PURADYN FILTER TECHNOLOGIES INC (Form: 10-Q, Received: 11/13/2014 08:02:15)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

(Mark One)


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

For the quarterly period ended: September 30, 2014
or

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

For the transition period from: _____________ to _____________

COMMISSION FILE NUMBER: 001-11991

PURADYN FILTER TECHNOLOGIES INCORPORATED

(Name of registrant as specified in its charter)


DELAWARE	14-1708544
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2017 HIGH RIDGE ROAD, BOYNTON BEACH, FL	33426
( Address of principal executive offices)	(Zip Code)

(561) 547-9499

(Registrant's telephone number, including area code)

NOT APPLICABLE

( Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.

þ 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 (§ 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).

þ 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 the 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	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes þ No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 48,933,920 shares of common stock are issued and outstanding as of November 13, 2014.

TABLE OF CONTENTS


		Page No.
	PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS.	1

	Condensed Balance Sheets – As of September 30, 2014 (unaudited) and December 31, 2013	1
	Condensed Statements of Operations – Three months and Nine months ended September 30, 2014 and 2013 (unaudited)	2
	Condensed Statements of Cash Flows – Nine months ended September 30, 2014 and 2013 (unaudited)	3
	Condensed Statements of Changes In Stockholders’ Deficit – Nine months ended September 30, 2014 (unaudited)	4
	Notes to Condensed Financial Statements (Unaudited)	5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	12

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	17

ITEM 4.	CONTROLS AND PROCEDURES.	17

	PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS.	18

ITEM 1A.	RISK FACTORS.	18

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	18

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	18

ITEM 4.	MINE SAFETY DISCLOSURE.	18

ITEM 5.	OTHER INFORMATION.	18

ITEM 6.	EXHIBITS.	18

OTHER PERTINENT INFORMATION

Our web site is www.puradyn.com . The information which appears on our web site is not part of this report.

When used in this report, the terms "Puradyn," the "Company," "we," "our," and "us" refers to Puradyn Filter Technologies Incorporated, a Delaware corporation, and our subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to:

our history of losses and uncertainty that we will be able to continue as a going concern,

our ability to generate net sales in an amount to pay our operating expenses,

our need for additional financing and uncertainties related to our ability to obtain these funds,

our ability to repay the outstanding debt of $10.4 million at September 30, 2014 and any future loans due our Chairman and CEO,

our reliance on sales to a limited number of customers,

our dependence on a limited number of distributors,

our ability to compete,

our ability to protect our intellectual property, and

the application of penny stock rules to the trading in our stock.

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review our Annual Report on Form 10-K for the year ended December 31, 2013 including the risks described in Part I. Item 1A. Risk Factors, and this report together with our subsequent filings with the Securities and Exchange Commission in their entirety. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

PART I - FINANCIAL INFORMATION

PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED BALANCE SHEETS


	September 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash	$	133,580		$	161,503
Accounts receivable, net of allowance for uncollectible accounts of $16,990 and $16,236, respectively		298,947			182,143
Inventories, net		519,108			593,783
Prepaid expenses and other current assets		121,547			84,279
Total current assets		1,073,182			1,021,708

Property and equipment, net		49,393			57,046
Other noncurrent assets		344,585			317,508
Total assets	$	1,467,160		$	1,396,262

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	142,279		$	103,252
Accrued liabilities		290,505			279,470
Current portion of capital lease obligation		5,372			8,097
Deferred compensation		1,512,366			1,400,796
Total current liabilities		1,950,522			1,791,615

Capital lease obligation, less current portion		—			3,280
Notes Payable – related party		10,379,342			9,829,242
Total Long Term Liabilities		10,379,342			9,832,522
Total Liabilities		12,329,864			11,624,137

Commitments and contingencies (See Note 6)

Stockholders’ deficit:
Preferred stock, $.001 par value:
Authorized shares – 500,000;
None issued and outstanding		—			—
Common stock, $.001 par value,
Authorized shares – 100,000,000;
Issued and outstanding – 48,933,921 and 48,632,482, respectively		48,934			48,632
Additional paid-in capital		47,127,056			47,010,511
Accumulated deficit		(58,038,694	)		(57,287,018	)
Total stockholders’ deficit		(10,862,704	)		(10,227,875	)
Total liabilities and stockholders’ deficit	$	1,467,160		$	1,396,262

See accompanying notes to unaudited condensed financial statements

PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)


	Three Months Ended September 30						Nine Months Ended September 30
	2014			2013			2014			2013

Net sales	$	829,402		$	564,294		$	2,496,584		$	1,739,172
Cost of products sold		523,083			383,291			1,551,899			1,292,854
Gross profit		306,319			181,003			944,685			446,318

Costs and expenses:
Salaries and wages		293,295			263,680			830,045			817,819
Selling and administrative		230,262			232,539			680,463			740,724
		523,557			496,219			1,510,508			1,558,543

Loss from operations		(217,238	)		(315,216	)		(565,823	)		(1,112,225	)

Other income (expense):
Other income		—			136,273			—			146,273

Interest expense		(64,835	)		(55,918	)		(185,853	)		(159,810	)

Total other expense, net		(64,835	)		80,355			(185,853	)		(13,537	)

Loss before income taxes		(282,073	)		(234,861	)		(751,676	)		(1,125,762	)

Income tax expense		—			—			—			—

Net loss	$	(282,073	)	$	(234,861	)	$	(751,676	)	$	(1,125,762	)

Basic and diluted loss per common share	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.02	)

Weighted average common shares outstanding (basic and diluted)		48,856,195			48,538,577			48,760,436			48,294,241

See accompanying notes to unaudited condensed financial statements

PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)


	Nine Months Ended September 30,
	2014			2013

Operating activities
Net loss	$	(751,676	)	$	(1,125,762	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		31,123			26,588
Provision for bad debts		754			803
Provision for obsolete and slow moving inventory		(4,522	)		42,702
Amortization of deferred financing costs included in interest expense					189
Compensation expense on stock-based arrangements with employees, consultants		98,531			137,265
Changes in operating assets and liabilities:
Accounts receivable		(117,558	)		(84,285	)
Inventories		79,197			45,552
Prepaid expenses and other current assets		(37,268	)		(34,937	)
Accounts payable		39,027			3,632
Accrued liabilities		11,035			4,130
Deferred compensation		111,570			147,200
Net cash used in operating activities		(539,787	)		(836,923	)

Investing activities
Capitalized patent costs		(35,343	)		(35,231	)
Security deposits		(205	)		—
Purchases of property and equipment		(14,999	)		(23,362	)
Net cash used in investing activities		(50,547	)		(58,593	)

