7,777) | 20,442 |
Customer deposits | (60,383) | 156,382 |
Accounts payable-related parties | 20,296 | 38,329 |
Billings in excess of costs and estimated earnings | (30,000) | 36,600 |
Accrued management compensation | 58,897 | 184,366 |
Net Cash Provided by (Used in) Operating Activities | (79,383) | 79,191 |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (2,714) | 0 |
Net Cash Used by Investing Activities | (2,714) | 0 |
FINANCING ACTIVITIES | ||
Proceeds from convertible note payable | 100,000 | 0 |
Net Cash Provided by Financing Activities | 100,000 | 0 |
NET INCREASE IN CASH | 17,903 | 79,191 |
CASH AT BEGINNING OF YEAR | 23,279 | 17,782 |
CASH AT END OF PERIOD | 41,182 | 96,973 |
CASH PAID FOR: | ||
Interest | 4,583 | 3,780 |
Income taxes | 800 | 800 |
NON CASH INVESTING AND FINANCING ACTIVITIES | ||
Options issued for accrued salary | $ 0 | $ 100,000 |
Note 1 - Condensed Financial St
Note 1 - Condensed Financial Statements | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 1 - Condensed Financial Statements | 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 June 30, 2018 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, 2017 audited financial statements. The results of operations for the periods ended June 30, 2018 and 2017 are not necessarily indicative of the operating results for the full years. |
Note 2 - Significant Accounting
Note 2 - Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
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. New Revenue Recognition Standard In May 2014, the FASB issued ASU 2014-09, which provides a single conprehensive accounting standard for revenue recognition for contracts with customers and supersedes current industry-specific guidance, including ASC 605-35. The new standard requires companies to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the company expects to be entitled in exchange for the goods or services. The new model requires companies to identify contractural performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. The new standard also significantly expands disclosure requirements regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We adopted the new standard on January 1, 2018 (“Adoption Date”), using the modified retrospective method, which provides for a cumulative effect adjustment to beginning 2018 retained earnings for those uncompleted contracts impacted by the adoption of the new standard. The changes to the method and/or timing of our revenue recognition associated with our adoption of the new standard primarily relate to long-term engine development contracts. We will continue to recognize these contracts over time utilizing the cost to cost measure of progress under the new standard, consistent with our historical accouting treatment for these contracts. Due to the low level of backlog at December 31, 2017 for our contracts impacted by the new standard, no adjustmnet to beginning 2018 retained earnings resulted from the adoption of the new standard. See Note 3 for additional discussion of our revenue recognition accounting policies and expanded disclosures required by the new standard. 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: June 30, December 31, Location : Vista, CA 2018 2017 Raw materials $ 971,882 $ 990,945 Finished goods 1,163,512 1,185,888 Work in progress 6,432 26,432 Allowance for obsolete inventory (698,609) (648,609) Total $ 1,443,217 $ 1,554,656 The Company has established an allowance for obsolete inventory. Expense for obsolete inventory was $50,000 and $-0-, for the periods ended June 30, 2018 and June 30, 2017, respectively. Property and Equipment Property and equipment at June 30, 2018 and December 31, 2017 consisted of the following: June 30, December 31, 2018 2017 Production equipment $ 64,673 $ 61,960 Computers/Office equipment 28,540 28,540 Tooling equipment 12,380 12,380 Leasehold Improvements 42,451 42,451 Less: accumulated depreciation (143,804) (138,078) Total $ 4,240 $ 7,253 Depreciation expense for the periods ended June 30, 2018 and June 30, 2017 was $5,726 and $12,448, 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 2,577,223 and 2,379,723 stock options that would have been included in the fully diluted earnings per share as of June 30, 2018 and December 31, 2017, respectively. However, the common stock equivalents were not included in the computation of the loss per share computation because they are anti dilutive. NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 June 30, 2018 and December 31, 2017 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, 2018, the Company had an accumulated deficit of $19,961,734 and total stockholders’ equity of $329,226. At June 30, 2018, the Company had current assets of $1,543,343 including cash of $41,182, and current liabilities of $1,162,637, resulting in working capital of $380,706. For the six months ended June 30, 2018, the Company reported a net loss of $174,633 and net cash used by operating activities of $79,383. Management believes that based on its operating plan, the projected sales for 2018, 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 significant 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. |
