10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: JUNE 30, 2016

Commission File Number     000-53955

OMNITEK ENGINEERING CORP.

 (Exact name of Registrant as specified in its charter)

California	33-0984450
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1333 Keystone Way, #101, Vista, California 92081

 (Address of principal executive offices, Zip Code)

(760) 591-0089

 (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☒   No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of "large accelerated filer,"  "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

As of August 15, 2016, the Registrant had 20,281,082 shares of its no par value Common Stock outstanding.

TABLE OF CONTENTS
	Page
PART I - FINANCIAL INFORMATION
Item 1.       Financial Statements
Condensed Balance Sheets as of June 30, 2016 and December 31, 2015	2
Condensed Statements of Operations for the six months ended June 30, 2016 and June 30, 2015	3
Condensed Statements of Cash Flows for the six months ended June 30, 2016 and June 30, 2015	4
Notes to the Condensed Financial Statements	5
Item 2.       Management's Discussion and Analysis of the Financial Condition and Results of Operations	10
Item 3.       Quantitative and Qualitative Disclosures about Market Risk	14
Item 4.       Controls and Procedures	14
PART II - OTHER INFORMATION
Item 1.       Legal Proceedings	15
Item 1A.    Risk Factors	15
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.       Defaults Upon Senior Securities	16
Item 5.       Other Information	16
Item 6.       Exhibits	16

PART I

FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Page 1

OMNITEK ENGINEERING CORP.

Condensed Balance Sheets

ASSETS
	June 30,			December 31,
	2016			2015
	(unaudited)
CURRENT ASSETS
Cash	$	27,125		$	105,846
Accounts receivable, net		39,965			30,835
Accounts receivable - related parties		13,057			17,257
Inventory, net		2,070,107			2,107,463
Prepaid expense		5,324			6,050
Deposits		19,145			19,745
Total Current Assets		2,174,723			2,287,196
FIXED ASSETS, net		44,969			59,151
OTHER ASSETS
Intellectual property, net		-			281
Other noncurrent assets		14,280			14,280
Total Other Assets		14,280			14,561
TOTAL ASSETS	$	2,233,972		$	2,360,908
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	226,239		$	145,207
Accrued management compensation		155,413			189,163
Accounts payable - related parties		8,152			7,591
Customer deposits		227,185			230,349
Total Current Liabilities		616,989			572,310
Total Liabilities		616,989			572,310
STOCKHOLDERS' EQUITY
Common stock, 125,000,000 shares authorized no par value
20,231,082 and 19,981,082 shares issued and outstanding,
respectively		8,391,411			8,291,411
Additional paid-in capital		11,564,667			11,346,599
Accumulated deficit		(18,339,095	)		(17,849,412	)
Total Stockholders' Equity		1,616,983			1,788,598
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,233,972		$	2,360,908

The accompanying notes are an integral part of these financial statements.

Page 2

OMNITEK ENGINEERING CORP.

Condensed Statements of Operations (unaudited)

	For the Three			For the Three			For the Six			For the Six
	Months Ended			Months Ended			Months Ended			Months Ended
	June 30			June 30			June 30			June 30
	2016			2015			2016			2015
REVENUES	$	247,177		$	576,366		$	576,223		$	1,027,066
REVENUES, related parties		5,139			14,819			15,676			14,819
COST OF GOODS SOLD		148,316			269,003			320,493			520,648
GROSS MARGIN		104,000			322,182			271,406			521,237
OPERATING EXPENSES
General and administrative		341,461			396,841			654,257			747,893
Research and development		46,897			89,655			94,303			166,239
Depreciation and amortization		6,976			7,734			14,463			15,524
Total Operating Expenses		395,334			494,230			763,023			929,656
LOSS FROM OPERATIONS		(291,334	)		(172,048	)		(491,617	)		(408,419	)
OTHER INCOME (EXPENSE)
Other income		1,144			3,934			5,374			3,934
Interest expense		(1,949	)		(172	)		(2,640	)		(172	)
Interest income		-			6			-			15
Total Other Income (Expense)		(805	)		3,768			2,734			3,777
LOSS BEFORE INCOME TAXES		(292,139	)		(168,280	)		(488,883	)		(404,642	)
INCOME TAX EXPENSE		800			-			800			800
NET LOSS	$	(292,939	)	$	(168,280	)	$	(489,683	)	$	(405,442	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING
-BASIC AND DILUTED		20,030,533			19,981,082			20,005,807			19,980,858

The accompanying notes are an integral part of these financial statements.

Page 3

OMNITEK ENGINEERING CORP.

