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, 2017

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

(Exact 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.  

  ¨ Yes     þ 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

þ

 

 

Emerging growth company

o


If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨


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. 69,016,468 shares of common stock are issued and outstanding as of November 17, 2017

 

 

 








TABLE OF CONTENTS

 


 

 

Page No.

                  

PART I. FINANCIAL INFORMATION

                  

 

 

 

ITEM 1.

FINANCIAL STATEMENTS.

1

 

 

 

 

Condensed Balance Sheets – As of September 30, 2017 (unaudited) and December 31, 2016

1

 

Condensed Statements of Operations –Three months and Nine months ended September 30, 2017 and 2016 (unaudited)

2

 

Condensed Statements of Cash Flows –  Nine months ended September 30, 2017 and 2016 (unaudited)

3

 

Notes to Condensed Financial Statements (Unaudited)

4

 

 

 

ITEM 2.

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

16

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

19

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

20

 

 

 

 

PART II.   OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS.

21

 

 

 

ITEM 1A.

RISK FACTORS.

21

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

21

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

22

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURE.

22

 

 

 

ITEM 5.

OTHER INFORMATION.

22

 

 

 

ITEM 6.

EXHIBITS.

22

 







i





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.


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:

Ÿ

our ability to continue as a going concern;

·

our history of losses;

·

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

Ÿ

our dependence on sales to a single customer in the oil and gas industry;

·

our need for additional financing and the significant uncertainties related to our ability to obtain these funds;

·

our ability to repay the outstanding debt of 7,768,349 at November 17, 2017 due our Chairman and CEO which matures on December 31, 2018;

·

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, 2016 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.





ii



 


PART I - FINANCIAL INFORMATION


ITEM 1.

FINANCIAL STATEMENTS.


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED BALANCE SHEETS


 

 

September 30,

2017

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

ASSETS

     

 

                       

    

 

                       

  

Current assets:

 

 

 

 

 

 

 

Cash

 

$

22,652

 

$

12,806

 

Accounts receivable, net of allowance for uncollectible accounts of $17,000 and $17,000, respectively

 

 

211,321

 

 

260,171

 

Inventories, net

 

 

420,653

 

 

682,108

 

Prepaid expenses and other current assets

 

 

80,744

 

 

55,447

 

Total current assets

 

 

735,370

 

 

1,010,532

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

55,596

 

 

42,502

 

Other noncurrent assets

 

 

513,608

 

 

470,408

 

Total assets

 

$

1,304,574

 

$

1,523,442

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

178,836

 

$

147,584

 

Accrued liabilities

 

 

360,581

 

 

334,910

 

Sales incentives

 

 

30,708

 

 

 

Current portion of capital lease obligation

 

 

3,755

 

 

3,755

 

Deferred compensation

 

 

1,594,283

 

 

1,602,826

 

Notes Payable - stockholders

 

 

 

 

7,188,349

 

Total current liabilities

 

 

2,168,163

 

 

9,277,424

 

 

 

 

 

 

 

 

 

Capital lease obligation, less current portion

 

 

627

 

 

3,443

 

Notes Payable - stockholders

 

 

7,688,349

 

 

 

Total Long Term Liabilities

 

 

7,688,976

 

 

3,443

 

Total Liabilities

 

 

9,857,139

 

 

9,280,867

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 69,016,468 and 69,016,468, respectively

 

 

69,016

 

 

69,016

 

Additional paid-in capital

 

 

53,562,512

 

 

53,504,744

 

Accumulated deficit

 

 

(62,184,093

)

 

(61,331,185

)

Total stockholders’ deficit

 

 

(8,552,565

)

 

(7,757,425

)

Total liabilities and stockholders’ deficit

 

$

1,304,574

 

$

1,523,442

 





See accompanying notes to unaudited condensed financial statements


1



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)


 

 

Three Months Ended

September 30

 

Nine Months Ended
September 30

 

 

 

2017

 

2016

 

2017

 

2016

 

 

     

 

                    

     

 

                    

     

 

                    

     

 

                    

  

Net sales

 

$

515,846

 

$

438,263

 

$

1,780,006

 

$

1,455,137

 

Cost of products sold

 

 

385,738

 

 

341,618

 

 

1,364,849

 

 

1,077,533

 

Gross profit

 

 

130,108

 

 

96,645

 

 

415,157

 

 

377,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and wages

 

 

223,049

 

 

217,998

 

 

640,137

 

 

672,364

 

Selling and administrative

 

 

131,098

 

 

160,646

 

 

424,459

 

 

533,781

 

Total operating costs

 

 

354,147

 

 

378,644

 

 

1,064,596

 

 

1,206,145

 

Loss from operations

 

 

(224,039

)

 

(281,999

)

 

(649,439)

 

 

(828,541

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(70,300

)

 

(94,434

)

 

(203,469

)

 

(269,862

)

Total other expense, net

 

 

(70,300

)

 

(94,434

)

 

(203,469

)

 

(269,862

)

Loss before income taxes

 

 

(294,339

)

 

(376,433

)

 

(852,908

)

 

(1,098,403

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(294,339

)

$

(376,433

)

$

(852,908

)

$

(1,098,403

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per common share

 

$

(0.00

)

$

(0.01

)

$

(0.01

)

$

(0.02

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

69,016,468

 

 

48,683,135

 

 

69,016,468

 

 

48,683,135

 





See accompanying notes to unaudited condensed financial statements


2



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)


 

 

Nine Months Ended

September 30

 

  

 

2017

 

 

2016

 

Operating activities

  

 

 

 

 

 

Net loss

 

$

(852,908

)

 