Note 3 - COSTS AND ESTIMATED EA
Note 3 - COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 3 - COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS | NOTE 3 – COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS Billing practices for our contracts are governed by the contract terms of each project based on progress toward completion approved by the owner, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized under the percentage-of-completion method of accounting. The current liability, “Billings in excess of costs and estimated earnings,” represents billings in excess of revenues recognized. The current asset, “Costs and estimated earnings in excess of billings,” represents revenues recognized in excess of amounts billed to the customer, which are usually billed during normal billing processes following achievement of contractural requirements. NOTE 3 – COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS (CONTINUED) June 30, December 31, 2018 2017 Cost incurred on uncompleted contracts $ - $ - Estimated earnings - - - - Billings on uncompleted contracts - (30,000) Costs incurred and estimated earnings under billings on uncompleted contracts - (30,000) Included in the accompanying balance sheets under the following captions: June 30, December 31, 2018 2017 Costs and estimated earnings in excess of billings on uncompleted contracts $ - $ - Billings in excess of costs and estimated earnings on uncompleted contracts - (30,000) Net amount of costs and estimated earnings on uncompleted contracts above billings $ - $ (30,000) |
Note 4 - Related Party Transact
Note 4 - Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 4 - Related Party Transactions | For the periods ended June 30, 2018 and December 31, 2017, the Company’s president and chief financial officer were due amounts for services performed for the Company. June 30, December 31, 2018 2017 Amounts due to the president $ 369,392 $ 321,796 Amounts due to the chief financial officer 96,346 85,045 Total $ 465,738 $ 406,841 |
Note 5 - Note Payable - Related
Note 5 - Note Payable - Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 5 - Note Payable - Related Party Transactions | On November 7, 2017 the Company issued a convertible promissory note for $15,000 to a related party. 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 July 7, 2018. The note has a conversion feature, wherein, at the lender’s option, at the maturity date the lender may convert the remaining unpaid 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 five trading days before the maturity date. Due to this provision, the Company considered whether the imbedded 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 June 30, 2018. 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, 2019. As of June 30, 2018 and December 31, 2017 Note Payable – Related Party consisted of the following: June 30, December 31, 2018 2017 Note payable, related party $ 15,000 $ 15,000 Total $ 15,000 $ 15,000 |
Note 6 - CONVERTIBLE NOTE PAYAB
Note 6 - CONVERTIBLE NOTE PAYABLE | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 6 - CONVERTIBLE NOTE PAYABLE | On June 15, 2018 the Company entered into a Securities Purchase Agreement with an accredited investor, under which the investor purchased a Secured Convertible Promissory Note from the Company in the principal amount of $100,000. Under the terms of the Note simple interest will accrue at a rate of 10% per annum. The note will automatically mature and be due and payable on the eighteen (18) month anniversary. The Company shall make principal payments under the Note in the amount of $5,000 per month, beginning on the seventh month anniversary and continuing each month thereafter through the maturity date. Also commencing on the seventh month anniversary of the Note, the Company shall make interest payments under this Note based on the unpaid principal balance. The Note is secured by the inventory of the Company in accordance with a Security Agreement executed concurrently with the Note and UCC-1 Financing Statement