The Company has established an allowance for obsolete inventory. Expense for obsolete inventory was $(51,347) and $18,068, for the periods ended June 30, 2026, and June 30, 2025, respectively.
Property and Equipment
Property and equipment at June 30, 2026 and December 31, 2025 consisted of the following:
| June 30,
|
| December 31,
|
| 2026
|
| 2025
|
Production/Office equipment
| $
| 74,792
|
| $
| 74,792
|
Leasehold Improvements
|
| 4,689
|
|
| 4,689
|
Less: accumulated depreciation
|
| (76,594)
|
|
| (74,665)
|
Total
| $
| 2,887
|
| $
| 4,816
|
Depreciation expense for the periods ended June 30, 2026 and June 30, 2025 was $1,928 and $1,928 respectively.
Leases
ASC 842 supersedes the lease requirements in ASC 840 “Leases” and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use (“ROU”) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. For ROU assets, the Company has elected to account for non-lease components as part of the lease.
Any lease with a term of 12 months or less is considered short-term. As permitted by ASC 842, short-term leases are excluded from the ROU assets and lease liabilities on the balance sheets. Consistent with all other operating leases, short-term lease expense is recorded on a straight-line basis over the lease term.
The Company determines the present value of minimum future lease payments for operating leases by estimating a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments and a similar economic environment (the “incremental borrowing rate” or “IBR”).The Company determines the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances.
Page 9
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
June 30, 2026
(unaudited)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company’s lease consists of an operating lease for general office space and warehouse facilities. The Company recognizes rent expense for this lease on a straight-line basis over the lease term. Because the lease does not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease Commencement Date in determining the present value of future lease payments.
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 1,450,000 and 1,900,000 stock options, respectively that would have been included in the fully diluted earnings per share as of June 30, 2026, and June 30, 2025, respectively. However, the common stock equivalents were not included in the 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, 2026 and December 31, 2025 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, 2026, the Company had an accumulated deficit of $21,895,180 and total stockholders’ deficit of $1,209,978. At June 30, 2026, the Company had current assets of $789,123 including cash of $45,192, and current liabilities of $1,829,723, resulting in negative working capital of $1,040,600. For the six months ended June 30, 2026, the Company reported net loss of $141,335 and net cash used in operating activities of $2,905. Management believes that based on its operating plan, the projected sales for 2026, 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.
Page 10
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
June 30, 2026
(unaudited)
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which amends the disclosure to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis for to enable investors to develop more decision-useful financial analyses. All public entities will be required to report segment information in accordance with the new guidance starting in annual periods and interim period beginning after December 15, 2023 and December 15, 2024 respectively. The Company is currently assessing potential impacts of ASU 2023-06 and does not expect the adoption of this guidance will have a material impact on its financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09," Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which amends the disclosure to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. For entities other than public business entities, the requirements will be effective for annual periods beginning after December 15, 2025. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently assessing potential impacts of ASU 2023-09 and does not expect the adoption of this guidance will have a material impact on its financial statements and disclosures and the Company is in a loss position and not incurring any tax expenses.
NOTE 4 – CUSTOMER DEPOSITS
The customers deposit account relates to payments received from customers before product has been shipped. When the product is shipped the Company recognizes the associated revenue by reclassifying the customer deposit to the appropriate revenue account. By contrast, the Contract Liabilities account relates to long-term contracts where revenue is recognized over the term of the contract. For the periods ended June 30, 2026 and December 31, 2025, the balance due under customer deposits was $644,009 and $388,301, respectively.
NOTE 5 – OPERATING LEASE
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 expired on June 30, 2026. The monthly base rent under the lease was $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.
On April 28, 2026, the Company entered into a lease for the premises located at 1280 Activity Dr. #D, Vista, CA, containing approximately 7,222 square feet of rentable area. The lease commences on July 1, 2026 and expires on September 30, 2031. The monthly base rent under the lease is $10,111 per month and monthly operating expenses during the term of the lease, subject to adjustment under the lease, is $723 per month.
During the quarter ended June 30, 2026, cash paid for amounts included in the measurement of operating lease liabilities was $0 and the Company recorded operating lease expenses included in operating expenses of $37,290.
