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EX-31.1 - EXHIBIT 31.1 - Omnitek Engineering Corpexhibit31-1.htm
EX-32.1 - EXHIBIT 32.1 - Omnitek Engineering Corpexhibit32-1.htm
 


 
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:  March 31, 2012

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.)
 
1945 S. Rancho Santa Fe Road, San Marcos, California 92078
 (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) 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 x   No o
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 (§ 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 x   No o

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
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x

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

As of May 8, 2012, the Registrant had 19,749,582 shares of its no par value Common Stock outstanding.


 
 

 

 
 
 
Page
PART I - FINANCIAL INFORMATION
   
1
     
 
     
   
 
     
   
 
     
 
     
     
     
     
     
  PART II - OTHER INFORMATION
     
     
     
Risk Factors
     
     
     
     
     
Exhibits
 
 
 
 
 
Condensed Balance Sheets
         
ASSETS
         
 
March 31,
 
December 31,
 
 
2012
 
2011
         
CURRENT ASSETS
       
Cash
  $ 47,934     $ 31,196  
Accounts receivable, net
    55,807       13,506  
Accounts receivable -related party
    -       16,715  
Inventory
    961,591       1,020,117  
Prepaid expense
    1,675       2,512  
Deposits
    85,193       41,943  
                 
Total Current Assets
    1,152,200       1,125,989  
                 
FIXED ASSETS, net
    12,551       13,249  
                 
OTHER ASSETS
               
Intellectual property, net
    7,497       8,256  
                 
Total Other Assets
    7,497       8,256  
                 
TOTAL ASSETS
  $ 1,172,248     $ 1,147,494  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 130,619     $ 57,828  
Accrued expenses - related parties
    347,470       351,580  
Accounts payable - related parties
    13,332       2,568  
Notes Payable
    40,000       -  
Customer deposits
    319,592       286,608  
                 
Total Current Liabilities
    851,013       698,584  
                 
Total Liabilities
    851,013       698,584  
                 
STOCKHOLDERS' EQUITY
               
Common stock, 125,000,000 shares authorized no par value
               
   17,247,336 and 17,137,812 shares issued and outstanding,
               
   respectively
    2,679,299       2,659,299  
Additional paid-in capital
    4,228,763       4,213,313  
Accumulated deficit
    (6,586,827 )     (6,423,702 )
                 
Total Stockholders' Equity
    321,235       448,910  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 1,172,248     $ 1,147,494  
                 
                 
                 
The accompanying notes are an integral part of these condensed financial statements.
                 
 
 


 
Condensed Statements of Operations
 
             
   
For the Three
   
For the Three
 
   
Months Ended
   
Months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
 
             
REVENUES
  $ 306,369     $ 615,256  
COST OF GOODS SOLD
    200,612       282,630  
GROSS MARGIN
    105,757       332,626  
                 
OPERATING EXPENSES
               
                 
General and administrative
    237,323       265,857  
Research and development expense
    28,894       27,465  
Depreciation and amortization expense
    1,457       20,393  
                 
Total Operating Expenses
    267,674       313,715  
                 
LOSS FROM OPERATIONS
    (161,917 )     18,911  
                 
OTHER EXPENSE
               
                 
Interest expense
    (408 )     -  
                 
Total Other Expense
    (408 )     -  
                 
NET INCOME (LOSS) BEFORE INCOME TAXES
    (162,325 )     18,911  
INCOME TAX EXPENSE
    800       800  
                 
NET INCOME (LOSS)
  $ (163,125 )   $ 18,111  
                 
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
  $ (0.01 )   $ 0.00  
                 
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
               
  OF COMMON SHARES OUTSTANDING
    17,196,734       15,659,829  
                 
                 
                 
The accompanying notes are an integral part of these condensed financial statements.
 
 
 

 
 
Condensed Statements of Cash Flows
 
             
   
For the Three
   
For the Three
 
   
Months Ended
   
Months Ended
 
   
March 31,
   
March 31,
 
    2012     2011  
OPERATING ACTIVITIES
 
 
       
Net Income (loss)
  $ (163,125 )   $ 18,111  
Adjustments to reconcile net loss to
               
net cash used by operating activities:
               
Amortization and depreciation expense
    1,457       20,393  
Options and warrants granted
    15,450       69,452  
Changes in operating assets and liabilities:
               