$

(1,098,403

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

24,938

 

 

 

28,013

 

Provision for slow moving inventory

 

 

121,998

 

 

 

2,950

 

Compensation expense on stock-based arrangements with employees and consultants

 

 

31,396

 

 

 

80,861

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

48,851

 

 

 

(139,212

)

Inventories

 

 

139,457

 

 

 

71,844

 

Prepaid expenses and other current assets

 

 

(25,297

)

 

 

(19,011

)

Accounts payable

 

 

31,247

 

 

 

38,092

 

Sales incentives

 

 

30,708

 

 

 

 

Deferred compensation

 

 

(8,543

)

 

 

(33,043

)

Accrued liabilities

 

 

27,045

 

 

 

22,342

 

Net cash used in operating activities

 

 

(431,108

)

 

 

(1,045,567

)

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Capitalized patent costs

 

 

(53,385

)

 

 

(103,082

)

Purchases of property and equipment

 

 

(27,845

)

 

 

(3,180

)

Net cash used in investing activities

 

 

(81,230

)

 

 

(106,262

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of notes payable to stockholders

 

 

575,000

 

 

 

1,113,912

 

Repayment of note payable to stockholder

 

 

(50,000

)

 

 

 

Proceeds from Stockholder loan

 

 

 

 

 

25,000

 

Payment of capital lease obligations

 

 

(2,816

)

 

 

(2,816

)

Net cash provided by financing activities

 

 

522,184

 

 

 

1,136,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease ) /increase in cash

 

 

9,846

 

 

 

(15,733

)

Cash at beginning of period

 

 

12,806

 

 

 

34,471

 

Cash at end of period

 

$

22,652

 

 

$

18,738

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

180,317

 

 

$

258,356

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

 

Forgiveness of stockholder loan and accrued interest

 

$

26,373

 

 

$

 






See accompanying notes to unaudited condensed financial statements


3



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)


1.

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


Organization


Puradyn Filter Technologies Incorporated (the “Company”), a Delaware corporation, is engaged in the manufacturing, distribution and sale of bypass  oil filtration systems under the trademark Puradyn ® primarily to companies within targeted industries. The Company holds the exclusive worldwide manufacturing and marketing rights for the Puradyn products through direct ownership of various patents.


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-month and nine-month periods ended September 30, 2017 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2017.


For further information, refer to the Company's financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016.


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 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.


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.


Cash and Cash Equivalents


Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At September 30, 2017 and December 31, 2016, the Company did not have any cash equivalents.


Fair Value of Financial Instruments


The carrying amounts of cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities and notes payable to stockholder approximate their fair values as of September 30, 2017 and December 31, 2016, respectively, because of their short-term natures.




4



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



Accounts Receivable


Accounts receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense.


The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made.


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 finished goods inventories at a rate based on estimated production capacity. 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.


Property and Equipment


Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets, except for assets held under capital leases, for which the Company records depreciation and amortization based on the shorter of the asset’s useful life or the term of the lease. The estimated useful lives of property and equipment range from 3 to 5 years. Upon sale or retirement, the cost and related accumulated depreciation and amortization are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.


Patents


Patents are stated at cost. Amortization is provided using the straight-line method over the estimated useful lives of the patents. The estimated useful lives of patents are 17 to 20 years. Upon retirement, the cost and related accumulated amortization are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations.


Impairment of Long-Lived Assets


Management assesses the recoverability of its long-lived assets when indicators of impairment are present. If such indicators are present, recoverability of these assets is determined by comparing the undiscounted net cash flows estimated to result from those assets over the remaining life to the assets’ net carrying amounts. If the estimated undiscounted net cash flows are less than the net carrying amount, the assets would be adjusted to their fair value, based on appraisal or the present value of the undiscounted net cash flows.


Sales Incentives and Consideration Paid to Customers


The Company accounts for certain promotional costs such as sales incentives and cooperative advertising as a reduction of sales.





5



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



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. For the nine months ended September 30, 2017, 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, 2017:


Balance as of December 31, 2016

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of September 30, 2017 (unaudited)

 

$

20,000

 


Advertising Costs


Advertising costs are expensed as incurred. During the three and nine months ended September 30, 2017 and 2016, advertising costs incurred by the Company totaled approximately $430, $731, $0, and $761, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Research and Development


Research and development costs are expensed as incurred. During the three and nine months ended September 30, 2017 and 2016, research and development costs incurred by the Company totaled $4,970, $4,970, $4,766 and $7,575, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Income Taxes


The Company accounts for income taxes under FASB ASC 740, Income Taxes . Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.


Stock Option Plans


We adopted FASB ASC 718, Compensation-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 by 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 year ended December 31, 2016 has been recognized as a component of cost of goods sold and general and administrative expenses in the accompanying financial statements for the three and nine months ended September 30, 2017.




6



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



The Company leases its employees from a payroll leasing company. The Company’s leased employees meet the definition of employees as specified by FASB Interpretation No. 44 for purposes of applying FASB ASC 718.


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, including related amendments and interpretations. The related expense is recognized over the period the services are provided.


Credit Risk


The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. At September 30, 2017 and December 31, 2016, respectively, the Company did not have cash balances above the FDIC insured limit. The Company performs ongoing evaluations of its significant trade accounts receivable customers and generally does not require collateral. An allowance for doubtful accounts is maintained against trade accounts receivable at levels which management believes is sufficient to cover probable credit losses. The Company also has some customer concentrations, and the loss of business from one or a combination of these significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations.  Please refer to Note 15 for further details.


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 was 4,175,126 and 5,241,196 for the nine months ended September 30, 2017 and 2016, respectively.


