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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-QSB
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(Mark one)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JUNE 30, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (No Fee Required)
For the transition period from _____________ to _____________
Commission file number 0-29192
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PURADYN FILTER TECHNOLOGIES INCORPORATED
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(Name of small business issuer in its charter)
Delaware 14-1708544
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2017 High Ridge Road, Boynton Beach, Florida 33426
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(Address of principal executive offices) (Zip Code)
(561) 547-9499
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Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that Puradyn Filter Technologies Incorporated was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [x] No [ ]
Indicate by check mark whether the issuer is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of August 15, 2006, there were 25,349,432 shares of registrant's common stock
outstanding, par value $.001.
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Puradyn Filter Technologies Incorporated
Index to Quarterly Report on Form 10-QSB
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet - As of June 30, 2006 and December 31, 2005 ............. 3
Condensed Consolidated Statements of Operations - Three months and six months ended
June 30, 2006 and 2005........................................................................ 4
Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2006
and 2005...................................................................................... 5
Condensed Consolidated Statement of Stockholders' Deficit - Six months ended June 30, 2006 ... 6
Notes to Condensed Consolidated Financial Statements.......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation ............. 15
Item 3. Controls and Procedures....................................................................... 20
Part II. Other Information
Item 1. Legal Proceedings............................................................................. 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds................................... 21
Item 3. Default Upon Senior Securities................................................................ 21
Item 4. Submission of Matters to a Vote of Security Holders........................................... 21
Item 5. Other Information............................................................................. 21
Item 6. Exhibits and Reports on Form 8-K.............................................................. 21
Signatures.................................................................................................. 22
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Puradyn Filter Technologies Incorporated
Condensed Consolidated Balance Sheet
As of June 30, 2006 and December 31, 2005
(Unaudited)
June 30, December 31,
----------- -----------
2006 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents 46,206 155,557
Accounts receivable, net of allowance for uncollectible accounts
of $27,705 and $50,250 519,115 423,041
Inventories 1,183,421 1,181,781
Prepaid expenses and other current assets 198,907 245,171
Deferred financing cost, net -- 89,648
----------- -----------
Total current assets 1,947,649 2,095,198
Property and equipment, net 239,079 334,615
Deferred financing costs, net 61,124 --
Other noncurrent assets 40,930 40,930
----------- -----------
Total assets
2,288,782 2,470,743
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable 235,073 270,389
Accrued liabilities 930,783 747,810
Current portion of capital lease obligation 4,520 4,520
Deferred revenue 85,141 75,810
----------- -----------
Total current liabilities
1,255,517 1,098,529
Capital lease obligation, less current portion 3,592 6,060
Notes payable to stockholder 5,901,000 6,071,000
Stockholders' deficit:
Preferred stock, $.001 par value:
Authorized shares - 500,000 -- --
None issued and outstanding
Common stock, $.001 par value:
Authorized shares - 30,000,000
Issued and outstanding - 25,349,432 25,350 22,276
Additional paid-in capital 38,172,359 37,078,716
Notes receivable from stockholders (1,112,426) (1,088,590)
Accumulated deficit (41,911,358) (40,730,646)
Accumulated other comprehensive loss (45,251) 13,398
----------- -----------
Total stockholders' deficit (4,871,327) (4,704,846)
----------- -----------
Total liabilities and stockholders' deficit 2,288,782 2,470,743
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3
Puradyn Filter Technologies Incorporated
Condensed Consolidated Statements of Operations
For the Three Months and Six Months Ended June 30, 2006 and 2005
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales 855,315 639,090 1,678,059 1,236,783
Costs and expenses:
