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NOTE 7 - STOCK OPTIONS AND WARRANTS

6 Months Ended

Jun. 30, 2019

During the six months ended June 30, 2019 and 2018, the Company granted 450,000 and 590,000 options for services, respectively. During the six months ended June 30, 2019 and 2018, the Company recognized expense of $36,822 and $27,186, 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 $19,978.

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, 2019 the Company has a total of 600,000 options issued under the 2011 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, 2019 the Company has a total of 2,065,556 options issued under the 2015 Plan. In October 2017, the Company’s shareholders approved its 2017 Long-Term Incentive Plan (the “2017 Plan”). Under the 2017 plan, the Company may issue up to 5,000,000 shares of both Incentive Stock Options to employees only and Non-Qualified Stock Options to employees and consultants at its discretion. As of June 30, 2019, the Company has a total of 750,000 options issued under the 2017 Plan. During the six months ended June 30, 2019 and 2018 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, 2019	June 30, 2018
Expected volatility	142%	150%
Expected dividends	0%	0%
Expected term	7 Years	7 Years
Risk-free interest rate	2.01%	2.46%

A summary of the status of the options and warrants granted at June 30, 2019 and December 31, 2018 and changes during the periods then ended is presented below:

	June 30,			December 31,
	2019			2018
			Weighted-Average			Weighted-Average
	Shares		Exercise Price	Shares		Exercise Price
Outstanding at beginning of year	2,965,556	$	0.63	2,600,556	$	0.82
Granted	450,000		0.08	590,000		0.07
Exercised	-		-	-		-
Expired or cancelled	-		-	(225,000)		1.33
Outstanding at end of period	3,415,556		0.56	2,965,556		0.63
Exercisable	2,978,890	$	0.59	2,556,390	$	0.67

A summary of the status of the options and warrants outstanding at June 30, 2019 is presented below:

Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Number Exercisable	Weighted-Average Exercise Price

$ 0.01-0.99	2,890,556	4.68 years	2,453,890	0.22
$ 1.00-1.99	75,000	0.68 years	75,000	1.37
$ 2.00-2.99	450,000	0.31 years	450,000	2.53

$ 0.01-2.99	3,415,556	4.02 years	2,978,890	$ 0.59