Reclassifications


Certain prior year amounts have been reclassified to conform to the current year presentation.


Recent Accounting Pronouncements


In August 2015, FASB issued ASU No. 2015-14, “ Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ” defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. 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.




7



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



In August 2016, the FASB issued ASU 2016-15, " Classification of Certain Cash Receipts and Cash Payments ," which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017.  The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, “ Compensation – Stock Compensation (Topic 718) ” (“ASU 2016-09”). This guidance which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the full impact of the new standard.


In February 2016, the FASB issued ASU 2016-02, Leases , which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. 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.


All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.


2.

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 through the nine-months ended September 30, 2017, and used net cash in operations of $431,108 and $1,045,567 during the nine-months ended September 30, 2017 and 2016, respectively. As a result, the Company has had to rely principally on stockholder loans to fund its activities to date. The principal stockholder, who is a member of our Board of Directors and Chief Executive Officer, has recently advised the Company that he is unable to continue to provide working capital advances to the Company.  In addition, we owe this affiliate $7,768,349 in notes payable which mature on December 31, 2018.  We do not have sufficient funds to pay our operating expenses through the balance of the fiscal year or to satisfy our obligations as they become due.  If the Company does not raise funds as needed, of which there are no assurances, the Company will be unable to continue our existing business and operations.


These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from affiliates have led the Company’s independent registered public accounting firm, Liggett & 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, 2016 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.




8



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



3.

Inventories


Inventories consisted of the following at September 30, 2017 and December 31, 2016, respectively:



 

 

September 30,

2017

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

917,189

 

 

1,074,156

 

Work In Progress

 

 

1,962

 

 

 

Finished goods

 

 

128,082

 

 

112,535

 

Valuation allowance

 

 

(626,580

)

 

(504,583

)

Inventory, net

 

$

420,653

 

 

682,108

 


4.

Prepaid Expenses and Other Current Assets


At September 30, 2017 and December 31, 2016, prepaid expenses and other current assets consisted of the following:


 

 

September 30,

2017

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

45,052

 

 

27,447

 

Deposits

 

 

35,692

 

 

28,000

 

 

 

$

80,744

 

 

55,447

 


5.

Property and Equipment


At September 30, 2017 and December 31, 2016, property and equipment consisted of the following:


 

 

September 30,

2017

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

Machinery and equipment

 

$

1,050,462

 

$

1,045,217

 

Furniture and fixtures

 

 

56,558

 

 

56,558

 

Leasehold improvements

 

 

152,322

 

 

129,722

 

Software and website development

 

 

88,842

 

 

88,842

 

Computer hardware and software

 

 

153,249

 

 

153,249

 

 

 

 

1,501,433

 

 

1,473,588

 

Less accumulated depreciation and amortization

 

 

(1 ,445,837

)

 

(1,431,086

)

 

 

$

55 ,596

 

$

42,502

 


Depreciation and amortization expense of property and equipment for the three and nine months ended September 30, 2017 and 2016 is $9,010, $14,751, $5,381 and $17,363, respectively.




9



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



6.

Patents


Included in other assets at September 30, 2017 and December 31, 2016 are capitalized patent costs as follows:


 

 

September 30,

2017

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

Patent costs

 

$

535,527

 

$

482,142

 

Less accumulated amortization

 

 

(57,739

)

 

(47,555

)

 

 

$

477,788

 

$

434,587

 


Amortization expense for the three and nine months ended September 30, 2017 and 2016 amounted to $3,394, $10,184, $3,395, and $10,647, respectively.


7.

Leases


The Company leases its office and warehouse facilities in Boynton Beach, Florida under a long-term non-cancellable lease agreement, which contains renewal options and rent escalation clauses. As of September 30, 2017, a security deposit of $34,970 is included in noncurrent assets in the accompanying balance sheet. On September 27, 2012 the Company entered into a non-cancellable six-year lease agreement for the same facilities commencing August 1, 2013 and expiring July 31, 2019. The total minimum lease payments over the term of the current lease amount to $302,639.


In January 2017, the Company renewed the lease at an annual expense of $8,500 on a condominium in Ocean Ridge, Florida until December 20, 2017.


In January 2015 the Company entered into a capital lease for office equipment in the amount of $15,020.


8.

Accrued Liabilities


At September 30, 2017 and December 31, 2016, accrued liabilities consisted of the following:


 

 

September 30,

2017

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

64,230

 

$

60,904

 

Accrued expenses relating to vendors and others

 

 

106,143

 

 

138,863

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

145,435

 

 

84,988

 

Deferred rent

 

 

24,773

 

 

30,155

 

 

 

$

360,581

 

$

334,910

 


9.

Deferred Compensation


Deferred compensation represents amounts owed to three employees for salary. As there is no written agreement with these employees which memorializes the terms of the salary deferral, only a voluntary election to do so. It is possible that one or more of the employees could demand payment in full at any time. As of September 30, 2017 and December 31, 2016 the Company recorded deferred compensation of $1,594,283 and $1,602,826, respectively.





10



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



10.

Sales Incentives


On September 7, 2017 the Company entered into an exclusive distribution agreement for the worldwide rights to sell its product in the oil and gas industry effective August 1, 2017. The distributor will receive sales incentive credits toward future product, based upon the difference in current pricing and new pricing detailed in the agreement. The credits toward future product are only redeemable if targeted quarterly goals are achieved.  If the goals are not achieved the credits will be carried forward and are redeemable when the quarterly goals are achieved. As of September 30, 2017 the Company recorded a credit toward future product of $30,708.  