Cost of products sold 648,865 632,640 1,264,242 1,257,155
Salaries and wages 354,636 339,382 690,067 707,899
Selling and administrative 250,890 325,184 519,069 684,833
Stock based compensation 120,131 (34,263) 156,716 (68,478)
----------- ----------- ----------- -----------
1,374,522 1,262,943 2,630,094 2,581,409
----------- ----------- ----------- -----------
Loss from operations (519,207) (623,853) (952,035) (1,344,626)
Other income (expense):
Interest income 12,392 13,098 24,687 25,765
Interest expense (124,151) (112,436) (253,364) (226,078)
----------- ----------- ----------- -----------
Total other expense, net (111,759) (99,338) (228,677) (200,313)
----------- ----------- ----------- -----------
Loss before income taxes (630,966) (723,191) (1,180,712) (1,544,939)
Income tax expense -- -- -- --
----------- ----------- ----------- -----------
Net loss (630,966) (723,191) (1,180,712) (1,544,939)
=========== =========== =========== ===========
Basic and diluted loss per common
share (.02) (.04) (.05) (.08)
=========== =========== =========== ===========
Weighted average common shares
outstanding (basic and diluted) 25,349,432 18,991,477 24,567,388 18,227,542
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
4
Puradyn Filter Technologies Incorporated
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
SIX MONTHS ENDED JUNE 30,
--------------------------
2006 2005
----------- -----------
OPERATING ACTIVITIES
Net loss $(1,180,712) $(1,544,939)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 105,576 125,731
Provision for bad debts 9,081 6,217
Provision for obsolete and slow moving inventory (25,881) (69,003)
Amortization of deferred financing costs included in interest expense 28,524 56,373
Interest receivable from notes receivable from stockholders (23,836) (23,836)
Compensation expense on stock-based arrangements with employees,
consultants, investors and vendors 156,716 (64,400)
Changes in operating assets and liabilities:
Accounts receivable (105,156) 157,319
Inventories 26,319 198,245
Prepaid expenses and other current assets 46,264 49,839
Accounts payable (35,316) 43,461
Accrued liabilities 212,974 86,342
Deferred revenues 9,332 20,208
----------- -----------
Net cash used in operating activities (776,115) (958,443)
INVESTING ACTIVITIES
Purchases of property and equipment (8,407) (10,674)
----------- -----------
Net cash used in investing activities (8,407) (10,674)
FINANCING ACTIVITIES
Proceeds from sale of common stock 910,000 1,152,200
Proceeds from exercise of stock options -- 2,936
Proceeds from issuance of notes payable to stockholder 577,000 648,100
Payment of notes payable to stockholder (747,000) (834,000)
Payment of capital lease obligations (2,468) (2,219)
----------- -----------
Net cash provided by financing activities 737,532 967,017
Effect of exchange rate changes on cash and cash equivalents (62,361) 50,652
----------- -----------
Net (decrease) increase in cash and cash equivalents (109,351) 48,552
Cash and cash equivalents at beginning of period 155,557 257,210
----------- -----------
Cash and cash equivalents at end of period $ 46,206 $ 305,762
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 218,755 $ 160,148
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in settlement of accrued bonus $ 30,000 $ --
Subscription receivable from issuance of common stock -- 330,000
=========== ===========
Warrants issued in connection with financing costs $ -- $ 55,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
Puradyn Filter Technologies Incorporated
Condensed Consolidated Statements of Changes in Stockholders' Deficit
Six Months ended June 30, 2006
Accumulated
Notes Other
Additional Receivable Comprehensive Total
Common Stock Paid-in From Accumulated Income Stockholders'
Shares Amount Capital Stockholders Deficit (Loss) Deficit
------------ ------- ------------ ------------ ------------ --------- -----------
Balance at December 31, 2005 22,276,099 22,276 $ 37,078,716 $ (1,088,590) $(40,730,646) 13,398 $(4,704,845)
Foreign currency translation adjustment -- -- -- -- -- (58,650) (58,650)
Net loss -- -- -- -- (1,180,712) -- $(1,180,712)
-----------
Total comprehensive loss -- -- -- -- -- -- (5,944,207)
Compensation expense associated with
unvested options -- -- 2,624 -- -- -- 2,624
Issuance of common stock in
private placement , net 3,033,333 3,034 906,967 -- -- -- 910,000
Warrants issued to investors -- -- 66,492 -- -- -- 66,492
Shares issued in settlement of
employee bonus 40,000 40 29,960 -- -- -- 30,000
Interest receivable related to
notes receivable from stockholders -- -- -- (23,836) -- -- (23,836)
Compensation expense associated with
option modification -- -- 87,600 -- -- -- 87,600
------------ ------- ------------ ------------ ------------ -------- -----------
Balance at June 30, 2006 25,349,432 $25,350 $ 38,172,359 $ (1,112,426) $(41,911,358) $(45,252) $(4,871,327)
============ ======= ============ ============ ============ ======== ===========
See accompanying notes to condensed consolidated financial statements.