Condensed Statements of Cash Flows (unaudited)

	For the Six			For the Six
	Months Ended			Months Ended
	June 30,			June 30,
	2016			2015
OPERATING ACTIVITIES
Net loss	$	(489,683	)	$	(405,442	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization and depreciation expense		14,463			15,524
Options and warrants		118,068			87,089
Stock-based compensation		-			1,500
Changes in operating assets and liabilities:
Accounts receivable		(9,130	)		(37,074	)
Accounts receivable–related parties		4,200			(2,631	)
Deposits		600			(37,986	)
Prepaid expense		726			(1,850	)
Inventory		37,356			117,922
Accounts payable and accrued expenses		81,032			26,658
Customer deposits		(3,164	)		54,892
Accounts payable-related parties		561			3,496
Accrued management compensation		66,250			29,471
Net Cash Used in Operating Activities		(178,721	)		(148,431	)
INVESTING ACTIVITIES
Net Cash Provided by Investing Activities		-			-
FINANCING ACTIVITIES
Proceeds from stock sale		100,000			-
Net Cash Provided by Financing Activities		100,000			-
NET DECREASE IN CASH		(78,721	)		(148,431	)
CASH AT BEGINNING OF YEAR		105,846			498,782
CASH AT END OF PERIOD	$	27,125		$	350,351
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
CASH PAID FOR:
Interest	$	2,640		$	-
Income taxes	$	800		$	800

The accompanying notes are an integral part of these financial statements.

Page 4

OMNITEK ENGINEERING CORP.

Notes to Condensed Financial Statements

June 30, 2016

(unaudited)

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, 2016 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, 2015 audited financial statements.  The results of operations for the periods ended June 30, 2016 and 2015 are not necessarily indicative of the operating results for the full years.

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.

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.

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	2016			2015
Raw materials	$	1,118,623		$	1,093,890
Finished goods		1,201,000			1,263,089
Allowance for obsolete inventory		(249,516	)		(249,516	)
Total	$	2,070,107		$	2,107,463

The Company has established an allowance for obsolete inventory.  Expense for obsolete inventory was $-0- and $-0-, for the periods ended June 30, 2016 and June 30, 2015, respectively.

Page 5

OMNITEK ENGINEERING CORP.

Notes to Condensed Financial Statements

June 30, 2016

(unaudited)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30,			December 31,
	2016			2015
Production equipment	$	61,960		$	61,960
Computers/Office equipment		28,540			28,540
Tooling equipment		12,380			12,380
Leasehold Improvements		42,451			42,451
Less: accumulated depreciation		(100,362	)		(86,180	)
Total	$	44,969		$	59,151

Depreciation expense for the six month periods ended June 30, 2016 and June 30, 2015 was $14,183 and $14,781, 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 142,965 and -0- stock options and warrants that would have been included in the fully diluted earnings per share as of June 30, 2016 and December 31, 2015, respectively.  

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.

At the adoption date of November 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. 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, 2016 and December 31, 2015 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 2008.

Page 6

OMNITEK ENGINEERING CORP.

Notes to Condensed Financial Statements

June 30, 2016

(unaudited)

NOTE 3 - RELATED PARTY TRANSACTIONS

Accounts Receivable – Related Parties

The Company holds a non-controlling interest in various distributors in exchange for use of the Company's name and logo. As of December 31, 2015, the Company owned a 15% interest in Omnitek Engineering Thailand Co. Ltd. and a 20% interest in Omnitek Peru S.A.C.  As of June 30, 2016 and December 31, 2015, the Company was owed $13,057 and $17,257, respectively, by related parties for the purchase of products and services.

Accounts Payable – Related Parties

The Company regularly incurs expenses that are paid to related parties and purchases goods and services from related parties. As of June 30, 2016 and December 31, 2015, the Company owed related parties for such expenses, goods and services in the amounts of $8,152 and $7,591, respectively.

Accrued Management Expenses

For the periods ended June 30, 2016 and December 31, 2015, the Company's president and vice president were due amounts for services performed for the Company.  As of June 30, 2016 and December 31, 2015 the accrued management fees consisted of the following:

	June 30,			December 31,
	2016			2015
Amounts due to the president		$	98,719		$	148,719
Amounts due to the vice president			56,694			40,444
Total		$	155,413		$	189,163

NOTE 4 - STOCK OPTIONS AND WARRANTS

During the six months ended June 30, 2016 and 2015, the Company granted 250,000 and 50,000 options for services, respectively. During the six months ended June 30, 2016 and 2015, the Company recognized expense of $118,068 and $87,089, 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 $162,097.

In April 2007, the Company's shareholders approved its 2006 Long-Term Incentive Plan ("the 2006 Plan").   Under the 2006 plan, the Company may issue up to 10,000,000 shares of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion.  As of December 31, 2014 the remaining 2,590,000 options previously issued under the plan expired. 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, 2016 the Company has a total of 915,000 options issued under the 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, 2016 the Company has a total of 820,000 options issued under the plan. During the six months ended June 30, 2016 and 2015 the Company issued -0- and -0- warrants, respectively.

Page 7

OMNITEK ENGINEERING CORP.

Notes to Condensed Financial Statements

June 30, 2016

(unaudited)

NOTE 4 - STOCK OPTIONS AND WARRANTS (CONTINUED)

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, 2016			June 30, 2015
Expected volatility		87	%		74	%
Expected dividends		0	%		0	%
Expected term	7 Years			5 Years
Risk-free interest rate		1.52	%		1.58	%

A summary of the status of the options and warrants granted at June 30, 2016 and December 31, 2015 and changes during the periods then ended is presented below:

	June 30,					December 31,
	2016					2015
				Weighted-Average				Weighted-Average
	Shares			Exercise Price		Shares		Exercise Price
Outstanding at beginning of year		3,740,313		$	3.38		3,515,313	$	3.56
Granted		720,000			0.28		225,000		0.85
Exercised		-			-		-		-
Expired or cancelled		(100,000	)		2.74		-		-
Outstanding at end of period		4,360,313			2.88		3,740,313		3.38
Exercisable		4,160,313		$	2.94		3,414,063	$	3.52

Page 8

OMNITEK ENGINEERING CORP.