Financing activities
Proceeds from exercise of stock options		18,316			—
Proceeds from issuance of notes payable to related party		550,100			898,076
Payment of capital lease obligations		(6,005	)		(13,433	)
Net cash provided by financing activities		562,411			884,643

Net (decrease) increase in cash		(27,923	)		(10,873	)
Cash at beginning of period		161,503			114,512
Cash at end of period	$	133,580		$	103,639

Supplemental cash flow information:
Cash paid for interest	$	176,408		$	157,297
Cash paid for taxes	$			$	—

See accompanying notes to unaudited condensed financial statements

PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(UNAUDITED)


					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2013		48,632,482	$	48,632	$	47,010,511	$	(57,287,018	)	$	(10,227,875	)
Common Stock to consultant		183,107		184		35,816		—			36,000
Exercise of Stock Options		118,332		118		18,198		—			18,316
Compensation expense associated with option awards		—		—		62,531		—			62,531
Net loss		—		—		—		(751,676	)		(751,676	)
Balance at September 30, 2014		48,933,921		48,934		47,127,056		(58,038,694	)		(10,862,704	)

See accompanying notes to unaudited condensed financial statements

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

Basis of Presentation, Going Concern and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 2014 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2014.

For further information, refer to Puradyn Filter Technologies Incorporated’s (the “Company”) financial statements and footnotes thereto included in the Form 10-K for the year ended December 31, 2013.

Use of Estimates

The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.

Basic and Diluted Loss Per Share

FASB ASC 260, Earnings Per Share , requires a dual presentation of basic and diluted earnings per share. However, because of the Company's net losses, the effect of outstanding stock options and warrants would be anti-dilutive and, accordingly, is excluded from the computation of diluted loss per share. The number of such shares excluded from the computation of loss per share were 4,613,482, and 6,539,788 for the three and nine months ended September 30, 2014 and 2013, respectively.

Stock Compensation

The Company adopted FASB ASC 718, C ompensation – Stock Compensation, effective January 1, 2006 using the modified prospective application method of adoption which requires us to record compensation cost related to unvested stock awards as of December 31, 2005, recognizing the amortized grant date fair value in accordance with provisions of FASB ASC 718 on straight line basis over the service periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the periods ended September 30, 2014 and September 30, 2013 have been recognized as a component of cost of goods sold and general and administrative expenses in the accompanying Condensed Financial Statements.

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 718 and FASB ASC 505 Equity , including related amendments and interpretations. The related expense is recognized over the period the services are provided.

Inventories

Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending inventories at a rate based on estimated production capacity and any excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

Inventories consisted of the following at September 30, 2014 and December 31, 2013, respectively:


	September 30, 2014			December 31, 2013
	(unaudited)
Raw materials	$	853,869		$	953,575
Work In Progress		1,090			5,988
Finished goods		124,164			98,757
Valuation allowance		(460,015	)		(464,537	)
Inventory, net	$	519,108		$	593,783

Revenue Recognition

The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services or installation by the Company are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured in accordance with FASB ASC 605, Revenue Recognition , as amended and interpreted. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying condensed financial statements.

Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products sold.

Product Warranty Costs

As required by FASB ASC 460, Guarantor’s Guarantees , the Company is including the following disclosure applicable to its product warranties.

The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience. The Company's warranty reserve is included in accrued liabilities in the accompanying condensed financial statements and is calculated as the gross sales multiplied by the historical warranty expense return rate. As of September 30, 2014, there was no change to the reserve for warranty liability as the reserve balance was deemed sufficient to absorb any warranty costs that might be incurred from the sales activity for the period.

The following table shows the changes in the aggregate product warranty liability for the nine-months ended September 30, 2014:


Balance as of December 31, 2013	$	20,000
Less: Payments made		—
Add: Provision for current period warranties		—
Balance as of September 30, 2014 (unaudited)	$	20,000

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

New Accounting Pronouncements

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”. The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In June 2014, FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities.

Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. As of September 30, 2014, we have adopted the provisions of this ASU.

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

Going Concern

The Company's financial statements have been prepared on the assumption that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained losses since inception and used net cash in operations of $539,787 during the nine-months ended September 30, 2014. As a result, the Company has had to rely principally on stockholder loans to fund its activities to date.

These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from two stockholders led the Company’s independent registered public accounting firm, Liggett, Vogt & Webb, P.A., to include a statement in its audit report relating to the Company’s audited financial statements for the year ended December 31, 2013 expressing substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Common Stock

As partial compensation per an agreement dated May 19, 2011, and subsequently renewed on June 8, 2012 and July 24, 2013, for consultant work, the Company issued to Monarch Communications, Inc. the following:

On July 1, 2014, 21,053 shares of its common stock valued at $0.19 per share.

On August 1, 2014, 14,815 shares of its common stock valued at $0.27 per share.

On September 17, 2014, 15,385 shares of its common stock valued at $0.26 per share.

In July 2014 an employee exercised a total of 66,666 employee stock options with an exercise price of $0.14 per share The Company received net proceeds of $9,333 upon the exercise.

In September 2014 an employee exercised a total 25,000 employee stock options with an exercise price of $0.21 per share The Company received net proceeds of $5,250 upon the exercise.

In September 2014 an employee exercised a total 26,666 employee stock options with an exercise price of $0.14 per share The Company received net proceeds of $3,733 upon the exercise.

Stock Options and Warrants

For the three months and nine months ended September 30, 2014 and September 30, 2013, respectively, the Company recorded stock-based compensation expense of $17,050, $29,636, $62,531, and $101,265, respectively, relating to employee stock options.

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, Compensation – Stock Compensation . The related expense is recognized over the period the services are provided. Unrecognized expense remaining at September 30, 2014 and 2013 for the options is $132,794 and $146,221, respectively, and will be recognized through September 30, 2018.

In July 2014 an employee exercised a total of 66,666 employee stock options with an exercise price of $0.14 per share The Company received net proceeds of $9,333 upon the exercise.

In September 2014 an employee exercised a total 25,000 employee stock options with an exercise price of $0.21 per share The Company received net proceeds of $5,250 upon the exercise.

In September 2014 an employee exercised a total 26,666 employee stock options with an exercise price of $0.14 per share The Company received net proceeds of $3,733 upon the exercise.

On July 11, 2014, the Company board of directors resolved to extend the expiration date by an additional two years past the original individual expiration dates of 482,830 Class A warrants to purchase common stock at a price of $.35 per share, which were previously awarded to certain stockholder as part of private offerings.