6
Puradyn Filter Technologies Incorporated
Notes to Condensed Consolidated Financial Statements
June 30, 2006
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated 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-QSB
and Regulation S-B. 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 six-month periods ended June 30, 2006 may not necessarily be indicative of
the results that may be expected for the year ending December 31, 2006.
For further information, refer to Puradyn Filter Technologies Incorporated's
(the Company) consolidated financial statements and footnotes thereto included
in the Form 10-KSB for the year ended December 31, 2005.
Going Concern
The Company's financial statements have been prepared on the basis that it will
operate as a going concern, which comtemplates 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 an institutional investor and current stockholder have led
the Company's independent registered accounting firm Daszkal Bolton, LLP to
include a statement in its audit report relating to the Company's audited
consolidated financial statements for the year ended December 31, 2005
expressing substantial doubt about the Company's ability to continue as a going
concern.
Additionally, the Company continues to address liquidity concerns because of
inadequate revenue growth. As a result, cash flow from operations is
insufficient to cover our liquidity needs for the immediate future. The Company
is in the process of aggressively seeking to raise capital and is exploring
financing availability and options with investment bankers, funds, private
sources, members of management and existing stockholders. The Company has
implemented further measures to preserve its ability to operate, including
organizational changes, a reduction and/or deferral of salaries, reduction in
personnel and renegotiating creditor and collection arrangements. There can be
no assurance that the Company will be able to raise the additional capital
needed or reduce the level of expenditures in order to sustain operations. The
condensed consolidated financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Use of Estimates
The preparation of condensed consolidated 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 consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
7
Basic and Diluted Loss Per Share
SFAS No. 128, 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 totaled
3,072,070 and 3,089,570 respectively for the three-month and six-month periods
ended June 30, 2006 and 3,402,070 and 2,816,070 for the three-month and
six-month periods ended June 30, 2005, respectively.
Stock Compensation
Prior to January 1, 2006, the Company accounted for employee stock-based
compensation using the intrinsic value method supplemented by pro forma
disclosures in accordance with APB 25 and SFAS 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"), as amended by SFAS No.148 "Accounting for
Stock-Based Compensation--Transition and Disclosures." Under the intrinsic value
method, the recorded stock-based compensation expense was related to the
amortization of the intrinsic value of stock options issued and other
equity-based awards issued by the Company. Options granted with exercise prices
equal to the grant date fair value of the Company's stock have no intrinsic
value and therefore no expense was recorded for these options under APB 25. For
stock options whose exercise price was below the grant date fair value of the
Company's stock, the difference between the exercise price and the grant date
fair value of the Company's stock was expensed over the service period
(generally the vesting period) using an accelerated amortization approach in
accordance with FASB Interpretation No. 28 "Accounting for Stock Appreciation
Rights and Other Variable Stock Option or Award Plans."
Effective January 1, 2006 the Company adopted SFAS 123R using the modified
prospective approach and accordingly prior periods have not been restated to
reflect the impact of SFAS 123R. Under SFAS 123R, stock-based awards granted
prior to its adoption will be expensed over the remaining portion of their
vesting period. For stock-based awards granted on or after January 1, 2006, the
Company will amortize stock-based compensation expense on a straight-line basis
over the requisite service period, which is generally a one or four year vesting
period. SFAS 123R requires that the deferred stock-based compensation on the
condensed consolidated balance sheet on the date of adoption be netted against
additional paid-in capital.
