Page 10
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2026
(unaudited)
NOTE 5 - 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 March 31, 2026, and December 31, 2025, the Company owed related parties for such goods and services in the amounts of $36,807 and $34,630, respectively.
Accounts Receivable – Related Parties
As of March 31, 2026, and December 31, 2025, the Company was owed $22,734 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 March 31, 2026, and December 31, 2025, the Company’s president was due amounts for services performed for the Company.
As of March 31, 2026, and December 31, 2025, the accrued management fees consisted of the following:
| March 31, 2026
|
| December 31, 2025
|
Amounts due to the Company’s CEO
|
| $
| 636,311
|
|
| $
| 636,888
|
Total
|
| $
| 636,311
|
|
| $
| 636,888
|
NOTE 6 – 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 March 31, 2026.
As of March 31, 2026 and December 31, 2025 Convertible Notes – Related Party consisted of the following:
| March 31, 2026
|
| December 31, 2025
|
Convertible Notes payable, related parties
| $
| 10,000
|
| $
| 10,000
|
Less current portion
|
| (10,000)
|
| $
| (10,000)
|
Total
| $
| -
|
| $
| -
|
Page 11
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2026
(unaudited)
NOTE 6 – NOTES PAYABLE - RELATED PARTY (Continued)
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 March 31, 2026, the principal balance and accrued interest due under the Working Capital Note was $244,940 and $13,024.
As of March 31, 2026, and December 31, 2025, Note Payable – Related Party consisted of the following:
|
| March 31, 2026
|
|
| December 31, 2025
|
Note payable, related party
| $
| 244,940
|
| $
| 198,940
|
Total
| $
| 244,940
|
| $
| 198,940
|
NOTE 7 – DEBT
Loans payable – SBA Economic Injury Disaster Loan
On April 21, 2020, the Company obtained a loan (the “SBA EIDL Loan”) under the 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 (30) 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 March 31, 2026, accrued interest was $2,615. 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 March 31, 2026 and December 31, 2025, Debt consisted of the following:
| March 31, 2026
|
| December 31, 2025
|
Loan payable – SBA EIDL
| $
| 199,000
|
| $
| 199,000
|
Less current portion
|
| -
|
|
| -
|
Total
| $
| 199,000
|
| $
| 199,000
|
Page 12
OMNITEK ENGINEERING CORP.
Notes to Financial Statements
March 31, 2026
(unaudited)
NOTE 8 – STOCKHOLDERS’ DEFICIT
Options and Warrants
The Company has no warrants outstanding.
On January 15, 2026, 250,000 options expired. During the three months ended March 31, 2026, and March 31, 2025, the Company granted -0- and -0- options for services, respectively. During the three months ended March 31, 2026, and March 31, 2025, the Company recognized expense of $345 and $345, respectively, for options that vested during the periods pursuant to ASC
Topic 718. As of March 31, 2026, the total remaining amount of compensation expense to be recognized in future periods is $1,523.
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 March 31, 2026, all options issued under the 2015 Plan had expired.
In October 2017, the Company’s shareholders approved its 2017 Long-Term Incentive Plan (the “2017 Plan”). Under the 2017 plan, the Company may issue up to 5,000,000 shares of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion. As of March 31, 2026, the Company had a total of 1,650,000 options issued under the Plan. During the quarter ended March 31, 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:
| March 31, 2026
|
| March 31, 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 March 31, 2026, and December 31, 2025, and changes during the periods then ended is presented below:
NOTE 9 - SUBSEQUENT EVENT
Effective April 27, 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.
Page 14
ITEM 2MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the 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 March 31, 2026 and March 31, 2025
Revenues were $155,597 for the three months ended March 31, 2026, compared with $359,746 for the three months ended March 31, 2025, a decrease of $204,149.
For the three months ended March 31, 2026, total cost of goods sold was $74,984, for a gross margin of $80,613, compared with $218,778 and a gross margin of $140,968 for the three months ended March 31, 2025.
Gross margin as a percentage of sales for the three months ended March 31, 2026, was 52%, compared with 39% for the three months ended March 31, 2025.