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

A summary of the Company’s stock option plans as of September 30, 2014, and changes during the nine-month period then ended is presented below:


	Nine Months Ended September 30,
	Number of Options			Weighted Average Exercise Price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value
Options outstanding at December 31, 2013		4,194,972		$	.25
Options granted		30,000			.27
Options exercised		(118,332	)		.15
Options forfeited		(45,418	)		.15
Options expired		(452,825	)		.33
Options at end of period		3,608,397			.24
Options exercisable at September 30, 2014		2,776,717			.26	5.07		$721,946

Changes in the Company’s nonvested options for the nine months ended September 30, 2014 are summarized as follows:


	Nine Months Ended September 30, 2014
	Number of Options			Weighted Average Exercise Price
Nonvested options at December 31, 2013		1,311,674		$	.18
Options granted		30,000			.27
Options vested		(464,576	)		.19
Options forfeited		(45,418	)		.15
Nonvested options at September 30, 2014		831,680			.16


	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Remaining Average Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$.17 - 1.70		3,608,397		5.07		.24		2,776,717		.26
Totals		3,608,397		5.07		.24		2,776,717		.26

A summary of the Company’s warrant activity as of September 30, 2014 and changes during the nine month period then ended is presented below:


	Nine Months Ended September 30,
	Warrants		Weighted Average Exercise Price		Weighted- average remaining contractual terms (in years)	Aggregate intrinsic value
Warrants outstanding at December 31, 2013		2,271,483	$	.46
Granted
Exercised
Expired		1,266,398		.50
Warrants outstanding at September 30, 2014		1,005,085		.40	1.53	$

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)


	Warrants Outstanding
Range of Exercise Price	Number Outstanding		Remaining Average Contractual Life (In Years)		Weighted Average Exercise Price
$0.35 – 0.75		1,005,085		1.53	$	.40
Totals		1,005,085		1.53	$	.40

Notes Payable to Related Party

Beginning on March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the Chairman of the Board and an executive officer, to fund up to $6.1 million. Under the terms of the agreements, the Company can draw amounts as needed to fund operations. Amounts drawn bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points (2.417% per annum at September 30, 2014), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or consummation of any other financing over $7.0 million. Beginning in March 2006, annually, through March 2014, the maturity date for the agreement was extended annually from December 31, 2007 to December 31, 2015.

Between January 1, 2014 and September 30, 2014, the Company received loans in various amounts totaling $550,100, from the Company’s Chairman and CEO, as advances for working capital needs. The loans bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points.

At September 30, 2014 the Company had drawn the full funding amount under the agreement of $6.1 million plus an additional $4,029,342, plus direct loans of $250,000 for a total amount due of $10,379,342.

For the three and nine months ended September 30, 2014 and 2013, the Company recorded $64,239, $53,619, $184,222 and $156,666,respectively, of interest expense related to the notes payable, as noted above, which is included in interest expense in the accompanying condensed statements of operations.

Commitments and Contingencies

On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. The lease commenced August 1, 2013 and required an initial rent of $12,026 per month beginning in the second month for the first year, increasing in varying amounts to $13,941 per month in the sixth year. In addition, the Company is responsible for all operating expenses and utilities.

On September 30, 2014, the Company exercised the option to terminate the consulting agreement with Monarch Communications, Inc. for services rendered as public relations firm and media relations consultants for the Company. As compensation for their services, Monarch had received a monthly fee of $7,000, payable as $3,000 in cash and $4,000 in shares of common stock. Either party may terminate the agreement with 30 days’ notice. The recipient is an accredited or otherwise sophisticated investor who had such knowledge and experience in business matters and was capable of evaluating the merits and risks of the prospective investment in our securities. The issuance of the shares is exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(a)(2) of that act.

On October 20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract will remain in effect until terminated by either party providing 30 days written notice. Mr. Telesco, a member of our board of directors, a note holder and a significant stockholder, is President of Boxwood Associates, Inc.

In January 2014, the Company renewed the lease at an annual expense of $8,500, on a condominium in Ocean Ridge, Florida until December 31, 2014.

PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

Subsequent Events

On October 24, 2014, the Company received a loan in the amount of $95,000, from the Company’s Chairman and CEO, as advances for working capital needs. The loans bear interest at the BBA Libor Daily Floating Rate plus 1.4 points.

On October 1, 2014, as partial compensation for consultant work, the Company issued to Catalyst Global LLC, warrants to purchase 52,917 shares of its common stock, priced at $0.25 per share.

On November 3, 2014, as partial compensation for consultant work, the Company issued to Catalyst Global LLC, warrants to purchase 52,917 shares of its common stock, priced at $0.25 per share.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Puradyn, which has been in business for over 25 years, and designs, manufactures, and sells the Puradyn ^® System, a high-efficiency bypass oil filtration system and replacement filter elements. We generate revenues through the initial sale of the bypass oil filtration systems and through the sale of the replacement filter elements. We purchase component parts for unit housing and filter elements and the component parts are assembled, packed and shipped from our facility in Boynton Beach, Florida.

Sales of the Company’s products depend principally upon acceptance and demand by end-user customers and OEMs. We primarily focus our sales strategy on the development of individual end user relationships, along with building distributor sales efforts to continue expansion of a nationwide distribution network that will not only sell but also install and support our product. We currently have approximately 100 active distributors in the U.S. and internationally. This distribution network is comprised of direct distributors with signed agreements as well as dealers associated with OEMs.

We also focus our sales and marketing efforts to target industries open to innovative methods to reduce oil maintenance operating costs and overhaul cycles. These industries are also searching for new and progressive technologies to optimize their equipment use, including bypass oil filtration. While this is a long-term and ongoing process, we believe we have achieved a degree of product acceptance based on the expansion of existing strategic relationships with key accounts such as those that support sales and service at Nabors Industries, Inc., and with John Deere dealers.

Our net sales for the third quarter and first nine months of 2014 increased 47% and 44%, respectively, from the comparable periods in 2013. These increases are attributable to sustained increased activity from a number of our larger accounts at the beginning of the third quarter of 2014. We believe that industry acceptance will continue to grow in the remainder of fiscal 2014 based in part upon our progress this year. However, there can be no assurance that any of our sales efforts or strategic relationships will meet management’s expectations or result in an increase in our revenues.

In October 2014, we released two new additions to our line of bypass filtration products:

Millennium Technology System (MTS), which operates within a closed lubricating system, removing, as do all the Puradyn products, solid contaminant down to below one micron while safely extending the equipment oil's useful life. However, the MTS technology eliminates the legacy TF and PFT models’ electric evaporation plate, bringing the product into compliance with all new emission standards specified by Tier 4 engines. The MTS also offers the added benefits of reduced mechanical complexity and a smaller profile for a simpler, faster, and lower cost installation. The MTS can be used on all engine types and configurations using any fuel type, including natural gas and biofuels.