Accounts receivable
    (42,302 )     7,773  
Accounts receivable–related parties
    16,715       (30,295 )
Deposits
    (43,250 )     (38,876 )
Prepaid Expense
    837       -  
Inventory
    58,526       95,811  
Accounts payable and accrued expenses
    72,791       (71,366 )
Customer deposits
    32,984       (51,456 )
Accounts payable-related parties
    10,764       -  
Accrued expenses-related parties
    (4,110 )     (11,924 )
                 
Net Cash (Used in) Provided by Operating Activities
    (43,264 )     7,623  
                 
INVESTING ACTIVITIES
               
Purchase of property and equipment
    -       (10,621 )
                 
Net Cash Used in Investing Activities
    -       (10,621 )
                 
FINANCING ACTIVITIES
               
Issuance of common stock for cash
    20,000       -  
Note Payable
    40,000          
                 
Net Cash Provided by Financing Activities
    60,000       -  
                 
NET INCREASE (DECREASE) IN CASH
    16,737       (2,998 )
CASH AT BEGINNING OF YEAR
    31,196       34,944  
                 
CASH AT END OF PERIOD
  $ 47,933     $ 31,946  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
               
CASH PAID FOR:
               
Interest
  $ 408     $ -  
Income taxes
  $ 800     $ 800  
                 
NON CASH FINANCING ACTIVITIES:
               
Common stock issued for debt
  $ -     $ -  
                 
                 
                 
The accompanying notes are an integral part of these condensed financial statements.
 
                 
 

 
3

OMNITEK ENGINEERING CORP.
Condensed Notes to Financial Statements
March 31, 2012




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 March 31, 2012, 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, 2011 audited financial statements.  The results of operations for the periods ended March 31, 2012 and 2011 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 San Marcos, California at March 31, 2012 and December 31, 2011 consisted of the following:

   
March 31,
   
December 31,
 
   
2012
   
2011
 
Raw materials
 
$
872,830
   
$
946,762
 
Finished goods
   
697,836
     
674,198
 
Peru (finished goods)
   
18,454
     
18,454
 
In transit
   
-0-
     
8,232
 
Allowance for obsolete inventory
   
(627,529
)
   
(627,529
)
Total
 
$
961,591
   
$
1,020,117
 

The Company has established an allowance for obsolete inventory.  Expense for obsolete inventory was $-0- and $-0-, for the periods ended March 31, 2012 and December 31, 2011, respectively.
 
 


NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes ("Topic 740"), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

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 March 31, 2012 and December 31, 2011 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.

NOTE 3 - RELATED PARTY TRANSACTIONS

Accounts Receivable – Related Parties
During the years ended December 31, 2007 through 2010, the Company a minority interest in various distributors in exchange for use of the Company’s name and logo. As of December 31, 2011, the Company owned a 15% interest in Omnitek Engineering Thailand Co. Ltd., a 20% interest in Omnitek Peru S.A.C., and a 5% interest in Omnitek Stationary, Inc.  As of March 31, 2012 and December 31, 2011, the Company was owed $-0- and $16,715, respectively, by related parties for the purchase of products.

Accounts Payable – Related Parties
The Company regularly incurs expenses that are paid for by related parties and purchases goods and services from related parties. As of March 31, 2012 and December 31, 2011, the Company owed related parties for such expenses, goods and services in the amounts of $13,332 and $2,568, respectively.

 

NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)

Accrued Expenses – Related Parties
During the periods ended March 31, 2012 and December 31, 2011, related parties were due amounts for services performed for the Company.  During the three months ended March 31, 2012, officers of the company contributed $2,428 as compensation and the Company made cash payments of $6,538.

As of March 31, 2012 and December 31, 2011 the related parties’ payables consisted of the following:

 
March 31,
 
December 31,
 
 
2012
 
2011
 
Amounts due to the president
 
$
265,484
   
$
271,253
 
Amounts due to other officers of the company
   
81,986
     
80,327
 
Total
 
$
347,470
   
$
351,580
 

Line of Credit Payable  – Related Parties
On February 15, 2012 the Company has entered into a revolving line of credit agreement with a shareholder for $50,000 for an initial period of 6 months. The Company owes $40,000 under the revolving line of credit as of March 31, 2012. The revolving line of credit bears interest at 9% per annum and is secured by 100,000 shares of the Company’s common stock. The Company owes $128 of accrued interest on the revolving line of credit as of March 31, 2012. The Company granted 5,000 stock purchase warrants as consideration for the funding of the revolving line of credit resulting in an expense of $15,450.