Notes to Condensed Financial Statements

June 30, 2016

(unaudited)

NOTE 4 - STOCK OPTIONS AND WARRANTS (CONTINUED)

		Number Outstanding			Number Exercisable		Weighted-Average Exercise Price
Range of Exercise Prices				Weighted-Average Remaining Contractual Life
$	0.01-0.99		895,000	6.68 years		811,667	$	0.34
$	1.00-1.99		215,000	2.63 years		205,000		1.40
$	2.00-2.99		530,000	3.24 years		423,333		2.51
$	3.00-3.99		2,720,313	0.77 years		2,720,313		3.88
$	0.01-3.99		4,360,313	2.38 years		4,160,313	$	2.93

NOTE 5 – STOCKHOLDERS' EQUITY

On June 13, 2016 the Company sold, to an unrelated party, 250,000 shares of restricted common stock at a price of $0.40 per share for an aggegrate sales price of $100,000.

NOTE 6 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.  There are no material subsequent events to report

Page 9

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 financial statements and related notes to the 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, 2016 and 2015

Revenues were $252,316 for the three months ended June 30, 2016 compared with $591,185 for the three months ended June 30, 2015, a decrease of $338,869, or 57%. The results for the quarter reflect the impact of the timing of orders between the completion of pilot programs and the ramp-up of fleet conversions on a larger scale.

Our cost of sales was $148,316 for the three months ended June 30, 2016 compared with $269,003 for the three months ended June 30, 2015, a decrease of $120,687. Our gross margin was 41% for the three months ended June 30, 2016 compared with 54% in the same period in 2015. The gross margin for the quarter was impacted by the product mix but is still consistent with management's target range.

Our operating expenses for the three months ended June 30, 2016 were $395,334 compared with $494,230 in the same period in 2015, a decrease of $98,896 or 20%. General and administrative expense for the three months ended June 30, 2016 was $341,461 as compared with $396,841 for the three months ended June 30, 2015. Major components of general and administrative expenses for the three months ended June 30, 2016 were professional fees of $20,593, rent expense of $20,317, and salary and wages of $122,076. This compares to professional fees of $23,244, rent expense of $45,653 and salaries and wages of $129,241 for the three months ended June 30, 2015.  For the three months ended June 30, 2016 research and development outlays were decreased to $46,897 compared with $89,655 for the three months ended June 30, 2015.

Our net loss for the three months ended June 30, 2016 was $292,939, or $0.01 per share, compared with a net loss of $168,280, or $0.01 per share, for the three months ended June 30, 2015. The increased loss was due primarily to the reduction in sales.

Page 10

Results for the three months ended June 30, 2016 reflect the impact of non-cash expenses, including the value of options and warrants granted in the amount of $81,969 and depreciation and amortization of $6,976. For the three month period a year earlier, non-cash expenses for the value of options and warrants granted were $53,486, with depreciation and amortization of $7,734.

For the six months ended June 30, 2016 and 2015

Revenues decreased to $591,899 for the six months ended June 30, 2016 from $1,041,885 for the six months ended June 30, 2015, a decrease of $449,986 or 43%. The results for the period reflect the impact of the timing of orders between the completion of pilot programs and the ramp-up of fleet conversions on a larger scale.

Our cost of sales decreased to $320,493 for the six months ended June 30, 2016 from $520,648 for the six months ended June 30, 2015, a decrease of $200,155. Our gross margin was 46% for the six months ended June 30, 2016 compared to 50% in 2015. The gross margin for the period was impacted by the product mix but is still consistent with management's target range.

Our operating expenses for the six months ended June 30, 2016 were $763,023 compared to $929,656 in 2015, a decrease of $166,633 or 18%.  General and administrative expense for the six months ended June 30, 2016 was $654,257 as compared to $747,893 for the six months ended June 30, 2015.  The decrease is due primarily to lower travel expense of $10,345 for the six months ended June 30, 2016 as compared to $ $35,214 for the six months ended June 30, 2015, lower legal expense of $24,960 for the six months ended June 30, 2016 as compared to $36,937 for the six months ended June 30, 2015 and options expense of $ 118,068 for the six months ending June 30, 2016 as compared to $ 87,089 for the six months ended June 30, 2015.  Major components of general and administrative expenses for the six months ended June 30, 2016 were professional fees of $51,978, rent expense of $48,053 and salary and wages of $241,362. This compares to professional fees of $59,787, rent expense of $74,983, and salary and wages of $265,486 for the six months ended June 30, 2015. Research and development outlays were decreased to $94,303 for the six months ended June 30, 2016 compared to $166,239 for the six months ended June 30, 2015.

Our net loss for the six months ended June 30, 2016 was $489,683, or $0.02 per share, compared to a net loss of $405,442, or $0.02 per share, for the six months ended June 30, 2015. The increased loss was the result of reduced sales.