Polydry ™ , patented replacement filter element, specifically designed for use with the MTS. Polydry incorporates polymer-based technology formulated specifically to remove water contamination occurring naturally through condensation and the combustion process of engine oil and hydraulic systems.

Going Concern

The Company’s financial statements have been prepared on the basis that it will operate as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses each year since inception and has relied on the sale of its stock from time to time and loans from third parties and from related parties to fund its operations.

These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from a current stockholder have led the Company’s management to conclude there is substantial doubt about the Company’s ability to continue as a going concern.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We believe the critical accounting policies in Note 1 to the financial statements appearing elsewhere in this report affect our more significant judgments and estimates used in the preparation of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

Results of Operations for the Three-months Ended September 30, 2014 Compared to the Three-months Ended September 30, 2013

Net Sales

Net sales increased 47% in the third quarter of 2014 as compared to the third quarter of 2013. The increase in sales was primarily due to three customers who increased purchases accounted for 43% of the increase in sales. In addition several of our new distributors are beginning to generate sales in their areas, and helped to contribute to the increase in the third quarter.

We are dependent upon sales to a limited number of customers. Sales to four customers accounted for approximately 18%, 16%, 12% and 11%, respectively, for a total of 57% of the net sales for the three-months ended September 30, 2014, or 65% of the increase over net sales in the same period in 2013. While we remain dependent upon sales to a limited number of customers, our sales dependence is now on a larger group of customers. Sales to three customers accounted for approximately 22%, 14%, and 11%, respectively (for a total of 47%), of the net sales for the three-months ended September 30, 2013.

Cost of Products Sold

Gross profit, as a percentage of sales, increased from 32% in the third quarter of 2013 to 37% in the third quarter of 2014. The increase in gross profit was also attributable to sales of higher margin products, sales to customers in higher margin price categories and reduced charges for slow moving inventory. The last area that contributed to the increase in gross profit resulted from better pricing in the cost of a few of our key components, purchased during the period. We have obtained alternative sources for some of these components and this has contributed to improved margins.

Salaries and Wages

Salaries and wages were increased by 11% for the quarter ended September 30, 2014 compared to September 30, 2013 as a result of increased salaries which was partially offset by reduced expenses for employee benefits, primarily stock option expense. Salaries and wages, as a percentage of sales, were 35% for the third quarter of 2014 as compared to 47% for the third quarter of 2013.

Selling and Administrative Expenses

Selling and administrative expenses decreased slightly by less than 1% for the three months ended September 30, 2014 from the comparable period in 2013. This decrease was due to a decrease in travel, marketing expense and the allocation of engineering fees and was partially offset by increased professional fees to costs associated with patents. As we extend our reach to international customers and develop more specialized products for niche industries, we anticipate that travel and marketing costs will increase, but all other expenses will remain stable for the balance of the year. The following table lists the major categories of expenses included in Selling and Administrative expenses:


	Three Months Ended September 30,
	2014			2013		Change
Employee Benefits	$	49,678		$	49,950	$	(272	)
Travel & Marketing		54,876			55,640		(764	)
Depreciation & Amortization		6,431			5,045		1,386
Engineering		(2,935	)		1,414		(4,349	)
Professional Fees		51,145			47,030		4,115
Investor Relations		982			1,401		(419	)
Occupancy Expense		25,453			26,928		(1,475	)
Patent Expense		26,799			20,739		6,060
Stock Compensation		1,050			1,103		(53	)
Bad Debts		(272	)		412		(684	)
Other Expenses		17,055			22,877		(5,822	)

Total	$	230,262		$	232,539	$	(2,277	)

Interest Expense

Interest expense increased 16% for the three months ending September 30, 2014 as compared to the three months ending September 30, 2013 and was incurred primarily on the outstanding balance of the stockholder notes payable. The increase was due to higher borrowings. The Company pays interest monthly on the notes payable to the stockholder at the LIBOR Daily Floating Rate plus 1.4%, which was a weighted average of 2.417% as of September 30, 2014 as compared to 2.28% as of September 30, 2013.

Results of Operations for the Nine-months Ended September 30, 2014 Compared to the Nine-months Ended September 30, 2013

Net Sales

Net sales increased 44% in the nine months ending September 30, 2014 compared to the nine months ending September 30, 2013. The majority of our sales increase in the 2014 period resulted from orders from three customers in the amount of approximately $361,000, or 48%.

Sales to two customers individually accounted for 17% and 15% (for a total of 32%) for the nine months ending September 30, 2014. Sales to two customers individually accounted for 15%, and 14% (for a total of 29%) for the nine months ending September 30, 2013.

Cost of Products Sold

Gross profit, as a percentage of sales, increased from 26% in the nine months ending September 30, 2013 to 38% in the nine months ending September 30, 2014. The decrease in cost of goods sold as a percentage of sales, which generates a higher gross profit, is primarily attributable to the reserve for slow moving inventory of $42,702 recorded during the nine months ended September 30, 2013 and decreased allocation of manufacturing overhead due to lower than expected sales.

Salaries and Wages

Salaries and wages increased slightly by 1.5% for the nine months ending September 30, 2014 compared to the nine months ending September 30, 2013. This increase was primarily due to increased salaries which were partially offset by decreased expenses associated with employee benefits. Salaries and wages, as a percentage of sales, were 47% for the nine months ending September 30, 2013 and 33% for the nine months ending September 30, 2014.

Selling and Administrative Expenses

Selling and administrative expenses decreased 8% for the nine months ending September 30, 2014 compared to the nine months ending September 30, 2013. The following table represents the major components of Selling and Administrative expenses for the nine months ended September 30, 2014 and 2013, and the change of those components over their respective periods:


	Nine Months Ended September 30,
	2014			2013		Change
Employee Benefits	$	148,105		$	162,688	$	(14,583	)
Travel & Marketing		166,788			175,972		(9,184	)
Depreciation & Amortization		17,575			16,313		1,262
Engineering		(4,609	)		18,910		(23,519	)
Professional Fees		138,149			153,852		(15,703	)
Investor Relations		1,890			3,995		(2,105	)
Occupancy Expense		74,673			81,306		(6,633	)
Patent Expense		73,609			64,332		9,277
Stock Compensation		3,182			3,526		(344	)
Bad Debts		754			803		(49	)
Other Expenses		60,347			59,027		1,320

Total	$	680,463		$	740,724	$	(60,261	)

The changes in most components of selling and administrative expenses for the nine months ended September 30, 2014 from the comparable period in 2013 are the result of the same factors which impacted period to period changes described earlier in this section:

Reduced employee benefit was primarily the result of employee stock options becoming fully vested;

Engineering decreased due to an increase in the allocation of overhead applied;

Professional fees were reduced due to a change in outside consultants; and

Occupancy expense decreases as the Company was able to renew it lease on its facility with a reduction in costs

Interest Expense

Interest expense increased for the nine months ending September 30, 2014 as compared to the nine months ending September 30, 2013 and was incurred primarily on the outstanding balance of the stockholder notes payable. The increase was due to higher borrowings.