Targeted quarterly goals, if achieved, represent an aggregate of approximately $4 million in sales revenue between August 1, 2017 and June 30, 2018. Sales under the agreement amount to $154,470 for the period from August 1, 2017 to September 30, 2017.  


11.

Notes Payable to Stockholders – Related Party


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 Chief Executive Officer, to initially fund up to $2.5 million.  In March 2003 the Company and its Chairman and CEO entered into a second funding commitment pursuant to which he agreed to fund up to an additional $3 million which was subsequently increased to $3.5 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 (3.61% per annum at September 30, 2017), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or the consummation of any other financing over $7.0 million. Beginning in March 2006 and through February 2012, the maturity date for the agreements was extended annually from December 31, 2007 to the agreements’ current maturity date of December 31, 2018. Refer to Note 14.


During the year ended December 31, 2016 we borrowed an additional $1,363,732 from him and repaid $100,000, and at September 30, 2017 and December 31, 2016 we owed him $7,688,349 and $7,088,349, respectively which represented approximately 78% and 76%, respectively of our total liabilities. During the nine months ended September 30, 2017, he has advanced an additional $575,000 in working capital funding. On November 11, 2016, $6.1 million of principal and interest was converted into 20 , 333,333 shares of our common stock at a conversion price of $0.30 per share. This conversion was above the market price of our common stock.  The balance of this loan, which is unsecured, matures on December 31, 2018.  While he has continued to fund our working capital needs and extend the due date of the obligation, he is under no contractual obligation to do so. He has recently advised us he does not expect to continue to provide working capital advances to us. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive substantially all, or a portion, of this obligation.


Additionally, the Company had unsecured loans outstanding from a member of the board of directors who is also a significant stockholder, totaling $100,000 at December 31, 2016. During the nine months ended September 30, 2017 we repaid him $50,000 and in addition he forgave $25,000 and accrued interest of $1,374. The forgiveness was treated as a capital contribution.  The notes bear interest at a rate of 5% per annum and are due upon demand.


During the three and nine months ended September 30, 2017 and 2016, the Company incurred interest expense of $111,555, $200,405, $93,759, and $268,139, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $0 and $753 for the three and nine months ended September 30, 2017 related to the loan from a former Board member. These amounts, in addition to interest expense of $1,495, $1,996, $364, and $802, for the three and nine months ended September 30, 2017 and 2016, respectively, related to capital lease obligations, financing and loans from a stockholder.




11



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



Notes payable and capital leases consisted of the following at September 30, 2017 and December 31, 2016:


 

 

September 30,

2017

 

December 31, 2016

 

Notes payable to stockholders

 

$

7,688,349

 

$

7,188,349

 

Capital lease obligation

 

 

4,382

 

 

7,198

 

 

 

 

7,692,731

 

 

7,195,547

 

Less: long term maturities

 

 

(7,688,976

)

 

(3,443

)

 

 

$

3,755

 

$

7,192,140

 


Maturities of Long Term Obligations for Five Years and Beyond


The minimum annual principal payments of notes payable and capital lease obligations at September 30, 2017 were:


2017

 

$

3,755

 

2018

  

 

7,688,976

  

 

 

$

7,692,731

 


12.

Commitments and Contingencies


Agreements


In January 2017, the Company renewed the lease at an annual expense of $8,500 on a condominium in Ocean Ridge, Florida until December 20, 2017.


On March 7, 2016, the Company entered into an Advisory Agreement for duration of six months with an outside consultant, who is also a stockholder.  We issued the consultant five year warrants to purchase 350,000 shares of the Company's common stock with an exercise price of $0.05 per share. These warrants vested immediately.


On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. The renewed lease commences August 1, 2013 and requires an initial rent of $12,026 per month beginning in the second month of 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 October 20, 2009, the Company entered into a consulting agreement for management and strategic development services with Boxwood Associates, Inc., pursuant to which the Company pays a $2,000 monthly service fee. The contract remains in effect until terminated by either party providing 30 days written notice. A former member of our board of directors and a significant stockholder is President of Boxwood Associates, Inc. Refer to Note 14.


13.

Stock Options and Warrants


For the three and nine months ended September 30, 2017 and September 30, 2016, respectively, the Company recorded non-cash stock-based compensation expense of $9,999, $31,396, $17,699, and $80,861, relating to employee stock options and warrants issued for consulting services.




12



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



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, 2017 and 2016 for the options is $24,705 and $73,697, respectively, and will be recognized through September 30, 2019.


A summary of the Company’s stock option plans as of September 30, 2017, and changes during the nine month period then ended is presented below:


 

 

Nine Months Ended

September 30, 2017

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2016

 

 

3,365,500

 

 

$

0.20

 

Options granted

 

 

5,000

 

 

 

0.03

 

Options exercised

 

 

 

 

 

 

Options forfeited

 

 

(37,500

)

 

 

0.34

 

Options expired

 

 

(148,000

)

 

 

0.18

 

Options at end of period

 

 

3,185,000

 

 

$

0.20

 

Options exercisable at September 30, 2017

 

 

2,914,160

 

 

$

0.20

 


Changes in the Company’s nonvested options for the nine months ended September 30, 2017 are summarized as follows:


 

 

Nine Months Ended

September 30, 2017

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Nonvested options at December 31, 2016

 

 

560,840

 

 

$

0.16

 

Granted

 

 

5,000

 

 

 

0.03

 

Vested

 

 

258,333

 

 

 

0.16

 

Forfeited

 

 

(36,667

)

 

 

0.14

 

Nonvested options at September 30, 2017

 

 

270,840

 

 

$

0.15

 


 

 

 

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

 

$0.04-$0.35

 