perfecting said security interest. The Note includes a conversion feature wherein, under certain circumstances, the Lender may request that a portion of the principal repayment be converted and payable in restricted shares of the Company’s Common Stock at the lesser of five cents NOTE 6 – CONVERTIBLE NOTE PAYABLE (CONTINUED) ($0.05) per share or 90% of the average closing price calculated over the prior 20 trading days, but not less than $0.025 per share. The floor of $0.025 per share prevents the imbedded conversion option from qualifying for derivative accounting under ASC 815-15 “Derivative and Hedging”. As of June 30, 2018 and December 31, 2017 Convertible Note Payable consisted of the following: June 30, December 31, 2018 2017 Convertible note payable $ 100,000 $ - Less current portion (30,000) - Convertible note payable, net of current portion $ 70,000 $ - |
Note 7 - Stock Options and Warr
Note 7 - Stock Options and Warrants | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 7 - Stock Options and Warrants | NOTE 7 - STOCK OPTIONS AND WARRANTS During the six months ended June 30, 2018 and 2017, the Company granted 590,000 and 350,000 options for services, respectively. During the six months ended June 30, 2018 and 2017, the Company recognized expense of $27,186 and $94,733, respectively, for options and warrants that vested during the periods pursuant to ASC Topic 718. Total remaining amount of compensation expense to be recognized in future periods is $35,194. During the six months ended June 30, 2018 and 2017, the Company granted -0- and 555,556 options to the CEO for accrued compensation, respectively. 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 and Non-Qualified Stock Options to employees and consultants at its discretion. As of June 30, 2018 the Company has a total of 675,000 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 June 30, 2018 the Company has a total of 2,065,556 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 June 30, 2018, the Company has a total of 300,000 options issued under the 2017 Plan. During the three months ended June 30, 2018 and 2017 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 that options are expected to remain unexercised. The Company uses historical data to estimate the timing and amount of forfeitures. NOTE 7 - STOCK OPTIONS AND WARRANTS (CONTINUED) The following table presents the assumptions used to estimate the fair values of the stock options granted: June 30, 2018 June 30, 2017 Expected volatility 150 % 105 % Expected dividends 0 % 0 % Expected term 7 Years 7 Years Risk-free interest rate 2.46 % 2.22 % A summary of the status of the options and warrants granted at June 30, 2018 and December 31, 2017 and changes during the periods then ended is presented below: June 30, December 31, 2018 2017 Weighted-Average Weighted-Average Shares Exercise Price Shares Exercise Price Outstanding at beginning of year 2,600,556 $ 0.82 4,510,313 $ 2.81 Granted 590,000 0.07 905,556 0.18 Exercised - - - - Expired or cancelled (150,000) 1.01 (2,815,313) 3.81 Outstanding at end of period 3,040,556 0.67 2,600,556 0.82 Exercisable 2,577,223 $ 0.72 2,354,723 $ 0.84 A summary of the status of the options and warrants outstanding at June 30, 2018 is presented below: Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life Number Exercisable Weighted-Average Exercise Price $0.01-0.99 2,440,556 5.31 years 1,977,223 0.24 $1.00-1.99 125,000 1.05 years 125,000 1.18 $2.00-2.99 475,000 1.26 years 475,000 2.52 $0.01-2.99 3,040,556 4.50 years 2,577,223 $0.72 |
Note 8 - Subsequent Events
Note 8 - Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Notes | |
Note 8 - Subsequent Events | On July 6, 2018, the Company issued 139,320 restricted shares of Common Stock to John Palumbo, a Director of the Company, upon the conversion of $15,799, constituting unpaid principal of $15,000 and accrued interest of $799, owing under that certain Promissory Note dated November 7, 2017. The shares were issued at a price of $0.1134 per share, representing 90% of the average five (5) trading days pursuant to the terms of the Note. |
Note 2 - Significant Accounti14
Note 2 - Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Policies | |
Use of Estimates | 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. |