Liquidity and Capital Resources

As of September 30, 2014, the Company had cash of $133,580, as compared to $161,503 at December 31, 2013. At September 30, 2014, we had negative working capital of ($877,340) and our current ratio (current assets to current liabilities) was 0.55 to 1. At December 31, 2013 we had negative working capital of ($769,907) and our current ratio was 0.57 to 1. The decrease in working capital deficit and increase in current ratio is primarily attributable to decrease in cash and inventories, offset by an increase in accounts receivable and prepaid expenses.

We have incurred net losses each year since inception and at September 30, 2014 we had an accumulated deficit of $58,038,694. Our net sales are not sufficient to fund our operating expenses. We are primarily dependent upon loans from related parties to provide funds for working capital. During the nine months ended September 30, 2014 we raised an additional $550,100 from stockholder loans. During the nine months ended September 30, 2013, we raised $898,076 from stockholder loans. In addition during the nine months ended September 30, 2014 we received proceeds of $18,316 from the exercise of employee stock options. As of September 30, 2014, we owe our principal stockholder who is also an executive officer and a director of the Company $10.4 million for funds he has advanced to us from time to time for working capital. Interest expense on our loans was $184,222 for the nine months ended September 30, 2014.

We do not currently have any commitments for capital expenditures. Our current cash position is insufficient to cover our current operating needs for the next twelve months, and we do not have any external sources of working capital. While we anticipate an increase in cash flows from 2014 sales activity, we expect additional cash will still be needed to support operations, meet our working capital needs, and satisfy our obligations as they become due this year. Although we are actively seeking additional equity investments, we have no firm commitments from any third parties and there are no assurances we will be successful in attracting additional capital. In addition, as set forth above, we owe our stockholder $10.4 million which is due on December 31, 2015 or (i) at such time as we have raised an additional $7 million over the $3.5 million raised in prior offerings, or (ii) at such time as we are operating within sufficient cash flow parameters to sustain operations, or (iii) until a disposition of our company, such as an acquisition or merger, occurs. We do not have sufficient funds to pay this loan when it becomes due and there are no assurances our stockholder will extend the due date.

We continue to address liquidity concerns because of inadequate revenue growth. We have implemented measures to preserve our ability to operate, including organizational changes, a reduction and/or deferral of salaries, reduction in personnel and renegotiating creditor and collection arrangements. If budgeted sales levels are not achieved and/or significant unanticipated expenditures occur, or if we are not able to raise additional investment capital, we may have to modify our business plan, reduce or discontinue some of our operations or seek a buyer for part of our assets to continue as a going concern through 2014. There can be no assurance that we will be able to raise additional capital or that sales will increase to the level required to generate profitable operations to provide positive cash flow from operations. In that event, it is possible that stockholders could lose their entire investment in our company.

Cash Flows

Operating activities

For the nine-month period ended September 30, 2014 net cash used in operating activities was $539,787, which primarily resulted from the net loss of $751,676. In addition to the cash used in funding the operating loss, the utilization of cash in operations is also attributable to the increase in accounts receivable of $117,558 as a result of our increased sales. For the nine-month period ended September 30, 2013 net cash used in operating activities was $836,923, which primarily resulted from the net loss of $1,125,762.

Investing activities

For the nine months ending September 30, 2014, $50,547 was used in investing activities for the purchase of software and capitalized patent costs. For the nine months ending September 30, 2013, $58,593 was used in investing activities for the purchase of equipment.

Financing activities

Net cash provided by financing activities was $562,411 for the nine months ended September 30, 2014, which was composed of $550,100 in loans from our stockholders as described, proceeds of $18,316 from the exercise of employee stock options, which were partially offset by $6,005 in payments of capital lease obligations. Net cash provided by financing activities was $884,643 for the nine months ended September 30, 2013, which was composed of $898,076 in loans from our stockholders as described above, offset by $13,433 in payments of capital lease obligations.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable for a smaller reporting company.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, which includes our CEO and our Vice President who serves as our principal financial officer, have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2014 (the "Evaluation Date"). Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this report, our CEO and our Vice President who also serves as our principal financial officer have concluded that our disclosure controls and procedures were effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Vice President who serves as our principal financial officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal controls over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

None.

ITEM 1A.

RISK FACTORS.

Risk factors describing the major risks to our business can be found under Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2013. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On November 3, 2014, the Company issued Catalyst Global LLC a warrant to purchase 52,917 shares of its common stock with an exercise price of $0.25 per share under the terms of the agreement described later in this report. The recipient was an accredited or other sophisticated investor who had access to business and financial information on the Company. The issuance was exempt from registration under the Securities Act of 1933, as amended, in reliance on an exemption provided by Section 4(a)(2) of that act.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURE.

Not Applicable.

ITEM 5.

OTHER INFORMATION.

On October 1, 2014, the Company entered into a one-year agreement with Catalyst Global LLC to provide services rendered as investor relations counsel for the Company. As compensation for their services, Catalyst will receive a monthly service fee of $4,000 in addition to warrants to purchase 635,000 shares of common stock, in lots of a warrant to purchase 52,917 shares per month, priced at $0.25 per share. Either party may terminate the agreement with 30 days’ notice. The description of the agreement is qualified in its entirety by reference to the agreement and form of warrant which are filed as Exhibits 10.15 and 4.5, respective, to this report.

ITEM 6.

EXHIBITS.


4.5		Form of Common Stock Purchase Warrant to be issued to Catalyst Global LLC *
10.15		Investors Relations Agreement with Catalyst Global LLC dated October 1, 2014*
31.1		Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer *
31.2		Rule 13a-14(a)/15d-14(a) certificate of principal financial officer *
32.1		Section 1350 certification of Chief Executive Officer *
32.2		Section 1350 certification of principal financial officer *
101.INS		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema Document *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB		XBRL Taxonomy Extension Label Linkbase Document *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *

———————

filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PURADYN FILTER TECHNOLOGIES INCORPORATED


Date: November 13, 2014	By:	/s/ Joseph V. Vittoria
		Joseph V. Vittoria, Chairman and Chief Executive Officer, principal executive officer

Date: November 13, 2014	By:	/s/ Alan J. Sandler
		Alan J. Sandler, Secretary to the Board, Vice President and principal financial officer and principal accounting officer

EXHIBIT 4.5

FORM OF WARRANT

NEITHER THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ 1933 ACT ”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND PURADYN FILTER TECHNOLOGIES INCORPORATED AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS.

