| 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 7% and 0% of revenue for the periods ended June 30, 2019 and 2018,
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 93% and 100% of revenue for the periods ended June 30, 2019 and 2018, 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 June 30, 2019 and June 30, 2018:
For the three months ended June 30, For the three months ended June 30,
2019 2018
Consumer Long-term Consumer Long-term
Segments Products Contract Total Products Contract Total
Domestic $ 100,568 - 100,568 $ 157,576 - 157,576
International 145,064 18,764 163,828 211,979 - 211,979
$ 245,632 18,764 264,396 $ 369,555 - 369,555
Filters $ 175,736 - 175,736 $ 193,973 - 193,973
Components 69,896 - 69,896 175,582 - 175,582
Engineering Services - 18,764 18,764 - - -
$ 245,632 18,764 264,396 $ 369,555 - 369,555
The following table presents Omnitek’s revenues disaggregated
by region and product type for the six months ended June 30, 2019 and June 30, 2018:
For the six months ended June 30, For the six months ended June 30,
2019 2018
Consumer Long-term Consumer Long-term
Segments Products Contract Total Products Contract Total
Domestic $ 220,926 - 220,926 $ 296,324 - 296,324
International 350,344 44,474 394,818 432,761 - 432,761
$ 571,270 44,474 615,744 $ 729,085 - 729,085
Filters $ 415,624 - 415,624 $ 441,501 - 193,973
Components 155,646 - 155,646 287,584 - 287,584
Engineering Services - 44,474 44,474 - - -
$ 571,270 18,764 615,744 $ 729,085 - 729,085
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 2019 2018
Raw materials $ 939,179 $ 948,060
Finished goods 1,116,392 1,147,052
Inventory in transit - 10,611
Allowance for obsolete inventory (796,045) (746,045)
Total $ 1,259,526 $ 1,359,678 The Company has established
an allowance for obsolete inventory. Expense for obsolete inventory was $50,000 and $50,000, for the periods ended June
30, 2019 and June 30, 2018, respectively. Property and Equipment Property and equipment at June 30, 2019 and
December 31, 2018 consisted of the following:
June 30, December 31,
2019 2018
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 (145,963) (145,668)
Total $ 2,081 $ 2,376 Depreciation
expense for the periods ended June 30, 2019 and June 30, 2018 was $29 and $5,726, 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 2,978,890
and 2,577,223 stock options that would have been included in the fully diluted earnings per share as of June 30, 2019 and June
30, 2018, 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 June 30,
2019 and December 31, 2018 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, 2019, the Company had an accumulated deficit
of $20,491,776 and total stockholders’ deficit of $(104,688). At June 30, 2019, the Company had current assets of $1,331,605
including cash of $8,109, and current liabilities of $1,468,799, resulting in negative
working capital of $(137,194). For the six months ended June 30, 2019, the Company reported a net loss of $236,269 and net
cash provided by operating activities of $16,049. Management believes that based on its operating plan, the projected sales
for 2019, 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. Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update No. 2016-2 - Leases (Topic 842) In June 2018, the FASB
issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting
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. |