New Revenue Recognition Standard | New Revenue Recognition Standard In May 2014, the FASB issued ASU 2014-09, which provides a single conprehensive accounting standard for revenue recognition for contracts with customers and supersedes current industry-specific guidance, including ASC 605-35. The new standard requires companies to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the company expects to be entitled in exchange for the goods or services. The new model requires companies to identify contractural performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. The new standard also significantly expands disclosure requirements regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We adopted the new standard on January 1, 2018 (“Adoption Date”), using the modified retrospective method, which provides for a cumulative effect adjustment to beginning 2018 retained earnings for those uncompleted contracts impacted by the adoption of the new standard. The changes to the method and/or timing of our revenue recognition associated with our adoption of the new standard primarily relate to long-term engine development contracts. We will continue to recognize these contracts over time utilizing the cost to cost measure of progress under the new standard, consistent with our historical accouting treatment for these contracts. Due to the low level of backlog at December 31, 2017 for our contracts impacted by the new standard, no adjustmnet to beginning 2018 retained earnings resulted from the adoption of the new standard. See Note 3 for additional discussion of our revenue recognition accounting policies and expanded disclosures required by the new standard. |
Inventory | 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: June 30, December 31, Location : Vista, CA 2018 2017 Raw materials $ 971,882 $ 990,945 Finished goods 1,163,512 1,185,888 Work in progress 6,432 26,432 Allowance for obsolete inventory (698,609) (648,609) Total $ 1,443,217 $ 1,554,656 The Company has established an allowance for obsolete inventory. Expense for obsolete inventory was $50,000 and $-0-, for the periods ended June 30, 2018 and June 30, 2017, respectively. |
Property and Equipment | Property and Equipment Property and equipment at June 30, 2018 and December 31, 2017 consisted of the following: June 30, December 31, 2018 2017 Production equipment $ 64,673 $ 61,960 Computers/Office equipment 28,540 28,540 Tooling equipment 12,380 12,380 Leasehold Improvements 42,451 42,451 Less: accumulated depreciation (143,804) (138,078) Total $ 4,240 $ 7,253 Depreciation expense for the periods ended June 30, 2018 and June 30, 2017 was $5,726 and $12,448, respectively. |
Basic and Diluted Loss Per Share | 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 2,577,223 and 2,379,723 stock options that would have been included in the fully diluted earnings per share as of June 30, 2018 and December 31, 2017, 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 | 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 June 30, 2018 and December 31, 2017 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. |
Going Concern | Liquidity and Going Concern Historically, the Company has incurred net losses and negative cash flows from operations. As of June 30, 2018, the Company had an accumulated deficit of $19,961,734 and total stockholders’ equity of $329,226. At June 30, 2018, the Company had current assets of $1,543,343 including cash of $41,182, and current liabilities of $1,162,637, resulting in working capital of $380,706. For the six months ended June 30, 2018, the Company reported a net loss of $174,633 and net cash used by operating activities of $79,383. Management believes that based on its operating plan, the projected sales for 2018, 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 significant 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. |
Note 2 - Significant Accounti15
Note 2 - Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of 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: June 30, December 31, Location : Vista, CA 2018 2017 Raw materials $ 971,882 $ 990,945 Finished goods 1,163,512 1,185,888 Work in progress 6,432 26,432 Allowance for obsolete inventory (698,609) (648,609) Total $ 1,443,217 $ 1,554,656 |
Schedule of Property and Equipment | Property and equipment at June 30, 2018 and December 31, 2017 consisted of the following: June 30, December 31, 2018 2017 Production equipment $ 64,673 $ 61,960 Computers/Office equipment 28,540 28,540 Tooling equipment 12,380 12,380 Leasehold Improvements 42,451 42,451 Less: accumulated depreciation (143,804) (138,078) Total $ 4,240 $ 7,253 |
Note 3 - COSTS AND ESTIMATED 16
Note 3 - COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Costs in Excess of Billings | June 30, December 31, 2018 2017 Cost incurred on uncompleted contracts $ - $ - Estimated earnings - - - - Billings on uncompleted contracts - (30,000) Costs incurred and estimated earnings under billings on uncompleted contracts - (30,000) |