Warrant to Purchase Common Stock


Date of Issuance: [Date]	Warrant No.: CG-X
	Warrant to Purchase an Aggregate of
	______Shares of Common Stock

FOR VALUE RECEIVED , PURADYN FILTER TECHNOLOGIES INCORPORATED , a Delaware corporation (the “ Company ”), promises to issue in the name of, and sell and deliver to Catalyst Global LLC (the " Holder ") a certificate or certificates for an aggregate of _______ shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”), upon payment by the Holder of Twenty-five Cents ($0.25) per share (the “ Exercise Price ”), with the Exercise Price being subject to adjustment in the circumstances set forth below. This Warrant is one of a series of Warrants being issued pursuant to the terms and conditions of that certain letter agreement dated October 1, 2014 by and between the Company and the Holders.

Exercise of Warrant

(A)

Exercise Period . The Holder may exercise this Warrant, in whole or in part (but not as to fractional shares), at any time and time to time commencing on the date hereof and ending at 5:00 p.m., Eastern Time, on October 1, 2019 (the “ Exercise Period ”).

(B)

Exercise Procedure .

(i)

This Warrant will be deemed to have been exercised at such time as the Company has received all of the following items (the “ Exercise Date ”):

(a)

a completed Exercise Agreement, in the form attached hereto as Exhibit 1, executed by the Holder (the “ Purchaser ”); and

(b)

a certified check or other immediately available funds payable to the Company in an amount equal to the sum of the product of the Exercise Price multiplied by the number of shares of Common Stock being purchased upon such exercise.

(ii)

Certificates for the shares of Common Stock purchased upon exercise of this Warrant will be delivered by the Company to the Purchaser within ten (10) business days after the Exercise Date. Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Company will prepare a new Warrant representing the rights formerly represented by this Warrant that have not expired or been exercised. The Company will, within such ten (10) day period, deliver such new Warrant to the Holder at the address set forth in this Warrant.

(iii)

The shares of Common Stock issuable upon the exercise of this Warrant will be deemed to have been transferred to the Purchaser on the Exercise Date, and the Purchaser will be deemed for all purposes to have become the record holder of such Common Stock on the Exercise Date.

(iv)

The issuance of certificates for shares of Common Stock upon the exercise of this Warrant will be made without charge to the Purchaser for any issuance tax in respect thereof or any other cost incurred by the Company in connection with such exercise and related transfer of the shares; provided, however , that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate or instrument in a name other than that of the Holder of this Warrant, and that the Company shall not be required to issue or deliver any such certificate or instrument unless and until the person or persons requiring the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(v)

The Company has no obligation to register the resale of the shares of Common Stock underlying this Warrant under the 1933 Act. Unless the Company shall have so registered the shares of Common Stock underlying this Warrant, the shares of Common Stock issuable upon the exercise of this Warrant will be “restricted securities” as that term is defined in the 1933 Act. The Company may insert the following or similar legend on the face of the certificates evidencing shares of Common Stock if required in compliance with state securities laws:

" These securities have not been registered under any state securities laws and may not be sold or otherwise transferred or disposed of except pursuant to an effective registration statement under any applicable state securities laws, or an opinion of counsel satisfactory to counsel to Puradyn Filter Technologies Incorporated that an exemption from registration under any applicable state securities laws is available. "

(C)

Fractional Shares . The Company shall not be required to issue fractions of shares of Common Stock on the exercise of this Warrant. The Company shall not be obligated to issue any fractional share interests or fractional warrant interests upon the exercise of this Warrant, nor shall it be obligated to issue scrip or pay cash in lieu of fractional interests, provided, however, that if a holder exercises all the Warrants held of record by such holder, the Company shall at its option (i) eliminate the fractional interests by rounding any fraction up to the nearest whole number of shares or (ii) within 30 days after the Exercise Date, deliver to the Purchaser a check payable to the Purchaser, in lieu of such fractional share, in an amount equal to the value of such fractional share as determined by the closing price of the Company’s Common Stock as reported on the principal market on which the Company’s Common Stock is then listed or quoted, as of the close of business on the Exercise Date.

Effect of Reorganization, Reclassification, Consolidation, Merger or Sale

(A)

Recapitalization or Reclassification of Common Stock. In case the Company shall at any time prior to exercise of this Warrant or the expiration of the Exercise Period, whichever first occurs, effect a recapitalization or reclassification of such character that its Common Stock shall be changed into or become exchangeable for a larger or smaller number of shares, then, upon the effective date thereof, the number of shares of Common Stock that the Holder of this Warrant shall be entitled to purchase upon exercise hereof shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in such number of shares of Common Stock by reason of such recapitalization or reclassification, and the Exercise Price of such recapitalized or reclassified Common Stock shall, in the case of an increase in the number of shares, be proportionately decreased and, in the case of a decrease in the number of shares, be proportionately increased.

(B)

Consolidation, Merger or Sale . . In case the Company shall at any time prior to the exercise of this Warrant or the expiration of the Exercise Period, whichever first occurs, consolidate or merge with any other corporation (unless the Company shall be the surviving entity) or transfer all or substantially all of its assets to any other corporation preparatory to a dissolution (collectively, the " Fundamental Transaction "), then the Company shall, as a condition precedent to such transaction, provide notice to the Holder of not less than ten (10) of days prior to the closing and/or effective date of such Fundamental Transaction during which time the Holder shall have the right to exercise this Warrant pursuant to its terms. To the extent not exercised, this Warrant and any right to acquire shares of the Company's Common Stock will automatically expire on the closing date and/or effective date of such Fundamental Transaction.

(C)

Notice of Adjustment. Whenever the number of shares of Common Stock purchasable upon exercise of this Warrant shall be adjusted as provided herein, the Company shall file with its corporate records a certificate of its chief financial officer setting forth the computation and the adjusted number of shares of Common Stock purchasable hereunder resulting from such adjustments, and a copy of such certificate shall be mailed to the Holder. Any such certificate or letter shall be conclusive evidence as to the correctness of the adjustment or adjustments referred to therein and shall be available for inspection by the holders of the Warrants on any day during normal business hours.