Page 11
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
June 30, 2026
(unaudited)
NOTE 5 – OPERATING LEASE (continued)
1345 Specialty Dr. #E: Future minimum payments for monthly base rent due under the initial lease term are currently estimated to be as follows:
Years ending December 31,
|
|
2026 (remaining)
| $0
|
|
|
|
|
Total lease payments
| $0
|
Less: Imputed interest
|
|
Total lease liability
| (0.00)
|
Less: current lease liability
| (0.00)
|
Long-term lease liability
| $0.00
|
1280 Activity Dr. #D: Future minimum payments for monthly base rent due under the initial lease term are currently estimated to be as follows:
|
|
|
|
Years ending December 31,
|
|
|
|
2026 (remaining)
|
|
|
| $
| 32,500
|
2027
|
|
|
|
| 131,817
|
2028
|
|
|
|
| 135,512
|
2029
|
|
|
|
| 139,316
|
2030
|
|
|
|
| 143,234
|
2031
|
|
|
|
| 100,373
|
|
|
|
|
|
|
Total lease payments
|
|
|
|
| 682,752
|
Less: imputed interest
|
|
|
|
| (79,644)
|
Total lease liability
|
|
|
| $
| 603,108
|
Less: current lease liability
|
|
|
|
| (76,403)
|
Long-term lease liability
|
|
|
| $
| 526,705
|
Weighted average discount rate:
|
|
Operating leases
| 4.94%
|
NOTE 6 - RELATED PARTY TRANSACTIONS
Accounts Payable – Related Parties
The Company regularly incurs expenses that are paid to related parties for purchases of goods and services from related parties. As of June 30, 2026 and December 31, 2025, the Company owed related parties for such goods and services in the amounts of $34,047 and $34,630, respectively.
Accounts Receivable – Related Parties
As of June 30, 2026, and December 31, 2025, the Company was owed $16,698 and $20,393, respectively, by an entity controlled by the Company’s CEO for the purchase of products and services.
Accrued Management Compensation
For the periods ended June 30, 2026 and December 31, 2025, the Company’s president was due amounts for accrued employment compensation.
Page 12
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
June 30, 2026
(unaudited)
NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
As of June 30, 2026, and December 31, 2025, the accrued amounts consisted of the following:
| June 30,
|
| December 31,
|
| 2026
|
| 2025
|
Amounts due to the president
| $
| 636,311
|
| $
| 636,888
|
Total
| $
| 636,311
|
| $
| 636,888
|
NOTE 7 – NOTES PAYABLE - RELATED PARTY
Convertible Notes – Related Parties
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 was due and payable on or before December 4, 2021. On December 14, 2021, the maturity date of convertible promissory note was extended for an additional period of 3 months until March 4, 2022. Subsequently the maturity date was extended for additional periods to June 4, 2022, September 4, 2022, December 4, 2022, June 4, 2023 and December 4, 2023. On December 4, 2023 the Company made a payment of $10,000 reducing the outstanding balance to $10,000 and also extended the note until December 4, 2024. On December 4, 2024 the note was extended until December 4, 2025. On December 2, 2025 the note was extended until December 4, 2026. 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 is not convertible until maturity, no derivative liability was recognized as of June 30, 2026.
As of June 30, 2026 and December 31, 2025 Convertible Notes – Related Party consisted of the following:
| June 30,
2026
|
| December 31,
2025
|
Convertible Note payable, related parties
| $
| 10,000
|
| $
| 10,000
|
Less current portion
|
| (10,000)
|
|
| (10,000)
|
Total
| $
| -
|
| $
| -
|
Notes Payable – Related Party
On March 23, 2023, the Company issued a Working Capital Promissory Note (the : Working Capital Note”), in favor of its CEO (the “Lender”), evidencing the additional loans to the Company by the CEO, with an Initial Principal Balance of $20,000, and to evidence any future additional advances and loans by the CEO to the Company. Pursuant to the terms of the Working Capital Note, the unpaid principal and accrued simple interest at the rate of 8.0% per annum (“Applicable Rate”) shall be due and payable on or before March 22, 2026, (the “Maturity Date”). The principal amount of the Working Capital Note shall be increased by the amount of any additional advances made by the CEO to the Company, from time-to-time, with interest thereon at the applicable Rate, from the date of such advance. On September 15, 2023, the Company and the CEO (Lender) agreed that the unpaid principal balance of $15,000 payable under a June 4, 2021 promissory note payable to the CEO would be transferred to and become part of the Working Capital Note. Additionally, on June 4, 2023, the Company and the CEO (Lender) agreed that the unpaid principal balance of $7,940 payable under a January 19, 2017 promissory note payable to the CEO would be transferred to and become part of the Working Capital Note. On March 22, 2025 the Maturity Date of the Working Capital Promissory Note was extended to March 23, 2028. As of June 30, 2026, the principal balance and accrued interest due under the Working Capital Note was $232,940 and $17,870.