 

 

3,185,000

 

 

 

3.87

 

 

$

0.20

 

 

 

2,914,160

 

 

$

0.20

 

Totals

 

 

 

3,185,000

 

 

 

3.87

 

 

$

0.20

 

 

 

2,914,160

 

 

$

0.20

 




13



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



A summary of the Company’s warrant activity as of September 30, 2017 and changes during the nine month period then ended is presented below:


 

 

Nine months ended

September 30, 2017

 

  

 

Weighted Average Exercise

 

  

 

Warrants

 

 

Price

 

Warrants outstanding at December 31, 2016

 

 

1,315,340

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Expired

 

 

325,178

 

 

 

0.35

 

Warrants outstanding at September 30, 2017

 

 

990,162

 

 

$

0.20

 


 

 

 

Warrants Outstanding

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average

Exercise Price

 

$0.05-$0.35

 

 

 

990,162

 

 

 

2.17

 

 

$

0.20

 

Totals

 

 

 

990,162

 

 

 

2.17

 

 

$

0.20

 


14.

Related Party Transactions


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 Chief Executive Officer, to initially fund up to $2.5 million.  In March 2003 the Company and its Chairman and CEO entered into a second funding commitment pursuant to which he agreed to fund up to an additional $3 million which was subsequently increased to $3.5 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 (3.61% per annum at September 30, 2017), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or the consummation of any other financing over $7.0 million. Beginning in March 2006 and through February 2012, the maturity date for the agreements was extended annually from December 31, 2007 to the agreements’ current maturity date of December 31, 2018.


During the year ended December 31, 2016 we borrowed an additional $1,363,732 from him and repaid $100,000, and at September 30, 2017 and December 31, 2016 we owed him $7,688,349 and $7,088,349, respectively, which represented approximately 78% and 76%, respectively, of our total liabilities. During the nine months ended September 30, 2017, he has advanced an additional $575,000 in working capital funding. On November 11, 2016, $6.1 million of principal and interest was converted into 20 , 333,333 shares of our common stock at a conversion price of $0.30 per share. This conversion was above the market price of our common stock. The balance of this loan, which is unsecured, matures on December 31, 2018.  While he has continued to fund our working capital needs and extend the due date of the obligation, he is under no contractual obligation to do so. He has recently advised us he does not expect to extend the due date of the obligation. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive substantially all, or a portion, of this obligation.


Additionally, the Company had unsecured loans outstanding from a member of the board of directors who is also a significant stockholder, totaling $100,000 at December 31, 2016. During the nine months ended September 30, 2017 we repaid him $50,000 and in addition he forgave $25,000 and accrued interest of $1,374. The forgiveness was treated as a capital contribution.  The notes bear interest at a rate of 5% per annum and are due upon demand.




14



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



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 remains in effect until terminated by either party providing 30 days written notice. During each of three and nine months ended September 30, 2017 and 2016, we paid Boxwood Associates, Inc. $6,000 and $18,000, respectively under this agreement. A former member of our board of directors is President of Boxwood Associates, Inc.


15.

Major Customers


There are concentrations of credit risk with respect to accounts receivables due to the amounts owed by five customers at September 30, 2017 whose balances each represented approximately 11%, 12%, 13%, 20% and 30%, for a total of 86% of total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed by three customers at December 31, 2016 whose balances each represented approximately 50%, 18%, and 13% , for a total of 81% of total accounts receivables.   The loss of business from one or a combination of the Company’s significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations. During the three months ended September 30, 2017 sales from four customers represented 33%, 17%, 16% and 11% for a total of 77% of sales.  During the three months ended September 30, 2016 sales from three customers represented 17%, 17%, and 14% for a total of 48% of sales. During the nine months ended September 30, 2017 sales from three customers represented 39%, 12%, and 11% for a total of 62% of sales. During the nine months ended September 30, 2016 sales from three customers represented 20%, 17%, and 10% for a total of 47% of sales The loss of business from one or a combination of the Company’s significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations.


16.

Subsequent Events


From October 1, 2017 through November 17, 2017, the Company received additional loans in the amount of $80,000 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.


In November 2017, the Company received an additional loan in the amount of $25,000 from a former member of the Board of Directors. The loan bears interest at a rate of 5% per annum.


On November 16, 2017, our Chairman and Chief Executive Officer extended the due date of the funding commitment to December 31, 2018.



 




15





ITEM 2.

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


We focus our sales strategy on individual sales and distribution efforts as well as on the development of a worldwide distribution network that will sell, install and support our product. We currently have a network of over 55 domestic and international distributors and dealers; however, the majority of our products are sold through a limited number of distributors.


Sales of the Company’s products, the Puradyn ® bypass oil filtration system and replaceable filter elements depend principally upon end user demand for such products.  We continue to market our product and its benefits through direct contact efforts with our distributors, direct customers, and original equipment manufacturers.


Our sales and marketing efforts target industries and potential customers open to innovative methods to reduce oil maintenance costs. We believe these businesses are searching for new and progressive ways to better maintain their equipment, including bypass oil filtration.

DistributionNow (DNOW) joined the Puradyn distributor network early in 2016 and, effective October 2017, is now the exclusive Master Distributor for the oil and gas industry.  We believe that DNOW provides the potential to consistently support our product on a global basis. DNOW has approximately 300 outlets worldwide that have the potential to sell and/or service the Puradyn system.  As exclusive global distributor for the oil and gas services industry, our relationship with DNOW increased our potential reach to new markets and customers within this industry, which we had not previously been able to effectively develop. Sales to DNOW represented 39% of our net sales in the nine months ended September 30, 2017.