Results for the six months ended June 30, 2016 reflect the impact of non-cash expenses, including the value of options and warrants granted in the amount of $118,068 and depreciation and amortization of $14,463. For the six-month period a year earlier, non-cash expenses for the value of options and warrants granted were $87,089 and depreciation and amortization of $15,524.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash provided by operating 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, 2016, our current liabilities totaled $616,989 and our current assets totaled $2,174,723, resulting in positive working capital of $1,557,734 and a current ratio of 3.52.

Page 11

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 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 $18,339,095 at June 30, 2016, of which $5,604,135 is a direct result of derivative expense and change in fair value of derivative liability and is unrelated to, and has no effect on, our operations or cash flow.

Operating Activities

We realized a negative cash flow from operations of $178,721 for the six months ended June 30, 2016 compared with a negative cash flow of $148,431 during the six months ended June 30, 2015.

Included in the net loss of $489,683 for the six months ended June 30, 2016 are non-cash expenses, which are not a drain on our capital resources. During the six months ended June 30, 2016, the non-cash expenses include the value of options and warrants granted in the amount of $118,068 and depreciation and amortization of $14,463. Excluding these non-cash amounts, our EBITDA for the six months ended June 30, 2016 would have been a loss of $357,152.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policiesand 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.

Inventory

Inventory is stated at the lower of cost or market. The Company's inventory consists of finished goods and raw material. The Company identifies items in its inventory that have not been sold in a timely manner. Accordingly, the Company has established an allowance for the cost of such obsolete inventory.

Page 12

Long-lived assets

The Company assesses the recoverability of its long lived assets annually and whenever circumstances would 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.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification 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. The Company uses historical experience to determine the likely-hood of realization of deferred tax liabilities and assets.

Revenue Recognition

The Company recognizes revenue from the sale of new natural gas engines and components to convert existing diesel engines to natural gas engines. Revenue is recognized upon shipment of the products, and when collection is reasonably assured.

Accounting for 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.

At the adoption date of November 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized.

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, 2016, 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 2008.

At June 30, 2016, the Company had net operating loss carry forwards of approximately $6,300,000 through 2034.No tax benefit has been reported in the June 30, 2016 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Page 13

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

Recently Issued 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.

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 and Principal Financial 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 and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2016.

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, 2016 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Page 14

PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

We are not a party to any pending legal proceeding.  No federal, state or local governmental agency is presently contemplating any proceeding 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

On April 15, 2016, pursuant to the agreement Werner Funk, the President and CEO of the Company, and in consideration of the exchange and cancellation of $100,000 of deferred salary owing by the Company to Mr. Funk, the Company granted to Mr. Funk a non-qualified stock option to purchase 470,000 shares of common stock, at an exercise price of $0.286 representing 110% of the closing price of the Company's common stock as of April 15, 2016.  Such Option shall be exercisable for a period of seven years.  The Option shall vest and be exercisable immediately.  No underwriters were used. The securities were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933.  As the President and CEO of the Company, Mr. Funk was intimately acquainted with the Company's business plan and proposed activities at the time of issuance, and possessed information on the Company necessary to make an informed investment decision.

On April 15, 2016, the Company granted to each of Janice Quigley, Vice President and Richard Miller, Chief Financial Officer, a non-qualified stock option to purchase 50,000 shares of common stock, at an exercise price of $0.286 representing 110% of the closing price of the Company's common stock as of April 15, 2016. Such Options shall be exercisable for a period of seven years.  The Option shall vest and be exercisable immediately.  No underwriters were used. The securities were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. The individuals receiving the options were intimately acquainted with the Company's business plan and proposed activities at the time of issuance, and possessed information on the Company necessary to make an informed investment decision.

On April 15, 2016, the Company granted to each of John M. Palumbo, Gary S. Maier and George G. Chachas, the three outside directors, a non-qualified stock option to purchase 50,000 shares of the Company's common stock at an exercise price of $0.26 per share representing 100% of the closing price of the Company's common stock as of April 15, 2016. Such Options shall be exercisable for a period of seven years.  The Option shall vest and be exercisable immediately.  No underwriters were used. The securities were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. The individuals receiving the options were intimately acquainted with the Company's business plan and proposed activities at the time of issuance, and possessed information on the Company necessary to make an informed investment decision.

On June 13, 2016, as previously reported on Form 8-K as filed with the Securities and Exchange Commission on June 17, 2016, the Company sold 250,000 shares of its restricted common stock for cash to unrelated accredited investor at a price of $0.40 per share, which resulted in aggregate gross proceeds to Company of $100,000. No underwriters were used. The securities were sold pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933.

Subsequent to the period covered by this report, on July 15, 2016, the Company issued 50,000 shares of its restricted common stock for consulting services, which shares were valued at a price of $0.40 per share. No underwriters were used. The securities were sold pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. The individual receiving the shares was intimately acquainted with the Company's business plan and proposed activities at the time of issuance, and possessed information on the Company necessary to make an informed investment decision.