Page 13
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
June 30, 2026
(unaudited)
NOTE 7 – NOTES PAYABLE - RELATED PARTY (continued)
As of June 30, 2026, and December 31, 2025, Note Payable – Related Party consisted of the following:
| June 30,
|
| December 31,
|
| 2026
|
| 2025
|
Note payable, related party
| $
| 232,940
|
| $
| 198,940
|
Total
| $
| 232,940
|
| $
| 198,940
|
NOTE 8 – DEBT
Loans payable – SBA Economic Injury Disaster Loan
On April 21, 2020, the Company obtained a loan (the “SBA EIDL Loan”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) adminitstered by the U.S. Small Business Administration. The Company received total proceeds of $199,000 from the 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. As of June 30, 2026, accrued interest was $5,743. Current monthly payments are applied to the accrued interest. 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 June 30, 2026 and December 31, 2025 Debt consisted of the following:
| June 30,
|
| December 31,
|
| 2026
|
| 2025
|
Loan payable – SBA EIDL
| $
| 199,000
|
| $
| 199,000
|
Less current portion
|
| -
|
|
| -
|
Total
| $
| 199,000
|
| $
| 199,000
|
NOTE 9 – STOCKHOLDERS’ DEFICIT
Options and Warrants
The Company has no warrants outstanding.
On January 15, 2026, 250,000 options expired and on June 3, 2026, an additional 200,000 options expired. During the six months ended June 30, 2026, and June 30, 2025, the Company granted 0 and 150,000 options for services, respectively. During the six months ended June 30, 2026, and June 30, 2025, the Company recognized expense of $694 and $3,782 respectively, for options that vested during the periods pursuant to ASC Topic 718. As of June 30, 2026, the total remaining amount of compensation expense to be recognized in future periods is $1,174.
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. On February 9, 2024, 855,556 option issued under the 2015 Plan expired. As of June 30, 2026, all options issued under the 2015 plan had expired.
Page 14
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
June 30, 2026
(unaudited)
NOTE 9 – STOCKHOLDERS’ DEFICIT (continued)
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, 2026, the Company had a total of 1,450,000 options issued under the Plan. During the quarter ended June 30, 2026, the Company issued no options.
The Company recognizes compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of the award based on their grant date fair value. The Company estimates the fair value of stock options using a Black-Scholes option pricing model which requires management to make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of stock and expected dividend yield of stock. When determining expected volatility, the Company considers the historical performance of the Company’s stock, as well as implied volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant, based on the options’ expected term. The expected term of the options is based on the Company’s evaluation of option holders’ exercise patterns and represents the period of time that options are expected to remain unexercised. The Company uses historical data to estimate the timing and amount of forfeitures.
The following table presents the assumptions used to estimate the fair values of the stock options granted:
| June 30, 2026
|
| June 30, 2025
|
Expected volatility
| 215%
|
| 210%
|
Expected dividends
| 0%
|
| 0%
|
Expected term
| 7 Years
|
| 7 Years
|
Risk-free interest rate
| 4.11%
|
| 4.66%
|
A summary of the status of the options granted at June 30, 2026, and December 31, 2025, and changes during the periods then ended is presented below:
NOTE 10 - SUBSEQUENT EVENTS
On April 28, 2026, the Company entered into a lease for the premises located at 1280 Activity Drive # D, Vista, California, consisting of approximately 7,222 square feet of rentable area. The lease commenced July 1, 2026 and expires on September 30, 2031. The monthly base rent under the lease is $10,111 per month and monthly operating expenses during the term of the lease, subject to adjustment per the lease, of $723 per month.
Page 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed financial statements and related notes to the condensed financial statements included elsewhere in this periodic report. Some of the statements under “Management’s Discussion and Analysis,” “Description of Business” and elsewhere herein may include forward-looking statements which reflect our current views with respect to future events and financial performance. These statements include forward-looking statements both with respect to us specifically and the alternative fuels engines industry in general. Statements which include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. The safe harbor provisions of the federal securities laws do not apply to any forward-looking statements contained in this registration statement.
All forward-looking statements address such matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read herein reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our written and oral forward-looking statements attributable to us or individuals acting on our behalf and such statements are expressly qualified in their entirety by this paragraph.
Results of Operations
For the three months ended June 30, 2026 and June 30, 2025
Revenues were $306,238 for the three months period ended June 30, 2026 compared with $605,407 for the three months period ended June 30, 2025, an decrease of $299,169 or 49%.
Total cost of goods sold was $173,139 for the three months period ended June 30, 2026 compared with $383,656 for the three months period ended June 30, 2025, a decrease of $210,517. Gross margin as a percentage of sales was 43% for the three months period ended June 30, 2026, compared with 37% for the three months period ended June 30, 2025.