Contract, Asset and Liability | Included in the accompanying balance sheets under the following captions: June 30, December 31, 2018 2017 Costs and estimated earnings in excess of billings on uncompleted contracts $ - $ - Billings in excess of costs and estimated earnings on uncompleted contracts - (30,000) Net amount of costs and estimated earnings on uncompleted contracts above billings $ - $ (30,000) |
Note 4 - Related Party Transa17
Note 4 - Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Accrued Management Fees | As of June 30, 2018 and December 31, 2017 the accrued management fees consisted of the following: June 30, December 31, 2018 2017 Amounts due to the president $ 369,392 $ 321,796 Amounts due to the chief financial officer 96,346 85,045 Total $ 465,738 $ 406,841 |
Note 5 - Note Payable - Relat18
Note 5 - Note Payable - Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Convertible Notes, Related Party | As of June 30, 2018 and December 31, 2017 Convertible Notes – Related Party consisted of the following: June 30, December 31, 2018 2017 Convertible note, related party $ 15,000 $ 15,000 Total $ 15,000 $ 15,000 |
Schedule of Note Payable Related Party | As of June 30, 2018 and December 31, 2017 Note Payable – Related Party consisted of the following: June 30, December 31, 2018 2017 Note payable, related party $ 15,000 $ 15,000 Total $ 15,000 $ 15,000 |
Note 6 - CONVERTIBLE NOTE PAY19
Note 6 - CONVERTIBLE NOTE PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Convertible Note payable | As of June 30, 2018 and December 31, 2017 Convertible Note Payable consisted of the following: June 30, December 31, 2018 2017 Convertible note payable $ 100,000 $ - Less current portion (30,000) - Convertible note payable, net of current portion $ 70,000 $ - |
Schedule of Convertible Note Payable | As of June 30, 2018 and December 31, 2017 Convertible Note Payable consisted of the following: June 30, December 31, 2018 2017 Convertible note payable $ 100,000 $ - Less current portion (30,000) - Convertible note payable, net of current portion $ 70,000 $ - |
Note 7 - Stock Options and Wa20
Note 7 - Stock Options and Warrants (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Assumptions Used to Estimate the Fair Values of Stock Options Granted | The following table presents the assumptions used to estimate the fair values of the stock options granted: June 30, 2018 June 30, 2017 Expected volatility 150 % 105 % Expected dividends 0 % 0 % Expected term 7 Years 7 Years Risk-free interest rate 2.46 % 2.22 % |
Schedule of Stock Options and Warrants, Activity | A summary of the status of the options and warrants granted at June 30, 2018 and December 31, 2017 and changes during the periods then ended is presented below: June 30, December 31, 2018 2017 Weighted-Average Weighted-Average Shares Exercise Price Shares Exercise Price Outstanding at beginning of year 2,600,556 $ 0.82 4,510,313 $ 2.81 Granted 590,000 0.07 905,556 0.18 Exercised - - - - Expired or cancelled (150,000) 1.01 (2,815,313) 3.81 Outstanding at end of period 3,040,556 0.67 2,600,556 0.82 Exercisable 2,577,223 $ 0.72 2,354,723 $ 0.84 |
Summary of the Status of the Options and Warrants Outstanding | A summary of the status of the options and warrants outstanding at June 30, 2018 is presented below: Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life Number Exercisable Weighted-Average Exercise Price $0.01-0.99 2,440,556 5.31 years 1,977,223 0.24 $1.00-1.99 125,000 1.05 years 125,000 1.18 $2.00-2.99 475,000 1.26 years 475,000 2.52 $0.01-2.99 3,040,556 4.50 years 2,577,223 $0.72 |
Note 2 - Significant Accounti21
Note 2 - Significant Accounting Policies: Inventory: Schedule of Inventory (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Raw materials | $ 971,882 | $ 990,945 |
Finished goods | 1,163,512 | 1,185,888 |
Work in progress | 6,432 | 26,432 |
Allowance for obsolete inventory | (698,609) | (648,609) |
Total | $ 1,443,217 | $ 1,554,656 |
Note 2 - Significant Accounti22
Note 2 - Significant Accounting Policies: Inventory (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||
Inventory reserve | $ 50,000 | $ 0 |
Note 2 - Significant Accounti23
Note 2 - Significant Accounting Policies: Property and Equipment: Schedule of Property and Equipment (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Less: accumulated depreciation | $ (143,804) | $ (138,078) |
Total | 4,240 | 7,253 |
Production Equipment | ||
Property, Plant and Equipment, Gross | 64,673 | 61,960 |
Computer Equipment | ||
Property, Plant and Equipment, Gross | 28,540 | 28,540 |