Page 15

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 5.OTHER INFORMATION

None

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, 2016 and the audited balance sheet as of December 31, 2015, the condensed unaudited Statements of Operations for the six months periods ended June 30, 2016 and 2015, and the condensed unaudited Statements of Cash Flows for the six month periods ended June 30, 2016 and 2015, 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)
31.01	CEO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3)
31.02	CFO certification pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 (3)
32.01	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, 2016 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 on Form 10 on April 27, 2010

⁽²⁾ Previously filed on Form 8-K on August 2, 2012

⁽³⁾ Filed herewith

Page 16

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 15, 2016
		By: Werner Funk
		Its: Chief Executive Officer Principal Executive Officer

Dated: August 15, 2016	/s/ Richard L. Miller
	By: Richard L. Miller
	Its: Chief Financial Officer Principal Financial Officer

Page 17

EX-31.01

Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14

I, Werner Funk, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Omnitek Engineering Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have, for the small business issuer and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5.I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability torecord, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Dated: August 15, 2016	___________________________
	By:  Werner Funk
	Its:  President and Secretary

EX-31.02

Exhibit 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14

I, Richard Miller, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Omnitek Engineering Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have, for the small business issuer and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the smallbusiness issuer, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and,

(d)    Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and,

5.I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and,

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: April

Dated: August 15, 2016	/s/ Richard Miller
	___________________________
	By: Richard Miller
	Its:  Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Omnitek Engineering Corp. (the "Company") on Form 10-Q for the period ending June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Werner Funk, Chief Executive Officer and I, Richard Miller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: August 15, 2016	___________________________
	By:  Werner Funk
	Its:  Chief Executive Officer,
	President and Secretary
Dated: August 15, 2016	/s/ Richard Miller
	___________________________
	By: Richard Miller
	Its:  Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 15, 2016
Document and Entity Information
Entity Registrant Name	Omnitek Engineering Corp.
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Entity Central Index Key	0001404804
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		20,281,082
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	omtk

XML

Condensed Balance Sheets - USD ($)	Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS
Cash	$ 27,125	$ 105,846
Accounts receivable, net	39,965	30,835
Accounts receivable - related parties	13,057	17,257
Inventory, net	2,070,107	2,107,463
Prepaid expense	5,324	6,050
Deposits	19,145	19,745
Total Current Assets	2,174,723	2,287,196
FIXED ASSETS, net	44,969	59,151
OTHER ASSETS
Intellectual property, net		281
Other noncurrent assets	14,280	14,280
Total Other Assets	14,280	14,561
TOTAL ASSETS	2,233,972	2,360,908
CURRENT LIABILITIES
Accounts payable and accrued expenses	226,239	145,207
Accrued management compensation	155,413	189,163
Accounts payable - related parties	8,152	7,591
Customer deposits	227,185	230,349
Total Current Liabilities	616,989	572,310
Total Liabilities	616,989	572,310
STOCKHOLDERS' EQUITY
Common stock, 125,000,000 shares authorized no par value 20,231,082 and 19,981,082 shares issued and outstanding, respectively	8,391,411	8,291,411
Additional paid-in capital	11,564,667	11,346,599
Accumulated deficit	(18,339,095)	(17,849,412)
Total Stockholders' Equity	1,616,983	1,788,598
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 2,233,972	$ 2,360,908

XML

Condensed Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position
Common Stock, par or stated value	$ 0	$ 0
Common Stock, shares authorized	125,000,000	125,000,000
Common Stock, shares issued	20,231,082	19,981,082
Common Stock, shares outstanding	20,231,082	19,981,082

XML

Condensed Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement
REVENUES	$ 247,177	$ 576,366	$ 576,223	$ 1,027,066
REVENUES, related parties	5,139	14,819	15,676	14,819
COST OF GOODS SOLD	148,316	269,003	320,493	520,648
GROSS MARGIN	104,000	322,182	271,406	521,237
OPERATING EXPENSES
General and administrative	341,461	396,841	654,257	747,893
Research and development	46,897	89,655	94,303	166,239
Depreciation and amortization	6,976	7,734	14,463	15,524
Total Operating Expenses	395,334	494,230	763,023	929,656
LOSS FROM OPERATIONS	(291,334)	(172,048)	(491,617)	(408,419)
OTHER INCOME (EXPENSE)
Other income	1,144	3,934	5,374	3,934
Interest expense	(1,949)	(172)	(2,640)	(172)
Interest income		6		15
Total Other Income (Expense)	(805)	3,768	2,734	3,777
LOSS BEFORE INCOME TAXES	(292,139)	(168,280)	(488,883)	(404,642)
INCOME TAX EXPENSE	800		800	800
NET LOSS	$ (292,939)	$ (168,280)	$ (489,683)	$ (405,442)
BASIC AND DILUTED LOSS PER SHARE	$ (0.01)	$ (0.01)	$ (0.02)	$ (0.02)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -BASIC AND DILUTED	20,030,533	19,981,082	20,005,807	19,980,858

XML

Condensed Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
OPERATING ACTIVITIES
Net loss	$ (489,683)	$ (405,442)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation expense	14,463	15,524
Options and warrants	118,068	87,089
Stock-based compensation		1,500
Changes in operating assets and liabilities:
Accounts receivable	(9,130)	(37,074)
Accounts receivable-related parties	4,200	(2,631)
Deposits	600	(37,986)
Prepaid expense	726	(1,850)
Inventory	37,356	117,922
Accounts payable and accrued expenses	81,032	26,658
Customer deposits	(3,164)	54,892
Accounts payable-related parties	561	3,496
Accrued management compensation	66,250	29,471
Net Cash Used in Operating Activities	(178,721)	(148,431)
INVESTING ACTIVITIES
Net Cash Provided by Investing Activities
FINANCING ACTIVITIES
Proceeds from stock sale	100,000
Net Cash Provided by Financing Activities	100,000
NET DECREASE IN CASH	(78,721)	(148,431)
CASH AT BEGINNING OF YEAR	105,846	498,782
CASH AT END OF PERIOD	27,125	350,351
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
CASH PAID FOR: Interest	2,640
CASH PAID FOR: Income taxes	$ 800	$ 800