Reservation of Common Stock . The Company will at all time reserve and keep available such number of shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. Upon exercise of this Warrant pursuant to its terms, the Holder will acquire fully paid and non-assessable ownership rights of the Common Stock, free and clear of any liens, claims or encumbrances except as otherwise provided herein.

No Stockholder Rights or Obligations . This Warrant will not entitle the Holder hereof to any voting rights or other rights as a stockholder of the Company. Until the shares of Common Stock issuable upon the exercise of this Warrant are recorded as issued on the books and records of the Company’s transfer agent, the Holder shall not be entitled to any voting rights or other rights as a stockholder; provided, however , the Company uses its best efforts to ensure that, upon receipt of the Exercise Agreement and payment of the Exercise Price, the appropriate documentation necessary to effectuate the exercise of the Warrant and the issuance of the Common Stock is accomplished as expeditiously as possible. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Common Stock, and no enumeration in this Warrant of the rights or privileges of the Holder, will give rise to any obligation of such Holder for the Exercise Price or as a stockholder of the Company.

Transferability . Subject to the terms hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed Assignment in the form of Exhibit 2 hereto at the principal offices of the Company. This Warrant and the underlying shares of Common Stock may not be offered, sold or transferred except in compliance with the Securities 1933 Act, and any applicable state securities laws, and then only against receipt of an agreement of the person to whom such offer or sale or transfer is made to comply with the provisions of this Warrant with respect to any resale or other disposition of such securities; provided, however , that no such agreement shall be required from any person purchasing this Warrant or the underlying shares of Common Stock pursuant to a registration statement effective under the 1933 Act. The Holder of this Warrant agrees that, prior to the disposition of any security purchased on the exercise hereof other than pursuant to a registration statement then effective under the 1933 Act, or any similar statute then in effect, the Holder shall give written notice to the Company, expressing his intention as to such disposition. Upon receiving such notice, the Company shall present a copy thereof to its securities counsel. If, in the sole opinion of such counsel, which such opinion shall not be unreasonably withheld, the proposed disposition does not require registration of such security under the 1933 Act, or any similar statute then in effect, the Company shall, as promptly as practicable, notify the Holder of such opinion, whereupon the Holder shall be entitled to dispose of such security in accordance with the terms of the notice delivered by the Holder to the Company.

Miscellaneous

(A)

Notices . Any notices, requests or consents hereunder shall be deemed given, and any instruments delivered, two days after they have been mailed by first class mail, postage prepaid, or upon receipt if delivered personally or by facsimile transmission, as follows:

If to the Company:

Puradyn Filter Technologies Incorporated

2017 High Ridge Road

Boynton Beach, FL 33426

Attention: President

If to the Holder:

To the address and/or facsimile of

Holder as recorded in the records

of the Company.

except that any of the foregoing may from time to time by written notice to the other designate another address which shall thereupon become its effective address for the purposes of this paragraph.

(B)

Entire Agreement . This Warrant, including the exhibits and documents referred to herein which are a part hereof, contain the entire understanding of the parties hereto with respect to the subject matter and may be amended only by a written instrument executed by the parties hereto or their successors or assigns. Any paragraph headings contained in this Warrant are for reference purposes only and shall not affect in any way the meaning or interpretation of this Warrant.

(C)

Governing Law . This Warrants shall be construed in accordance with the laws of the State of Delaware, without and application of the principles of conflicts of laws. If it becomes necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, and such legal action results in a final judgment in favor of such party (" Prevailing Party "), then the party or parties against whom said final judgment is obtained shall reimburse the Prevailing Party for all direct, indirect or incidental expenses incurred, including, but not limited to, all attorney's fees, court costs and other expenses incurred throughout all negotiations, trials or appeals undertaken in order to enforce the Prevailing Party's rights hereunder. Any suit, action or proceeding with respect to this Warrant shall be

brought in the state or federal courts located in Palm Beach County, Florida. The parties hereto hereby accept the exclusive jurisdiction and venue of those courts for the purpose of any such suit, action or proceeding. The parties hereto hereby irrevocably waive, to the fullest extent permitted by law, any objection that any of them may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any judgment entered by any court in respect thereof brought in Palm Beach County, Florida, and hereby further irrevocably waive any claim that any suit, action or proceeding brought in Palm Beach County, Florida, has been brought in an inconvenient forum.

IN WITNESS WHEREOF , this Warrant has been duly executed and the corporate seal affixed hereto, all as of the day and year first above written.


	PURADYN FILTER TECHNOLOGIES INCORPORATED

	By:
		Alan J. Sandler, Principal Financial Officer

E XHIBIT 1

E XERCISE A GREEMENT

To:

____________________

Dated:

____________________

The undersigned record Holder, pursuant to the provisions set forth in the within Warrant, hereby subscribed for and purchases _______________ shares of Common Stock covered by such Warrant and hereby makes full cash payment of $________________ for such shares at the Exercise Price provided by such Warrant.

________________________________

(Signature)

________________________________

(Print or type name)

________________________________

(Address)

NOTICE : The signature of this Exercise Agreement must correspond with the name as written upon the face of the within Warrant, or upon the Assignment thereof, if applicable, in every particular, without alteration, enlargement or any change whatsoever.

E XHIBIT 2

A SSIGNMENT

FOR VALUE RECEIVED, __________________, the undersigned Holder hereby sells, assigns, and transfers all of the rights of the undersigned under the within Warrant with respect to the number of shares of Common Stock issuable upon the exercise of such Warrant set forth below, unto the Assignee identified below, and does hereby irrevocable constitute and appoint ________________ to effect such transfer of rights on the books of the Company, with full power of substitution:

Number of Shares

Name of Assignee

Address of Assignee

of Common Stock

Dated: ________________

_____________________________

(Signature of Holder)

_____________________________

(Print or type name)

CONSENT OF ASSIGNEE

I HEREBY CONSENT to abide by the terms and conditions of the within Warrant.

Dated: ____________

______________________________

(Signature of Assignee)

______________________________

(Print or type name)

EXHIBIT 10.15


October 1, 2014

Mr. Joseph V. Vittoria
Chairman and Chief Executive Officer
Puradyn Filter Technologies Incorporated
2017 High Ridge Road
Boynton Beach, FL 33426

Dear Joe:

This letter confirms the terms and conditions of our agreement that effective October 1, 2014 Puradyn Filter Technologies Incorporated ("Puradyn") has engaged Catalyst Global LLC ("Catalyst") as investor relations counsel.

Catalyst's principal responsibilities will be: (i) to jointly arrive at objectives with Puradyn with respect to investor relations and financial relations and to develop and implement programs to achieve those objectives; (ii) to advise Puradyn with respect to investor relations and financial policies, opportunities and problems; and (iii) at "Company's" request, provide additional services for special projects.