NOTE 4 - STOCK OPTIONS AND WARRANTS

During the three months ended March 31, 2012, the Company granted 5,000 warrants as consideration for the funding of the revolving line of credit.  The fair value of the options granted was estimated on the date granted using the Black-Scholes pricing model, with the following assumptions used for the valuation: risk-free interest rate of 85.00%, expected dividend yield of zero, expected life of five years and expected volatility of 582.87%. The warrants have an exercise price of 2.68, and can be exercised at any time and expire in five years from the grant date.

During the three months ended March 31, 2012 and 2011, the Company recognized expense of $15,450 and $69,452, respectively, for options and warrants that vested during the periods pursuant to ASC Topic 718.
    
In April 2007, the Company’s shareholders approved its 2006 Long-Term Incentive Plan (“the Plan”). Under the 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 March 31, 2012 the Company has a total of 2,825,000 options issued under the plan.

A summary of the status of the options and warrants granted at March 31, 2012 and December 31, 2011 and changes during the periods then ended is presented below:


 

NOTE 4 - STOCK OPTIONS AND WARRANTS (CONTINUED)

 
2012
 
2011
 
Shares
 
Weighted
Average
 Exercise
Price
 
Shares
 
Weighted
Average
 Exercise
 Price
Outstanding at beginning of period
  2,820,000   $ 0.73     5,870,000   $ 0.52
Granted
  5,000     2.68     -     -
Exercised
        -     (1,177,983 )   0.15
Expired or canceled
  -     -     (1,872,017 )   0.43
Outstanding at end of period
  2,825,000     0.73     2,820,000     0.73
Exercisable
  2,825,000   $ 0.73     2,820,000   $ 0.73
 
A summary of the status of the options and warrants outstanding at March 31, 2012 is presented below:
 
   
Total Outstanding
 
Total Exercisable
 
     
Average
     
Weighted
   
Number
Remaining
 
Number
 
Average
Range
  O/S
Life (Yrs)
 
Exercisable
 
Exercisable
$ 0.01 - 0.50   200,000 2.53   200,000   $ 0.38
$ 0.51 - 0.75   1,580,000 0.63   1,580,000   $ 0.63
$ 0.76 - 1.00   1,040,000 0.61   1,040,000   $ 0.94
$ 1.01 - 3.00   5,000 0.02   5,000   $ 0.01
$ 0.01 – 3.00   2,825,000 0.75   2,825,000   $ 0.73

NOTE 5 - SUBSEQUENT EVENTS

On April 9, 2012, the Company closed a private placement (the “Private Placement”) with select accredited investors (the “Investors”) related to the sale and issuance of an aggregate of 2,602,246 shares of common stock (the “Common Stock”) of the Company (the “Shares”) and warrants to purchase an aggregate of 2,602,246 shares of Common Stock (the “Warrants”). The aggregate gross proceeds raised by the Company were $5,516,762 million. Each Share will be sold to the Investors at $2.12 per Share. The Warrants will expire five (5) years from the date of issue and may be exercised at $3.88 per Share, subject to adjustment in certain circumstances. The Company has allocated $2,758,381 of the total $5,516,762 proceeds to the value of the warrants.
 
In connection with the Private Placement, the Company paid its placement agents (the “Placement Agents”) an aggregate cash commission equal to $386,173.  In addition, the Company will reimburse the Placement Agents $23,632 for costs and expenses incurred in connection with the Private Placement, and issue to the Placement Agents five-year warrants to purchase an aggregate of 78,067 shares of common stock, at an exercise price of $3.88 per share, subject to adjustment in certain circumstances (the “Placement Agent Warrants”).  
 
 
 
 
NOTE 5 - SUBSEQUENT EVENTS (CONTINUED)

The Company also issued to two consultants, five-year warrants purchasing an aggregate of 40,000 shares of common stock, at an exercise price of $3.88 per share.
 
The Company estimates that the total compensation expense that will be recognized in connection with the warrants using the Black-Scholes pricing model will be $502,965.

On April 10, 2012, the Line of Credit – Related Party was repaid in full and the 100,000 collateral shares were cancelled

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

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.
 
A.           Results of Operations

For the three months ended March 31, 2012 and 2011

Revenues decreased to $306,369 for the three months ended March 31, 2012 from $615,256 for the three months ended March 31, 2011, a decrease of $308,887 or 50%.  Revenues for the period ended March 31, 2011 were exceptionally high due to due rescheduling of orders by certain customers.  We expect the sales for the remainder of 2012 to be on a par with or somewhat higher than 2011.

Our cost of sales decreased to $200,612 for the three months ended March 31, 2012 from $282,630 for the three months ended March 31, 2011, a decrease of $82,018. Our gross margin was 34.5% for the three months ended March 31, 2012 compared to 54 % in 2011.  This was mainly due to the volume and mix of product that was shipped.  We anticipate our margin being between 38% to 42% for the remainder of the year.