XML

Note 1 - Condensed Financial Statements

6 Months Ended

Jun. 30, 2016

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, 2016 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, 2015 audited financial statements.  The results of operations for the periods ended June 30, 2016 and 2015 are not necessarily indicative of the operating results for the full years.

XML

Note 2 - Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

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.

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.

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	2016	2015
Raw materials	$1,118,623	$1,093,890
Finished goods	1,201,000	1,263,089
Allowance for obsolete inventory	(249,516)	(249,516)
Total	$2,070,107	$2,107,463

The Company has established an allowance for obsolete inventory.  Expense for obsolete inventory was $-0- and $-0-, for the periods ended June 30, 2016 and June 30, 2015, respectively.

Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30,	December 31,
	2016	2015
Production equipment	$61,960	$61,960
Computers/Office equipment	28,540	28,540
Tooling equipment	12,380	12,380
Leasehold Improvements	42,451	42,451
Less: accumulated depreciation	(100,362)	(86,180)
Total	$44,969	$59,151

Depreciation expense for the six month periods ended June 30, 2016 and June 30, 2015 was $14,183 and $14,781, 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 142,965 and -0- stock options and warrants that would have been included in the fully diluted earnings per share as of June 30, 2016 and December 31, 2015, respectively.  

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.

At the adoption date of November 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. 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, 2016 and December 31, 2015 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 2008.

XML

Note 3 - Related Party Transactions

6 Months Ended

Jun. 30, 2016

Notes

Note 3 - Related Party Transactions

NOTE 3 - RELATED PARTY TRANSACTIONS

Accounts Receivable – Related Parties

The Company holds a non-controlling interest in various distributors in exchange for use of the Company's name and logo. As of December 31, 2015, the Company owned a 15% interest in Omnitek Engineering Thailand Co. Ltd. and a 20% interest in Omnitek Peru S.A.C.  As of June 30, 2016 and December 31, 2015, the Company was owed $13,057 and $17,257, respectively, by related parties for the purchase of products and services.

Accounts Payable – Related Parties

The Company regularly incurs expenses that are paid to related parties and purchases goods and services from related parties. As of June 30, 2016 and December 31, 2015, the Company owed related parties for such expenses, goods and services in the amounts of $8,152 and $7,591, respectively.

Accrued Management Expenses

For the periods ended June 30, 2016 and December 31, 2015, the Company's president and vice president were due amounts for services performed for the Company.  

As of June 30, 2016 and December 31, 2015 the accrued management fees consisted of the following:

	June 30,	December 31,
	2016	2015
Amounts due to the president	$98,719	$148,719
Amounts due to the vice president	56,694	40,444
Total	$155,413	$189,163

XML

Note 4 - Stock Options and Warrants

6 Months Ended

Jun. 30, 2016

Notes

Note 4 - Stock Options and Warrants

NOTE 4 - STOCK OPTIONS AND WARRANTS

During the six months ended June 30, 2016 and 2015, the Company granted 250,000 and 50,000 options for services, respectively. During the six months ended June 30, 2016 and 2015, the Company recognized expense of $118,068 and $87,089, 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 $162,097.

In April 2007, the Company's shareholders approved its 2006 Long-Term Incentive Plan ("the 2006 Plan").   Under the 2006 plan, the Company may issue up to 10,000,000 shares of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion.  As of December 31, 2014 the remaining 2,590,000 options previously issued under the plan expired. 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, 2016 the Company has a total of 915,000 options issued under the 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, 2016 the Company has a total of 820,000 options issued under the plan. During the six months ended June 30, 2016 and 2015 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.

The following table presents the assumptions used to estimate the fair values of the stock options granted:

	June 30, 2016	June 30, 2015
Expected volatility	87%	74%
Expected dividends	0%	0%
Expected term	7 Years	5 Years
Risk-free interest rate	1.52%	1.58%

A summary of the status of the options and warrants granted at June 30, 2016 and December 31, 2015 and changes during the periods then ended is presented below:

	June 30,		December 31,
	2016		2015
		Weighted-Average		Weighted-Average
	Shares	Exercise Price	Shares	Exercise Price
Outstanding at beginning of year	3,740,313	$3.38	3,515,313	$3.56
Granted	720,000	0.28	225,000	0.85
Exercised	-	-	-	-
Expired or cancelled	(100,000)	2.74	-	-
Outstanding at end of period	4,360,313	2.88	3,740,313	3.38
Exercisable	4,160,313	$2.94	3,414,063	$3.52

Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Number Exercisable	Weighted-Average Exercise Price
$0.01-0.99	895,000	6.68 years	811,667	$0.34
$1.00-1.99	215,000	2.63 years	205,000	$1.40
$2.00-2.99	530,000	3.24 years	423,333	$2.51
$3.00-3.99	2,720,313	0.77 years	2,720,313	$3.88
$0.01-3.99	4,360,313	2.38 years	4,160,313	$2.93

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Note 5 - Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Notes

Note 5 - Stockholders' Equity

NOTE 5 – STOCKHOLDERS' EQUITY

On June 13, 2016 the Company sold, to an unrelated party, 250,000shares of restricted common stock at a price of $0.40 per share for an aggegrate sales price of $100,000.