Tools, Dies and Molds | ||
Property, Plant and Equipment, Gross | 12,380 | 12,380 |
Leasehold Improvements | ||
Property, Plant and Equipment, Gross | $ 42,451 | $ 42,451 |
Note 2 - Significant Accounti24
Note 2 - Significant Accounting Policies: Property and Equipment (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||
Depreciation expense | $ 5,726 | $ 12,448 |
Note 2 - Significant Accounti25
Note 2 - Significant Accounting Policies: Basic and Diluted Loss Per Share (Details) - shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Details | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2,577,223 | 2,379,723 |
Note 2 - Significant Accounti26
Note 2 - Significant Accounting Policies: Going Concern (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||||||
Accumulated deficit | $ (19,961,734) | $ (19,961,734) | $ (19,787,101) | |||
Total Stockholders' Equity | 329,226 | 329,226 | 476,673 | |||
Total Current Assets | 1,543,343 | 1,543,343 | 1,606,744 | |||
Cash | 41,182 | $ 96,973 | 41,182 | $ 96,973 | 23,279 | $ 17,782 |
Total Current Liabilities | 1,162,637 | 1,162,637 | $ 1,151,604 | |||
Working Capital | 380,706 | |||||
NET LOSS | $ (76,543) | $ (191,589) | (174,633) | (400,630) | ||
Net Cash Provided by (Used in) Operating Activities | $ (79,383) | $ 79,191 |
Note 3 - COSTS AND ESTIMATED 27
Note 3 - COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS: Schedule of Costs in Excess of Billings (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Cost incurred on uncompleted contracts | $ 0 | $ 0 |
Estimated earnings | 0 | 0 |
Billings on uncompleted contracts | 0 | (30,000) |
Costs incurred and estimated earnings under billings on uncompleted contracts | $ 0 | $ (30,000) |
Note 3 - COSTS AND ESTIMATED 28
Note 3 - COSTS AND ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS: Contract, Asset and Liability (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ 0 | $ 0 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 0 | (30,000) |
Net amount of costs and estimated earnings on uncompleted contracts above billings | $ 0 | $ (30,000) |
Note 4 - Related Party Transa29
Note 4 - Related Party Transactions (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Accounts receivable - related parties | $ 5,771 | $ 3,440 |
Accounts payable - related parties | 134,617 | 114,321 |
Nology Engineering Inc | ||
Accounts payable - related parties | $ 134,617 | $ 114,321 |
Omnitek Engineering Thailand Co Ltd | ||
Noncontrolling Interest, Ownership Percentage by Parent | 15.00% | |
Omnitek Peru SAC | ||
Noncontrolling Interest, Ownership Percentage by Parent | 20.00% |
Note 4 - Related Party Transa30
Note 4 - Related Party Transactions: Schedule of Accrued Management Fees (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Accrued management compensation | $ 465,738 | $ 406,841 |
President | ||
Accrued management compensation | 369,392 | 321,796 |
Chief Financial Officer | ||
Accrued management compensation | $ 96,346 | $ 85,045 |
Note 5 - Note Payable - Relat31
Note 5 - Note Payable - Related Party Transactions (Details) - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Nov. 07, 2017 | Jan. 19, 2017 | |
Related Party Convertible Note | |||
Debt Instrument, Face Amount | $ 15,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | ||
Debt Instrument, Maturity Date | Jul. 7, 2018 | ||
Debt Instrument, Convertible, Terms of Conversion Feature | 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 five trading days before the maturity date | ||
Related Party Note Payable | |||
Debt Instrument, Face Amount | $ 15,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | ||
Debt Instrument, Maturity Date | Jan. 19, 2019 |
Note 5 - Note Payable - Relat32
Note 5 - Note Payable - Related Party Transactions: Schedule of Convertible Notes, Related Party (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Convertible notes payable - related parties | $ 15,000 | $ 15,000 |
Note 5 - Note Payable - Relat33
Note 5 - Note Payable - Related Party Transactions: Schedule of Note Payable Related Party (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Notes payable - related parties | $ 15,000 | $ 15,000 |
Note 6 - CONVERTIBLE NOTE PAY34
Note 6 - CONVERTIBLE NOTE PAYABLE (Details) - Secured Convertible Promissory Note - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 15, 2018 | |
Debt Instrument, Face Amount | $ 100,000 | |
Debt Instrument, Interest Rate, Stated Percentage | 10.00% | |
Debt Instrument, Periodic Payment | $ 5,000 | |
Maximum | ||
Debt Instrument, Convertible, Conversion Price | $ 0.05 | |
Minimum | ||