Operating expenses for the three months ended March 31, 2026, were $130,697 compared with $151,724 for the three months ended March 31, 2025, a decrease of $21,027. General and administrative expense for the three months ended March 31, 2026, was $112,947 compared with $132,451 for the three months ended March 31, 2025. Major components of general and administrative expenses for the three months ended March 31, 2026, were professional fees of $5,738, rent expense of $10,430 and salary and wages of $51,738. This compares with professional fees of $18,918, rent expense of $10,430, and salary and wages of $55,861 for the three months ended March 31, 2025. For the three months ended March 31, 2026, research and development outlays were $16,786 compared with $18,309 for the three months ended March 31, 2025.
Our net loss for the three months ended March 31, 2026, was $68,584, or ($0.00) per share, compared with a net loss of $26,660, or ($0.00) per share, for the three months ended March 31, 2025.
Results for the three months ended March 31, 2026, reflect the impact of non-cash expenses, including the value of options and warrants granted in the amount of $345, and depreciation and amortization of $964. For the three months period ended March 31, 2025, non-cash expenses included options and warrants granted in the amount of $345, and depreciation and amortization of $964.
Page 15
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash provided by financing activities and available working capital. Additionally, from time to time, we may raise funds from the equity capital markets to fund our research and development programs, expansion of our business and general operations.
At March 31, 2026, our current liabilities totaled $1,827,897 and our current assets totaled $849,769, resulting in negative working capital of $978,128.
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 $21,822,429 at March 31, 2026.
Operating Activities
We realized a positive cash flow from operations of $19,107 for the three months ended March 31, 2026 compared with a negative cash flow of $109,115 during the three months ended March 31, 2025.
Included in the operating loss of $68,584 for the three months ended March 31, 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 and warrants granted in the amount of $345 and depreciation and amortization of $964. Additionally, the operating loss included general and administrative expenses of $112,947 and research and development expenses of $16,786.
Financing Activities
We realized $0 cash flow from financing activities for the three months ended March 31, 2026, compared to $0.00 cash flow for the three months ended March 31, 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:
Page 16
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.
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 and risks 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.
Page 17
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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer has concluded that our disclosure controls and procedures were not effective as of March 31, 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 March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Page 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 16, 2022 the Company received a Summons and was named as a cross-defendant in the matter of Olson-Ecologic Engine Testing Laboratories, LLC -v- Michael Naylor, Omnitek Engineering Corp., and Moto Concerto, Inc., filed in the Superior Court of the State of California, County of Orange, Central Justice Center, Case No. 30-2020-01171344.
On November 18, 2025, the above matter was settled out of court. Pursuant to the Settlement agreement, Omnitek will pay to Plaintiff, Olson-Ecologic, the sum of $13,872.97 in six equal monthly payments commencing December 2025, and will in exchange take back certain engine parts of equal value. Omnitek will further waive the amount of $5,025 believed owed by Olson-Ecologic relating to testing services.
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
Subsequent Events
Effective April 27, 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.
Page 19
ITEM 6. EXHIBITS
(a)Documents filed as part of this Report.
1. Financial Statements. The condensed unaudited Balance Sheet of Omnitek Engineering Corp. as of March 31, 2026 and the audited balance sheet as of December 31, 2025, the condensed unaudited Statements of Operations for the three month periods ended March 31, 2026 and March 31, 2025, the condensed unaudited Statements of Cash Flows for the three month periods ended March 31, 2026 and March 31, 2025 and the condensed unaudited Statements of Stockholders’ Equity (Deficit) as of March 31, 2026 and March 31, 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 (4)
|
31.2
|
| CFO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (4)
|
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 (4)
|
101
|
| The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 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.
Page 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Omnitek Engineering Corp.
|
|
|
|
|
|
|
Dated: May 20, 2026
|
| /s/ Werner Funk
|
|
| By: Werner Funk
|
|
| Its: Chief Executive Officer
Principal Executive Officer
|
|
|
|
|
|
|
|
|
|
Dated: May 20, 2026
|
| /s/ Werner Funk
|
|
| By: Werner Funk
Its: Chief Financial Officer
Principal Financial Officer
|
Page 21