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Note 6 - Subsequent Events

6 Months Ended

Jun. 30, 2016

Notes

Note 6 - Subsequent Events

NOTE 6 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.  There are no material subsequent events to report

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Note 2 - Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

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.

Recent Accounting Pronouncements

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.

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	2016	2015
Raw materials	$1,118,623	$1,093,890
Finished goods	1,201,000	1,263,089
Allowance for obsolete inventory	(249,516)	(249,516)
Total	$2,070,107	$2,107,463

The Company has established an allowance for obsolete inventory.  Expense for obsolete inventory was $-0- and $-0-, for the periods ended June 30, 2016 and June 30, 2015, respectively.

Property and Equipment

Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30,	December 31,
	2016	2015
Production equipment	$61,960	$61,960
Computers/Office equipment	28,540	28,540
Tooling equipment	12,380	12,380
Leasehold Improvements	42,451	42,451
Less: accumulated depreciation	(100,362)	(86,180)
Total	$44,969	$59,151

Depreciation expense for the six month periods ended June 30, 2016 and June 30, 2015 was $14,183 and $14,781, 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 142,965 and -0- stock options and warrants that would have been included in the fully diluted earnings per share as of June 30, 2016 and December 31, 2015, respectively.  

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.

At the adoption date of November 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. 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, 2016 and December 31, 2015 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 2008.

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Note 2 - Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2016

Tables/Schedules

Schedule of Inventory

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	2016	2015
Raw materials	$1,118,623	$1,093,890
Finished goods	1,201,000	1,263,089
Allowance for obsolete inventory	(249,516)	(249,516)
Total	$2,070,107	$2,107,463

Schedule of Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30,	December 31,
	2016	2015
Production equipment	$61,960	$61,960
Computers/Office equipment	28,540	28,540
Tooling equipment	12,380	12,380
Leasehold Improvements	42,451	42,451
Less: accumulated depreciation	(100,362)	(86,180)
Total	$44,969	$59,151

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Note 3 - Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2016

Tables/Schedules

Schedule of Accrued Management Fees

As of June 30, 2016 and December 31, 2015 the accrued management fees consisted of the following:

	June 30,	December 31,
	2016	2015
Amounts due to the president	$98,719	$148,719
Amounts due to the vice president	56,694	40,444
Total	$155,413	$189,163

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Note 4 - Stock Options and Warrants (Tables)

6 Months Ended

Jun. 30, 2016

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, 2016	June 30, 2015
Expected volatility	87%	74%
Expected dividends	0%	0%
Expected term	7 Years	5 Years
Risk-free interest rate	1.52%	1.58%

Schedule of Stock Options and Warrants, Activity

A summary of the status of the options and warrants granted at June 30, 2016 and December 31, 2015 and changes during the periods then ended is presented below:

	June 30,		December 31,
	2016		2015
		Weighted-Average		Weighted-Average
	Shares	Exercise Price	Shares	Exercise Price
Outstanding at beginning of year	3,740,313	$3.38	3,515,313	$3.56
Granted	720,000	0.28	225,000	0.85
Exercised	-	-	-	-
Expired or cancelled	(100,000)	2.74	-	-
Outstanding at end of period	4,360,313	2.88	3,740,313	3.38
Exercisable	4,160,313	$2.94	3,414,063	$3.52

Summary of the Status of the Options and Warrants Outstanding

Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Number Exercisable	Weighted-Average Exercise Price
$0.01-0.99	895,000	6.68 years	811,667	$0.34
$1.00-1.99	215,000	2.63 years	205,000	$1.40
$2.00-2.99	530,000	3.24 years	423,333	$2.51
$3.00-3.99	2,720,313	0.77 years	2,720,313	$3.88
$0.01-3.99	4,360,313	2.38 years	4,160,313	$2.93

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Note 2 - Significant Accounting Policies: Inventory: Schedule of Inventory (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Details
Raw materials	$ 1,118,623	$ 1,093,890
Finished goods	1,201,000	1,263,089
Allowance for obsolete inventory	(249,516)	(249,516)
Total	$ 2,070,107	$ 2,107,463

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Note 2 - Significant Accounting Policies: Inventory (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Details
Expense for Obsolete Inventory	$ 0	$ 0

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Note 2 - Significant Accounting Policies: Property and Equipment: Schedule of Property and Equipment (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Less: accumulated depreciation	$ (100,362)	$ (86,180)
Total	44,969	59,151
Production Equipment
Property, Plant and Equipment, Gross	61,960	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

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Note 2 - Significant Accounting Policies: Property and Equipment (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Details
Depreciation expense	$ 14,183	$ 14,781

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Note 2 - Significant Accounting Policies: Basic and Diluted Loss Per Share (Details) - shares	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Details
Incremental Common Shares Attributable to Dilutive Effect of Options and Warrants	142,965	0