Catalyst's compensation for all basic services under (i) and (ii) above shall be a service fee of $4,000 per month, prorated for any portion of a month. In addition to the monthly service fee, Puradyn has agreed to grant Catalyst Global LLC warrants to purchase 635,000 shares of Puradyn Common Stock at $0 . 25 per share. These warrants shall have a five (5) year period of exercise and expiration and do not contain a 'cashless exercise' .

All stock issued as a result of the exercise of warrants will be issued as a non-registered security and, as such, must be held for six (6) months from the date of issuance in accordance with SEC Rule 144 for non-registered stock. The warrants will vest monthly over a twelve-month period ending on the first anniversary of this agreement as follows:


October 1, 2014 Date of Agreement	Vesting Date	Expiration Date
52,917 warrants	11/1/2014	October 1, 2019
52,917 warrants	12/1/2014	October 1, 2019
52,917 warrants	1/1/2015	October 1, 2019
52,917 warrants	2/1/2015	October 1, 2019
52,917 warrants	3/1/2015	October 1, 2019
52,917 warrants	4/1/2015	October 1, 2019
52,917 warrants	5/1/2015	October 1, 2019
52,917 warrants	6/1/2015	October 1, 2019
52,916 warrants	7/1/2015	October 1, 2019
52,916 warrants	8/1/2015	October 1, 2019
52,916 warrants	9/1/2015	October 1, 2019
52,916 warrants	10/1/2015	October 1, 2019

Compensation beyond the first 12 months of this agreement will be subject to negotiation between Catalyst and Puradyn.

Catalyst will invoice Puradyn at the beginning of each month for that period's monthly service fees , expense allotment (paragraph 5) and any out of pocket expenses. Outstanding balances ove r thirty days are subject to a (1 1/2%) per month late fee . In the event any cash or equity balances are outstanding over sixty days, Catalyst has the right to suspend all services until such time as balances , including out -o f-pocket expenses and expense a ll otments , over thirty days outstanding are paid in full .

Additionally, Catalyst will be entitled to a c ommission of 7 % on all gross revenues from customer s that are introduced to Puradyn by Catalyst. The commission applies to any i ntroduced c ustomers ' purchases of the Puradyn product over an initial period of one year .

104 Fifth Avenue, 6th Floor | New York, NY 10011 | www.catalyst-ir.com | 212.924.9800


J.V. Vittoria, 10/1/14	page 2 of 2

This agreement shall be for a term of one (1) year from the date hereof and is cancelable at any point and by either party with 30 days written notice. Catalyst shall be entitled only to the amount of warrants issued and considered fully vested at the effective date of cancellation. In the event Puradyn is acquired or merged into another company, Catalyst shall be entitled to the immediate vesting of all remaining non-vested warrants.

You agree to reimburse Catalyst for all reasonable out-of-pocket disbursements made in the performance of Catalyst's duties under this agreement. Catalyst will bill a monthly out-of-pocket expense allotment of $100 to cover all general expenses such as domestic phone and fax, Internet, postage, local travel, general subscriptions, messengers, FedEx, photocopies, printing, stationery, and media and investor databases, including Salesforce.com and Big Dough. Catalyst will seek prior approval for any expenses in excess of $200.

Other expenses will be billed at cost, including but not limited to wire services, conference calls and webcasts, long distance travel and accommodation, meals and entertainment, outsourced printing projects, and conference expenses. Catalyst will actively utilize its agency status to negotiate discounts for all such services and will share any discounts with Puradyn on a 50/50 basis.

Puradyn agrees to indemnify, defend and hold harmless Catalyst from and against any and all losses, claims, damages, expenses or liabilities , including reasonable attorneys' fees, to which Catalyst may become subject arising in any way out of the proper performance of Catalyst's duties or relating to information, representations, reports or data Puradyn has furnished to Catalyst. Catalyst agrees that any confidential information contained in any media or format furnished by Puradyn will not be used without Puradyn's written agreement. Puradyn will not be held responsible or expected to indemnify, defend and hold harmless Catalyst from and against any and all losses, claims, damages, expenses or liabilities, including any attorneys' fees, to which Catalyst may become subject arising, in any way, out of improper or gross negligence associated with the performance of Catalyst's duties.

For a period of one year after the expiration of this agreement, Puradyn agrees not to employ, hire or solicit the employment of, or recommend to others the employment of, any person employed by Catalyst without Catalyst's prior written consent. This limitation shall terminate with respect to any such person one year after the termination of such person's employment with Catalyst.

Any controversy or claim arising out of or relating to this agreement, its validity or the breach thereof, shall be determined by arbitration in Palm Beach County, Florida, before a single arbitrator in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction.

Please acknowledge your acceptance of this agreement by signing in the space provided below.

With best regards,


		Catalyst Global LLC

	By:	/s/ David C. Collins
		David C. Collins
		Managing Director

ACCEPTED:


	Puradyn Filter Technologies Incorporated

By:	/s/ Joseph V. Vittoria
	Joseph V. Vittoria
	Chairman and Chief Executive Officer

Date: October 1 , 2014

[PFTI_EX10Z15002.JPG]

EXHIBIT 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Joseph V. Vittoria, certify that:


1.	I have reviewed this report on Form 10-Q for the period ended September 30, 2014 of Puradyn Filter Technologies Incorporated;


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.	The registrant’s other certifying officer(s) and I are 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 registrant and have:


	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, 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 registrant'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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.

Dated: November 13, 2014

/s/ Joseph V. Vittoria,

Joseph V. Vittoria, Chief Executive Officer, principal executive officer

EXHIBIT 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, Alan J. Sandler, certify that:


1.	I have reviewed this report on Form 10-Q for the period ended September 30, 2014 of Puradyn Filter Technologies Incorporated;


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.	The registrant’s other certifying officer(s) and I are 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 registrant and have:


	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, 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 registrant'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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.

Dated: November 13, 2014

/s/ Alan J. Sandler

Alan J. Sandler, Vice President, principal financial and accounting officer

EXHIBIT 32.1

Section 1350 Certification

In connection with the Quarterly Report of Puradyn Filter Technologies Incorporated (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission (the “Report”), I, Joseph V. Vittoria, Chief Executive Officer of the Company, and Alan J. Sandler, Vice President and principal financial and accounting officer of the Company, each certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and


2.	The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.

Dated: November 13, 2014

/s/ Joseph V. Vittoria

Joseph V. Vittoria, Chief Executive Officer, principal executive officer

/s/ Alan J. Sandler

Alan J. Sandler, Vice President, principal financial and accounting officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear 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.