We have found the price of oil not only affects our customers in the oil and gas industry but all ancillary industries these customers serve. The oil and gas industry, in particular, was hardest hit by the downturn in oil prices in 2015 and 2016 but as oil drilling rigs return to service and oil prices level off, we are resumed  orders for replacement filters and new installations. Based on industry intelligence from oil field services firm Baker Hughes as published online weekly on its website, the number of US oil rigs in service increased 41% during the first nine months of 2017 over the same time period in 2016, even with a slight decrease of 8.7% in 2017 for the price of NYMEX (WTI) crude oil. As the oil industry continues to recover in 2017, our customers in this segment are renewing orders for replacement filter elements and new purchases as their equipment continues to go back into service. Our sales to this industry for the nine months 2017 versus the first nine months 2016 increased 72%. However, some customers are recovering faster than others as 2017 is still considered a transition year during which time major oil companies are still cutting costs.


Puradyn also sells directly to other independent distributors outside of the oil and gas industry.


While our revenues increased in the three and nine months ended September 30, 2017 from the comparable period in 2016, our revenues remain insufficient to fund our operating expenses despite our efforts to reduce certain overhead costs. We rely almost exclusively on loans from our Chief Executive Officer to pay our operating expenses, including the purchase of raw materials, payment of salaries and general overhead expenses. Our liquidity issues are also adversely impacting our ability to ship product in a timely fashion .


During the nine months ended September 30, 2017 we borrowed an additional $575,000 from him, which included $135,000 during the third quarter of 2017, and at September 30, 2017 we owed him $7,688,349, which represented approximately 78% of our total liabilities. Subsequent to September 30, 2017, he has advanced us an additional $80,000 in working capital funding. Despite his significant commitment to us over the years, our Chief Executive Officer has advised us he is no longer able to advance funds to us for working capital.  In addition, the amounts we owe him are due at December 31, 2018 and we do not have sufficient funds to repay these unsecured obligations.




16





We also owe certain of our employees $1,594,283 in deferred cash compensation at September 30, 2017, which represents 15% of our current liabilities on that date. Since 2005, Messrs. Sandler and Kroger, two of our executive officers, and two other employees, elected to defer a portion of the compensation due them to assist us in managing our cash flow and working capital needs. As there is no written agreement with these employees which memorializes the terms of salary deferral, only a voluntary election to do so, it is possible that the employees could demand payment in full at any time. We do not have the funds to pay these amounts. As of September 30, 2017, one employee has withdrawn the full amount of deferred pay, and one other employee is currently drawing down a specified amount to offset the total deferred amount. Neither of these employees are executive officers.


We do not have any external sources of liquidity, and without outside financing, our working capital is not sufficient to fund our business.  The inability of our Chief Executive Officer to continue to advance funds to us at historic levels is beginning to have a material impact on our ability to continue our business and operations.  Our historic efforts during the past several years at raising third party capital have been unsuccessful, and there can be no assurance that we will be successful in raising third party capital in sufficient time to enable us to continue our business and operations and we may be forced to cease operations. In that event our stockholders would likely lose their entire investment in our company.


Going Concern


Our financial statements have been prepared on the basis that we will operate as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred net losses each year since inception and have relied on loans from related parties to fund our operations. These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from our principal stockholder, as set forth above, have led our independent registered public accounting firm Liggett & Webb, P.A. to include a statement in its audit report relating to our audited financial statements for the years ended December 31, 2016 and 2015 expressing substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities when they become due and to generate profitable operations in the future. There are no assurances that we will have sufficient funds to execute our business plan, pay our obligations as they become due or generate positive operating results.


Critical Accounting Policies and Estimates


The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our audited financial statements appearing elsewhere in this report.


Recent Accounting Pronouncements


Information concerning recently issued accounting pronouncements is set forth in Note 1 of our notes to condensed financial statements appearing elsewhere in this report.




17





Results of Operations for the Three-months and Nine-months Ended September 30, 2017 Compared to the Three-months and Nine-months Ended September 30, 2016


Net Sales


Net sales increased by 17% in the third quarter of 2017 as compared to the third quarter of 2016 and by 22% in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.  We attribute the results in the 2017 periods to a number of customers in targeted markets experiencing revived business outlook with apparent stability in the economy and oil pricing.   However, as world events which are beyond our control may adversely impact the economy and /or oil pricing during the balance of 2017, we are unable at this time to predict if the stabilization trend will continue during the balance of the year.


Cost of Products Sold


Gross profit, as a percentage of sales, increased by 3%; from 22% in the third quarter of 2016 to 25% in the third quarter of 2017.  Gross profit, as a percentage of sales, decreased by 3%, from 26% in the nine months ended September 30, of 2016 to 23% in the nine months ended September 30, 2017.  During the nine months ended September 30, 2017 the Company recorded an additional provision for slow moving inventory of $121,998 which adversely impacted margins in that period. We continue to review cost of materials increases, some of which were passed through to our customers as product price increases in the past few years.


Selling and Administrative Expenses


Selling and administrative expenses decreased 18% for the third quarter of 2017 from the comparable period in 2016, and 20% for the nine months ended September 30, 2017 from the comparable period in 2016, both which are attributable to reduction in expenses associated with stock compensation to employees, reduced professional fees, and reduced travel.  We anticipate that our selling and administration expenses will remain at the same level throughout 2017, inclusive of communication costs, office supplies, and other components of administrative expenses.


Salaries and Wages


Salaries and wages increased 2% in the third quarter of 2017 as compared to the third quarter of 2016, and decreased 5% for the nine months of 2017 from the comparable period in 2016, due to reduced staffing.  We anticipate that our salaries and wages will remain at the same level throughout 2017.