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Note 2 - Significant Accounting Policies: Income Taxes (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Details
Accrued Interest or penalties related to uncertain tax positions	$ 0	$ 0

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Note 3 - Related Party Transactions (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accounts receivable - related parties	$ 13,057	$ 17,257
Accounts payable - related parties	8,152	7,591
Nology Engineering Inc
Accounts payable - related parties	$ 8,152	$ 7,591
Omnitek Engineering Thailand Co. Ltd.
Noncontrolling Interest, Ownership Percentage by Parent		15.00%
Omnitek Peru S.A.C.
Noncontrolling Interest, Ownership Percentage by Parent		20.00%

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Note 3 - Related Party Transactions: Schedule of Accrued Management Fees (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accrued management compensation	$ 155,413	$ 189,163
President
Accrued management compensation	98,719	148,719
Vice President
Accrued management compensation	$ 56,694	$ 40,444

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Note 4 - Stock Options and Warrants (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Sep. 11, 2015	Dec. 31, 2014	Aug. 03, 2011	Apr. 30, 2007
Granted	720,000		225,000
Expense recognized for options and warrants vested	$ 118,068	$ 87,089
Total remaining amount of compensation expense to be recognized in future periods	$ 162,097
Outstanding	4,360,313		3,740,313		3,515,313
Warrants, Granted	0	0
Employee Stock Option
Granted	250,000	50,000
Fair Value, Option, Methodology and Assumptions	Black-Scholes option pricing model
Employee Stock Option | 2006 Long-Term Incentive Plan
Number of Shares Authorized							10,000,000
Outstanding					2,590,000
Employee Stock Option | 2011 Long-Term Incentive Plan
Number of Shares Authorized						1,000,000
Outstanding	915,000
Employee Stock Option | 2015 Long-Term Incentive Plan
Number of Shares Authorized				2,500,000
Outstanding	820,000

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Note 4 - Stock Options and Warrants: Schedule of Assumptions Used to Estimate the Fair Values of Stock Options Granted (Details)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Details
Expected volatility	87.00%	74.00%
Expected dividends	0.00%	0.00%
Expected term	7 years	5 years
Risk-free interest rate	1.52%	1.58%

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Note 4 - Stock Options and Warrants: Schedule of Stock Options and Warrants, Activity (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Outstanding at beginning of year	3,740,313	3,515,313
Outstanding, Weighted Average Exercise Price at beginning of year	$ 3.38	$ 3.56
Granted	720,000	225,000
Granted, Weighted Average Exercise Price	$ 0.28	$ 0.85
Exercised, Weighted Average Exercise	$ 0	$ 0
Expired or cancelled	(100,000)	0
Expired or cancelled, Weighted Average Exercise Price	$ 2.74	$ 0
Outstanding at end of year	4,360,313	3,740,313
Outstanding, Weighted Average Exercise Price at end of year	$ 2.88	$ 3.38
Exercisable	4,160,313	3,414,063
Exercisable, Weighted Average Exercise Price	$ 2.94	$ 3.52
Common Stock
Exercised	0	0

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Note 4 - Stock Options and Warrants: Summary of the Status of the Options and Warrants Outstanding (Details)	6 Months Ended
	Jun. 30, 2016 $ / shares shares
$0.01 - 0.99
Number Outstanding | shares	895,000
Weighted Average Remaining Contractual Life	6 years 8 months 5 days
Number Exercisable | shares	811,667
Weighted-Average Exercise Price	$ 0.34
Exercise Price Range, Lower Range Limit	0.01
Exercise Price Range, Upper Range Limit	$ 0.99
$1.00 - 1.99
Number Outstanding | shares	215,000
Weighted Average Remaining Contractual Life	2 years 7 months 17 days
Number Exercisable | shares	205,000
Weighted-Average Exercise Price	$ 1.40
Exercise Price Range, Lower Range Limit	1.00
Exercise Price Range, Upper Range Limit	$ 1.99
$2.00 - 2.99
Number Outstanding | shares	530,000
Weighted Average Remaining Contractual Life	3 years 2 months 26 days
Number Exercisable | shares	423,333
Weighted-Average Exercise Price	$ 2.51
Exercise Price Range, Lower Range Limit	2.00
Exercise Price Range, Upper Range Limit	$ 2.99
$3.00 - 3.99
Number Outstanding | shares	2,720,313
Weighted Average Remaining Contractual Life	9 months 7 days
Number Exercisable | shares	2,720,313
Weighted-Average Exercise Price	$ 3.88
Exercise Price Range, Lower Range Limit	3.00
Exercise Price Range, Upper Range Limit	$ 3.99
$0.01 - 3.99
Number Outstanding | shares	4,360,313
Weighted Average Remaining Contractual Life	2 years 4 months 17 days
Number Exercisable | shares	4,160,313
Weighted-Average Exercise Price	$ 2.93
Exercise Price Range, Lower Range Limit	0.01
Exercise Price Range, Upper Range Limit	$ 3.99

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Note 5 - Stockholders' Equity (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 13, 2016
Stock Issued During Period, Value, New Issues	$ 100,000
Common Stock
Stock Issued During Period, Shares, New Issues	250,000
Share Price		$ 0.40