Operating expenses for the three months period ended June 30, 2026 were $173,694 compared with $167,855 for the three months period ended June 30, 2025, an increase of $5,839. General and administrative expense for the three months period ended June 30, 2026 was $153,849 compared with $149,895 for the three months period ended June 30, 2025. Major components of general and administrative expenses for the three months period ended June 30, 2026 were professional fees of $36,253, rent expense of $9,922, and salaries and wages of $60,913. This compares with professional fees of $37,998, rent expense of $10,430 and salaries and wages of $51,979 for the three months period ended June 30, 2025. For the three months period ended June 30, 2026 research and development outlays were $18,881 compared with $16,996 for the three months period ended June 30, 2025.
Our net loss for the three months period ended June 30, 2026 was $72,751, or $0.00 per share, compared with a net income of $125,853, or ($0.01) per share, for the three months period ended June 30, 2025.
Results for the three months period ended June 30, 2026 reflect the impact of non-cash expenses, including the value of options granted in the amount of $349 and depreciation and amortization of $964. For the three month period ended June 30, 2025, non-cash expenses included options granted in the amount of $3,437, depreciation and amortization of $964.
Page 16
For the six months ended June 30, 2026 and June 30, 2025
Revenues decreased to $461,836 for the six months period ended June 30, 2026 from $965,153 for the six months period ended June 30, 2025, a decrease of $503,317 or 52%. The decrease in revenue is primarily contributed to the timing of order shipments and disruption in operations during the move to our new location.
Total cost of goods sold was $248,122 for the six months period ended June 30, 2026 and $602,434 for the six months period ended June 30, 2025, a decrease of $354,312. Gross margin as a percentage of sales was 46% for the six months period ended June 30, 2026, and 38% for the six months period ended June 30, 2025.
Our operating expenses for the six months period ended June 30, 2026 were $304,391 compared to $319,579 the six months period ended June 30, 2025, an decrease of $15,188. General and administrative expense for the six months period ended June 30, 2026 were $266,796 compared with $282,346 for the six months period ended June 30, 2025. Major components of general and administrative expenses for the six months period ended June 30, 2026 were professional fees of $41,991, rent expense of $20,352 and salaries and wages of $112,651. This compares with professional fees of $56,916, rent expense of $21,649, and salaries and wages of $114,133 for the six months period ended June 30, 2025. Research and development outlays were $35,627 for the six months period ended June 30, 2026 compared to $35,305 for the six months period ended June 30, 2025.
Our net loss for the six months period ended June 30, 2026 was $141,335, or $0.01 per share, compared to a net income of $99,193, or $0.00 per share, for the six months period ended June 30, 2025.
Results for the six months period ended June 30, 2026 reflect the impact of non-cash expenses, including the value of options granted in the amount of $694 and depreciation and amortization of $1,928. For the six-month period ended June 30, 2025, non-cash expenses included the value of options granted of $3,782 and depreciation and amortization of $1,928.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash provided by financing activities and available working capital. Additionally, from time to time we may raise funds from the equity capital markets to fund our research and development programs, expansion of our business and general operations.
At June 30, 2026, our current liabilities totaled $1,829,723 and our current assets totaled $789,123, resulting in negative working capital of $1,040,600.
We have no firm commitments or obligations for capital expenditures. However, substantial discretionary expenditures may be required to enable us to conduct existing and planned product research, design, development, manufacturing, marketing, and distribution of our products. We may need to raise additional capital to facilitate growth and support our long-term product development, manufacturing, and marketing programs. The Company has no established bank-financing arrangements. Therefore, it is possible that we may need to seek additional financing through subsequent future public or private sales of our securities, including equity securities. We may also seek funding for the development, manufacturing, and marketing of our products through strategic partnerships and other arrangements with corporate partners. There can be no assurance, however, that such collaborative arrangements or additional funds will be available when needed, or on terms acceptable to us, if at all. If adequate funds are not available, we may be required to curtail one or more of our research and development programs.
We have historically incurred significant losses, which have resulted in a total accumulated deficit of $21,895,180 at June 30, 2026.
Page 17
Operating Activities
We realized a negative cash flow from operations of $2,905 for the six months period ended June 30, 2026 compared with a negative cash flow of $128,809 during the six months period ended June 30, 2025. Included in the operating loss of $(90,678) for the six months period ended June 30, 2026 are non-cash expenses, which are not a drain on our capital resources. During the period, these non-cash expenses include the value of options granted in the amount of $694 and depreciation and amortization of $1928. Additionally, the operating income included general and administrative expenses of $266,796 and research and development expenses of $35,667.