Our operating expenses for the three months ended March 31, 2012 were $267,674 compared to $313,715 in 2011, a decrease of $46,041 or 15%.  General and administrative expense for the three months ended March 31, 2012 was $237,323 as compared to $265,857 for the three months ended March 31, 2011.  The decrease is due primarily to the decrease in expense related to stock options issued of $15,450 for the three months ended March 31, 2012 as compared to $69,451 for the three months ended March 31, 2011.  Major components of general and administrative expenses for the three months ended March 31, 2012 were professional fees of $48,253, rent expense of $33,376, and salary and wages of $88,914. This compares to professional fees of $27,561, rent expense of $30,998 and salaries and wages of $78,682 for the three months ended March 31, 2011.   In the three months ended March 31, 2012 professional fees were higher by approximately $20,692 due to legal expenses incurred in connection with the private placement which closed on April 9, 2012. Research and development outlays were  increased to $28,894 for the three months ended March 31, 2012 compared to $27,465 for the three months ended March 31, 2012.

Our net loss for the three months ended March 31, 2012 was $163,125, ($0.01 per share) compared to a net profit of $18,111 ($0.00 per share) for the three months ended March 31, 2011. The increased loss was the result of lower sales in the three months ended March 31, 2012 compared to the three months ended March 31, 2011.

 
 
 
Results for the three months ended March 31, 2012 reflect the impact of non-cash expenses, including the value of options and warrants granted in the amount of $15,450 and depreciation and amortization of $1,457. For the three month period a year earlier, non-cash expenses for the value of options and warrants granted were $69,452 and depreciation and amortization of $20,393.

B. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cash Requirements

We believe that we will have sufficient cash from operations to meet our operating requirements for the proximate 12 months.

Liquidity and Capital Resources

Overview

For the three months ended March 31, 2012 and 2011

At March 31, 2012, our current liabilities totaled $851,013 and our current assets totaled $1,152,200, resulting in positive working capital of $301,187 and a current ratio of 1.35.  During the three months ended March 31, 2012, we received $20,000 of cash from the issuance of common stock and $40,000 from the borrowing of funds. We believe that through the collection of accounts receivable and the sale of inventory, in the normal course of business, we will meet our obligations on a timely basis and that our liquidity is sufficient for at least the next twelve months.

We have no firm commitments or obligations for capital expenditures. However, substantial discretionary expenditures will be required to enable us to conduct existing and planned product research, design, development, manufacturing, marketing and distribution of our products and Intellectual Property. 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 and until we have sufficient assets, capital, and inventory or accounts receivable, it is not anticipated that we will secure any bank financing in the near future. Therefore, it is likely 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 $6,586,827 at March 31, 2012.

Operating Activities

We have realized a negative cash flow from operations of $43,264 for the three months ended March 31, 2012 compared to a positive cash flow of $7,623 during the three months ended March 31, 2011.

Included in the net loss of $163,125 for the twelve months ended March 31, 2012 are non-cash expenses which are not a drain on our capital resources.  During the three months ended March 31, 2012, the expenses include the value of options and warrants granted in the amount of $15,450 and depreciation and amortization of $1,457.  Excluding these non-cash amounts, our EBITDA for the twelve months ended March 31, 2012 would have been a loss of $146,218.

Off-Balance Sheet Arrangements

None.
 
 
 
 
Critical Accounting Policiesand 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:

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 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.

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.

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 March 31, 2012, 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 2006.

No tax benefit has been reported in the March 31, 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

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.
  


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.


Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure.

Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2012, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of March 31, 2012, our disclosure controls and procedures were effective.
 
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, 2012  that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 
 
 
PART II - OTHER INFORMATION
 

The Company received notice November 27, 2011 that it was named as a defendant in lawsuit brought in the Superior Court of Kern County California, case number S-1500-CL-259981.  The claim was that the Company was responsible for damages to an engine.  The damage was caused by an installation error and not by any of the materials that Omnitek provided.  As such, it was determined that the Company was not the proper party to the lawsuit; the Company was dismissed from the suit, with prejudice, on February 28, 2012.

On January 10, 2012, the Company was named as a defendant in a lawsuit brought in small claims court in San Diego County California, case number 37-2012-00011005-SC-SC-NC.  Thornburg & Litteken, LLC, the plaintiff, brought forth a claim for payment of services rendered in the hiring of an officer for Omnitek.  The case was heard on March 2, 2012 and the court rendered a decision in favor of the plaintiff for $5,000 and legal fees of $118.