Debt Instrument, Convertible, Conversion Price | $ 0.025 |
Note 6 - CONVERTIBLE NOTE PAY35
Note 6 - CONVERTIBLE NOTE PAYABLE: Schedule of Convertible Note Payable (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Details | ||
Convertible note payable | $ 100,000 | |
Convertible notes payable, current portion | 30,000 | $ 0 |
Convertible notes payable, net of current portion | $ 70,000 | $ 0 |
Note 7 - Stock Options and Wa36
Note 7 - Stock Options and Warrants (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 11, 2015 | Aug. 03, 2011 | |
Granted | 590,000 | 905,556 | ||||
Expense recognized for options and warrants vested | $ 27,186 | $ 94,733 | ||||
Total remaining amount of compensation expense to be recognized in future periods | $ 35,194 | |||||
Shares outstanding | 3,040,556 | 2,600,556 | 4,510,313 | |||
Warrant | ||||||
Granted | 0 | 0 | ||||
2017 Long Term Incentive Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 5,000,000 | |||||
Shares outstanding | 300,000 | |||||
President | ||||||
Granted | 0 | 555,556 | ||||
Employee Stock Option | ||||||
Granted | 590,000 | 350,000 | ||||
Employee Stock Option | 2011 Long Term Incentive Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 1,000,000 | |||||
Shares outstanding | 675,000 | |||||
Employee Stock Option | 2015 Long Term Incentive Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 2,500,000 | |||||
Shares outstanding | 2,065,556 |
Note 7 - Stock Options and Wa37
Note 7 - Stock Options and Warrants: Schedule of Assumptions Used to Estimate the Fair Values of Stock Options Granted (Details) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||
Expected volatility | 150.00% | 105.00% |
Expected dividends | 0.00% | 0.00% |
Expected term | 7 years | 7 years |
Risk-free interest rate | 2.46% | 2.22% |
Note 7 - Stock Options and Wa38
Note 7 - Stock Options and Warrants: Schedule of Stock Options and Warrants, Activity (Details) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Shares outstanding | 2,600,556 | 4,510,313 |
Outstanding, Weighted Average Exercise Price | $ 0.82 | $ 2.81 |
Granted | 590,000 | 905,556 |
Granted, Weighted Average Exercise Price | $ 0.07 | $ 0.18 |
Exercised, Weighted Average Exercise | $ 0 | $ 0 |
Expired or cancelled | (150,000) | (2,815,313) |
Expired or cancelled, Weighted Average Exercise Price | $ 1.01 | $ 3.81 |
Shares outstanding | 3,040,556 | 2,600,556 |
Outstanding, Weighted Average Exercise Price | $ 0.67 | $ 0.82 |
Exercisable | 2,577,223 | 2,354,723 |
Exercisable, Weighted Average Exercise Price | $ 0.72 | $ 0.84 |
Common Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period | 0 | 0 |
Note 7 - Stock Options and Wa39
Note 7 - Stock Options and Warrants: Summary of the Status of the Options and Warrants Outstanding (Details) | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
$0.01-0.99 | |
Exercise Price Range, Lower Range Limit | $ 0.01 |
Exercise Price Range, Upper Range Limit | $ 0.99 |
Number Outstanding | shares | 2,440,556 |
Weighted-Average Remaining Contractual Life | 5 years 3 months 21 days |
Number Exercisable | shares | 1,977,223 |
Weighted-Average Exercise Price | $ 0.24 |
$1.00-1.99 | |
Exercise Price Range, Lower Range Limit | 1 |
Exercise Price Range, Upper Range Limit | $ 1.99 |
Number Outstanding | shares | 125,000 |
Weighted-Average Remaining Contractual Life | 1 year 18 days |
Number Exercisable | shares | 125,000 |
Weighted-Average Exercise Price | $ 1.18 |
$2.00-2.99 | |
Exercise Price Range, Lower Range Limit | 2 |
Exercise Price Range, Upper Range Limit | $ 2.99 |
Number Outstanding | shares | 475,000 |
Weighted-Average Remaining Contractual Life | 1 year 3 months 3 days |
Number Exercisable | shares | 475,000 |
Weighted-Average Exercise Price | $ 2.52 |
$0.01-2.99 | |
Exercise Price Range, Lower Range Limit | 0.01 |
Exercise Price Range, Upper Range Limit | $ 2.99 |
Number Outstanding | shares | 3,040,556 |
Weighted-Average Remaining Contractual Life | 4 years 6 months |
Number Exercisable | shares | 2,577,223 |
Weighted-Average Exercise Price | $ 0.72 |
Note 8 - Subsequent Events (Det
Note 8 - Subsequent Events (Details) - Subsequent Event - Director | Jul. 06, 2018USD ($)$ / sharesshares |
Stock Issued During Period, Shares, Conversion of Convertible Securities | shares | 139,320 |
Stock Issued During Period, Value, Conversion of Convertible Securities | $ 15,799 |
Principal | |
Stock Issued During Period, Value, Conversion of Convertible Securities | 15,000 |
Interest | |
Stock Issued During Period, Value, Conversion of Convertible Securities | $ 799 |
Related Party Convertible Note | |
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.1134 |