Interest Expense


Interest expense decreased 25% for the each of the three months and nine months ended September 30, 2017 from the comparable periods in 2016.  These decreases are the result of the conversion of a portion of the debt to equity by Mr. Vittoria in November 2016. The Company pays interest monthly on the notes payable to our principal stockholder at prime rate less 0.5%, with rates reset as often as the Federal Reserve changes interest rates, which was a weighted average of 3.61% for the nine months ended September 30, 2017 as compared to an average of 2.86% for the three months ended September 30, 2016.


Liquidity and Capital Resources


As of September 30, 2017, the Company had cash of $22,652 as compared to $12,806 at December 31, 2016. At September 30, 2017, we had negative working capital of $1,432,793 and our current ratio (current assets to current liabilities) was .34 to 1. At December 31 2016, we had negative working capital of $8,266,892 and our current ratio (current assets to current liabilities) was .11 to 1. The decrease in working capital deficit and decrease in current ratio is primarily attributable to the decreased accounts receivable, inventory, which were partially offset by increases in accounts payable and accrued expenses. As described earlier in this report, we do not have sufficient funds to pay our operating expenses or satisfy our obligations as they become due. Accordingly, there are no assurances we will continue as a going concern.





18





Cash Flows  


Operating activities


For the nine-month period ended September 30, 2017 net cash used in operating activities was $431,108, which primarily resulted from the net loss of $852,908.  In addition to the cash used in funding the operating loss, the utilization of cash in operations is also attributable to a provision for slow moving inventory of $121,998, the decrease in accounts receivable of $48,851 and inventory of $139,457, an increase in prepaid expenses of $25,297, decreased deferred compensation of $8,543, increased accrued liabilities of $27,408 and accounts payable of $31,247. For the nine-month period ended September 30, 2016 net cash used in operating activities was $1,045,567, which primarily resulted from the net loss, after taxes, of $1,098,403.  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 $139,212, an increase in prepaid expenses of $19,011, decreased deferred compensation of $33,043, which were partially offset by increased accrued liabilities of $22,342, and increased accounts payable of $38,092. Further, we reduced inventory by $71,844 as a result of slower than expected sales for the nine month period ended September 30, 2016.


Investing activities


For the nine months ending September 30, 2017, $81,230 was used in investing activities for the purchase of equipment and capitalized patent costs. For the nine months ending September 30, 2016, $106,262 was used in investing activities for the purchase of software and capitalized patent costs.


Financing activities


Net cash provided by financing activities was $522,184 for the nine months ended September 30, 2017, which was composed of $575,000 in loans from our stockholders as described above, repayment of loan from a former member of the Board of Directors, totaling $50,000, and $2,816 in payments of capital lease obligations. Net cash provided by financing activities was $1,136,096 for the nine months ended September 30, 2016, which was composed of $1,113,912 in loans from our stockholders and an unsecured loan from a former member of the Board of Directors, totaling $25,000 which was partially offset by $2,816 in payments of capital lease obligations.


Backlog


On November 17, the Company received two purchase orders from a major oil and gas customer for delivery of Puradyn product in shipments ranging from December 2017 to September 2018. The revenue generated from this sale will be approximately $990,000. Although there is a commitment by all parties to fulfill the orders, the purchase orders can be cancelled at any time by the customer prior to shipment and, accordingly, there are no assurances these sales will be made.


Off Balance Sheet Arrangements


As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.  The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.


ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


Not applicable for a smaller reporting company.




19





ITEM 4.

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, 2017 (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 not 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 our failure to file a material contract with the Securities and Exchange Commission which is described in Part II, Item 5 of this report.  As a result of this failure to file a material agreement, we are not considered current in our filings with the SEC.  


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.




20





PART II.   OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS.


None.


ITEM 1A.

RISK FACTORS.


In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2016 and our subsequent filings with the SEC, which could materially affect our business, financial condition or future results, subject to the new or modified risk factors appearing below that should be read in conjunction with the risk factors disclosed in such Form 10-K. These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC.


OUR ABILITY TO CONTINUE AS A GOING CONCERN IS IN JEOPARDY.


As described elsewhere herein, our net sales are not sufficient to pay our operating expenses or satisfy our obligations as they become due. Historically, our operations have been financed primarily through loans from our Chief Executive Officer, as well as other affiliates. Our Chief Executive Officer recently advised us that he does not expect to continue to provide working capital advances to the Company and we do not have any another sources of capital. Based upon our current cash level and expected cash flows, we do not have sufficient capital to fund our business through December 31, 2017.  If we are unable to raise capital from third party sources, we will no longer be able to continue as a going concern and it is likely you will lose all of your investment in our company.


On November 17, the Company received two purchase orders from a major oil and gas customer for delivery of Puradyn product in shipments ranging from December 2017 to September 2018. The revenue generated from this sale will be approximately $990,000. Although there is a commitment by all parties to fulfill the orders, the purchase orders can be cancelled at any time by the customer prior to shipment and, accordingly, there are no assurances these sales will be made.


WE OWE APPROXIMATELY $7.6 MILLION WHICH IS DUE BY DECEMBER 31, 2018.


At September 30, 2017, we owe our Chief Executive Officer approximately $7.6 million, and he has advanced us an additional $80,000 in the fourth quarter of 2017. This loan, which is unsecured, is due on December 31, 2018 and we do not have sufficient funds to pay this loan when it becomes due. If we are unable to meet our obligation to our Chief Executive Officer prior to maturity, he has advised us that he may forgive substantially all, or a portion, of this obligation.  However, he is under no obligation to do so.