Other than as set forth above, 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.
 

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.


Subsequent to the period covered by this Report

On April 9, 2012, pursuant to a Securities Purchase Agreement, we issued to 32 Investors, an aggregate of 2,602,246 shares of our common stock and Warrants exercisable into 2,602,246 shares of our common stock for total subscription proceeds of $5,516,762.  The Warrants have an exercise price of $3.88 per share and are exercisable for a period of five years expiring on April 8, 2017.  The number of shares of common stock to be received upon the exercise of the Warrants are subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the common stock that occur after the Closing Date.

Pursuant to the terms of the Engagement Agreement, the Company also issued to the Placement Agent at the Closing Date warrants to purchase 78,067 shares of common stock of the Company, which is equal to 3% of the aggregate number of shares sold to Investors, which shall have the same terms, including exercise price and registration rights, as the Investor Warrants issued in the private placement. We also paid a cash placement fee of $386,173, which is equal to 7% of the aggregate purchase price paid by Investors that were sold in the private placement.

The issuance of securities to the Investors and the Placement Agent were not registered under the Securities Act. Such issuance of securities was exempt from registration under the safe harbor provided by Regulation D Rule 506 and Section 4(2) of the Securities Act. We made this determination in part based on the representations of Investors, which included, in pertinent part, that such Investors were an “accredited investor” as defined in Rule 501(a) under the Securities Act, and upon such further representations from the Investors that (a) the Investor is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (b) the Investor agrees not to sell or otherwise transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from
 
 
 
 
such registration are available, (c) the Investor either alone or together with its representatives has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, and (d) the Investor has no need for the liquidity in its investment in us and could afford the complete loss of such investment.  Our determination is made based further upon our action of (a) making written disclosure to each Investor in the Securities Purchase Agreement prior to the closing of sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or unless an exemption from registration is available, (b) making written descriptions of the securities being offered, the use of the proceeds from the offering and any material changes in the Company’s affairs that are not disclosed in the documents furnished, and (c) placement of a legend on the certificate that evidences the securities stating that the securities have not been registered under the Securities Act and setting forth the restrictions on transferability and sale of the securities, and upon such inaction of  the Company of any general solicitation or advertising for securities herein issued in reliance upon Regulation D Rule 506 and Section 4(2) of the Securities Act.

Additionally, on April 9, 2011, the Company issued warrants to purchase 40,000 shares of common stock of the Company to two accredited investors for consulting services provided to the Company.  The Warrants have an exercise price of $3.88 per share and are exercisable for a period of five years expiring on April 8, 2017.  The number of shares of common stock to be received upon the exercise of the Warrants are subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the common stock that occur after the Closing Date.  The issuance of the Warrants was exempt from registration under the safe harbor provided by Regulation D Rule 506 and Section 4(2) of the Securities Act.  The consultants receiving the Warrants were accredited investors, were 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.  No underwriters were used in the issuance of the securities.
 

None
 
 

On March 15, 2012, the Company divested itself of all interest in Performance Stores, Inc.  The Company sold 80,000 shares of common stock in Performance Stores, Inc. to a unrelated third party for $5,000.
  
 

 
(a)           Documents filed as part of this Report.
 
1.           Financial Statements.  The condensed unaudited Balance Sheet of Omnitek Engineering Corp. as of March 31, 2012 and the audited balance sheet as of December 31, 2011, the condensed unaudited Statements of Operations for the three month periods ended March 31, 2012 and 2011, and the condensed unaudited Statements of Cash Flows for the three-month periods ended March 31, 2012 and 2011, 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
31.1
CEO certification pursuant to Section 302 of  The Sarbanes – Oxley Act of 2002 (1)
31.2
CFO certification pursuant to Section 302 of  The Sarbanes – Oxley Act of 2002 (1)
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 (1)
101
The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended S, 2011 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. (2)
(1)  
Filed herewith
(2)  
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files submitted under Exhibit 101 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
 
 


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 9, 2012
  By: Werner Funk  
   
Its: President and Secretary
 
       
 
       
Dated: May 9, 2012
 
/s/ Janice M. Quigley
 
   
By: Janice M. Quigley
 
   
Its: Chief Financial Officer
 
       
 
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

   
 
 
 
     
Dated: May 9, 2012  
By: Werner Funk, Director
 
       
       

       
 
 
 
 
 
 
 
 
/s/ Janice M. Quigley
 
  Dated: May 9, 2012  
Janice M. Quigley, Director
 
       
 
 
 
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