Investing Activities
There was $0 cash flow from investing activities for the six month period ended June 20, 2026 compared with $0 cash flow from investing activities for the six month period ended June 30, 2025.
Financing Activities
We realized $34,000 positive cash flow from financing activities for the six months period ended June 30, 2026, compared with $0 cash flow for the six month period ended June 30, 2025.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
Accounting Method and Use of Estimates
The Company's financial statements are prepared using the accrual method of accounting. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas where significant estimates are required include the following:
Accounts Receivable
Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are
recorded when received.
Inventory
Inventories are stated at the lower of Net realizable value or average cost basis, cost determined on an average cost basis. Market value for raw materials is based on replacement costs. The Company reviews inventories on hand at least annually and records provisions for estimated excess, slow moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value. The regular and systematic inventory valuation reviews include a current assessment of future product demand, historical experience and product expiration. Accordingly, the Company has established an allowance for the cost of such obsolete inventory.
Long-lived assets
The Company assesses the recoverability of its long-lived assets annually and whenever circumstances indicate that there may be an impairment. The Company compares the estimated undiscounted future cash flows to the carrying value of the long-lived assets to determine if an impairment has occurred. In the event that an impairment has occurred, the Company recognizes the impairment immediately.
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Revenue Recognition
In general, revenue is recognized when control of the promised goods is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for the goods or services. In order to achieve that core principle, a five-step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when we satisfy the performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.
We recognize revenue on various products and services as follows:
Products - The Company recognizes revenue from the sale of products as performance obligations are satisfied. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership risk transfer (i.e. the performance obligation has been satisfied). In general, ownership and risk passes FOB shipping point, or as negotiated.
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.
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.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which amends the disclosure to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis for to enable investors to develop more decision-useful financial analyses. All public entities will be required to report segment information in accordance with the new guidance starting in annual periods beginning after December 15, 2023. The Company is currently assessing potential impacts of ASU 2023-06 and does not expect the adoption of this guidance will have a material impact on its financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which amends the disclosure to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. For entities other than public business entities, the requirements will be effective for annual periods beginning after December 15, 2025. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently assessing potential impacts of ASU 2023-09 and does not expect the adoption of this guidance will have a material impact on its financial statements and disclosures and the Company is in a loss position and not incurring any tax expenses.
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.
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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 June 30, 2026. 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 June 30, 2026 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 other pending legal proceeding. No federal, state or local governmental agency is presently contemplating any proceedings against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
ITEM 1A.RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2.UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable
ITEM 5.OTHER INFORMATION
On June 3, 2026, options to acquire 200,000 shares of common stock expired.
Subsequent Events
Effective April 28, 2026, the Company entered into a lease for the premises located at 1280 Activity Drive Unit D, Vista, California, consisting of approximately 7,222 square feet of rentable area. The lease commences July 1, 2026 and expires on September 30, 2031. The monthly base rent under the lease is $10,111 per month and monthly operating expenses during the term of the lease, subject to adjustment per the lease, of $723 per month.
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ITEM 6. EXHIBITS
(a)Documents filed as part of this Report.
1. Financial Statements. The condensed unaudited Balance Sheet of Omnitek Engineering Corp. as of June 30, 2026 and the audited balance sheet as of December 31, 2025, the condensed unaudited Statements of Operations for the three and six month periods ended June 30, 2026 and June 30, 2025, the condensed unaudited Statements of Cash Flows for the six month periods ended June 30, 2026 and June 30, 2025, and the condensed unaudited Statements of Stockholders’ Deficit as of June 30, 2026 and June 30, 2025, 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
|
|
|
|
3.1
|
| Amended and Restated Articles of Incorporation(1)
|
3.2
|
| Amended and Restated By-Laws Adopted July 12, 2012(2)
|
10.1
|
| Werner Funk Employment Agreement dated May 3, 2024 (3)
|
31.1
|
| CEO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3)
|
31.2
|
| CFO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3)
|
32.1
|
| CEO and CFO certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3)
|
101
|
| The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 formatted in Extensible Business Reporting Language ("XBRL"): (i) the balance sheets (unaudited); (ii) the statements of operations (unaudited); (iii) the statements of cash flows (unaudited); and, (iv) related notes.
|
(1)Previously filed on Form 10 on April 27, 2010
(2)Previously filed on Form 8-K on August 2, 2012
(3)Previously filed on Form 8-K on May 9, 2024
(4)Filed herewith.
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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: August 19, 2026
| /s/ Werner Funk
|
| By: Werner Funk
|
| Its: Chief Executive Officer, Secretary,
Principal Executive Officer
and Principal Accounting Officer
|
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