WE ARE DEPENDENT UPON SALES TO ONE CUSTOMER IN THE OIL AND GAS INDUSTRY.  THERE ARE NO ASSURANCES THIS CUSTOMER WILL MEET THE TARGETED SALES GOALS.


In September 2017 we entered into an exclusive distribution agreement with DNOW for the worldwide rights to sell our product in the oil and gas industry effective August 1, 2017.  Targeted quarterly goals, if achieved, represent an aggregate of approximately $4 million in sales revenue between August 1, 2017 and June 30, 2018; sales under the agreement amount to $154,470 for the period from August 1, 2017 to September 30, 2017.  There are no assurances that any of these targeted goals will be met and we have no right to cancel the agreement for the failure to meet the goals.  


ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


None, except as previously reported.




21





ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4.

MINE SAFETY DISCLOSURE.


Not Applicable.


ITEM 5.

OTHER INFORMATION.


On September 7, 2017 the Company entered into an exclusive distribution agreement DNOW for the worldwide rights to sell its product in the oil and gas industry effective August 1, 2017. The distributor will receive sales incentive credits toward future product, based upon the difference in current pricing and new pricing detailed in the agreement. The credits toward future product are only redeemable if targeted quarterly goals are achieved.  If the goals are not achieved the credits will carried forward and are redeemable when the quarterly goals are achieved. As of September 30, 2017 the Company recorded a credit toward future product of $30,708.


On November 16, 2017, the Company amended the employment agreement of its President and Chief Operating Officer, Kevin G. Kroger, lowering the amount of coverage on a life insurance policy.


ITEM 6.

EXHIBITS.


10.1

 

Standby Commitment Agreement Amendment No. 19 dated November 17, 2017*

10.2

 

Amendment dated November 17, 2017 to Employment Agreement dated July 3, 2000 between Puradyn Filter Technologies Incorporated and Kevin Kroger*

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.






22





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 20, 2017

By:

/s/ Joseph V. Vittoria

 

 

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

  

 

 

Date:  November 20, 2017

By:

/s/ Alan J. Sandler

 

 

Alan J. Sandler, Secretary to the Board,
Vice President and principal financial officer and principal accounting officer














23


EXHIBIT 10.1


Joseph V. Vittoria

1616 South Ocean Boulevard

Palm Beach, FL 33480

(T) 561 659 0860 (F) 561 659 1045




Puradyn Filter Technologies, Inc.

2017 High Ridge Road

Boynton Beach, FL 33426

Attention: Alan J. Sandler, VP/CAO, Principal Financial Officer


November 16, 2017


RE:

Standby Commitment Agreement Amendment #19


Dear Mr. Sandler:


Pursuant to the Standby Commitment Agreement letters dated March 28, 2002, and March 14, 2003 and all Amendments thereto, I, Joseph Vittoria (the “Lending Party”), agree to extend the payback dates from December 31, 2017 to December 31, 2018.


All other terms defined in the original Standby Commitment Agreement letters and the Amendments thereto, not otherwise in conflict with this Amendment, shall remain in full force and effect.


IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and delivered by the respective officers hereunto duly authorized on the date first written above.




/s/ Joseph V. Vittoria

Joseph V. Vittoria





Accepted and Agreed:

Puradyn Filter Technologies, Inc.




By:

/s/ Alan J. Sandler

Alan J. Sandler, Vice President,

Chief Administration Officer, Principal Financial Officer









EXHIBIT 10.2

ADDENDUM #2 TO EMPLOYMENT AGREEMENT OF JULY 3, 2000

This Addendum #2 to the July, 3, 2000, Employment Agreement (“Agreement”) between Kevin G. Kroger “Kroger”) and Puradyn Filter Technologies Incorporated (“PFTI”), is made and entered into effective November 16, 2017 (“Effective Date”).

Recitals

A.

Kevin Kroger and Puradyn Filter Technologies Incorporated entered into an employment agreement on July 3, 2000. As part of the compensation promised to Kroger in that agreement, Kroger is entitled to a $600,000 Life Insurance Policy as evidenced by Section #2(c)(ii), Compensation , Executive Perquisites, Benefits, and Other Compensation .  

B.

Kroger, in his desire to show his confidence and belief in the future performance of PFTI, and to conserve PFTI cash resources at this time, agrees to amend Section #2 (c)(ii), Compensation , Executive Perquisites, Benefits, and Other Compensation , of his employment contract.

AGREEMENT:

1.

In lieu of and in exchange for the $600,000 Life Insurance Policy, Kroger will accept a $300,000 Life Insurance Policy.

2.

All other terms and conditions of the July 3, 2000 Employment Agreement remain in full force and effect.


EMPLOYEE:

 

EMPLOYER:

Kevin G. Kroger

 

Puradyn Filter Technologies, Inc.

 

 

 

 

 

 

/s/Kevin G. Kroger

 

/s/Joseph V. Vittoria

Kevin G. Kroger

 

Joseph V. Vittoria

President and Chief Operating Officer

 

Chairman and Chief Executive Officer




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, 2017 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 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 20, 2017

 

/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 September 30, 2017,  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 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 20, 2017

 

/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, 2017 as filed with the Securities and Exchange Commission (the “Report”), I, Joseph V. Vittoria, Chief Executive Officer of the Company, 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 20, 2017

 

/s/ Joseph V. Vittoria

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
















EXHIBIT 32.2


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, 2017 as filed with the Securities and Exchange Commission (the “Report”), I, Alan J. Sandler, Vice President and principal financial and accounting officer of the Company, 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 20, 2017

 

/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.