Using the Black-Scholes option-pricing model for all options granted, the
Company's pro forma net loss and pro forma net loss per share with related
assumptions were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2005 2005
----------- -----------
Net loss as reported $ (723,191) $(1,544,939)
Stock-based employee compensation cost
(intrinsic value method) -- --
Fair value method stock option expense 12,299 139,630
----------- -----------
Pro forma net loss
$ (710,892) $(1,405,309)
=========== ===========
Loss per common share:
Basic and diluted loss as reported $ (0.04) $ (0.08)
Basic and diluted loss pro forma $ (0.04) $ (0.04)
Weighted average fair value per option
granted during the period(1) $ .50 $ .57
8
Assumptions:
Average Risk Free Interest Rate 4.02% 3.82%
Average Volatility Factor .658 .712
Expected Dividend Yield 0% 0%
Expected Life (in years) 5 5
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
values.
Inventories consisted of the following at June 30, 2006:
Raw materials $ 328,357
Finished goods 855,064
-----------
$ 1,183,421
===========
Deferred Financing Costs
The Company capitalizes financing costs and amortizes them using the
straight-line method, which approximates the effective interest method, over the
term of the related debt. Amortization of deferred financing costs is included
in interest expense and totaled approximately $10,000 and $22,000 for the
three-months ended June 30, 2006 and 2005, and $29,000 and $56,000 for the six
months ended June 30, 2006 and 2005 respectively. In March 2002, the Company
recorded the initial deferred financing costs of $318,000 for the shareholder
loan with a maturity date of December 31, 2004. On March 14, 2003, as the
maturity date was extended to December 31, 2005, an additional $214,400 in
deferred financing costs was recorded (see Note 2). On April 14, 2005 the
maturity date was extended to December 31, 2006, resulting in the addition of
approximately $55,000 of related deferred financing costs. Accumulated
amortization of deferred financing costs as of June 30, 2006 was approximately
$620,000.
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 collectibility is reasonably assured in accordance with
Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements
(SAB 104), 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 consolidated 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
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 calculated as the gross sales
multiplied by the historical warranty expense return rate.
9
The following table shows the changes in the aggregate product warranty
liability for the six-months ended June 30, 2006:
Balance as of December 31, 2005 $ 70,370
Less: Payments made (6,309)
Change in prior period estimate 894
Add: Provision for current period warranties 12,722
---------
Balance as of June 30, 2006 $ 77,677
=========
Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income (SFAS 130) establishes rules for
reporting and displaying of comprehensive income and its components.
Comprehensive income is the sum of net loss as reported in the consolidated
statements of operations and other comprehensive income transactions. Other
comprehensive income transactions that currently apply to the Company result
from changes in exchange rates used in translating the financial statements of
its wholly owned subsidiary, Puradyn Filter Technologies, Ltd. (Ltd).
Comprehensive loss as of June 30, 2006 and 2005 is not shown net of taxes
because the Company's deferred tax asset has been fully offset by a valuation
allowance.
Comprehensive loss consisted of the following for the three and six-months ended
June 30, 2006 and 2005:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net loss (630,966) (723,191) (1,180,712) (1,544,939)
---------- ---------- ---------- ----------
Other comprehensive income:
Foreign currency translation adjustment 58,650 39,615 68,593 50,652
---------- ---------- ---------- ----------
Total other comprehensive income 58,650 39,615 68,593 50,652
---------- ---------- ---------- ----------
Comprehensive loss (572,316) (683,576) (1,112,119) (1,494,287)
========== ========== ========== ==========
New Accounting Standard -- Accounting for Uncertainty in Income Taxes
In June 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes,"
which prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. In accordance with FIN 48, the Company
must adjust its financial statements to reflect only those tax positions that
are more-likely-than-not to be sustained as of the adoption date. The effective
date of FIN 48 for the Company is January 1, 2007. The adoption of FIN 48 is not
expected to have a material impact on the Company's condensed consolidated
financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. ISSUES AFFECTING LIQUIDITY AND MANAGEMENT'S PLANS
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has sustained losses since
inception in 1987 and used net cash in operations of approximately $776,000 and
$958,000 during the six-months ended June 30, 2006 and 2005, respectively. As a
result, the Company has had to rely principally on private equity funding,
including the conversion of debt into stock, as well as stockholder loans to
fund its activities to date.
10
These recurring operating losses, liabilities exceeding assets and the reliance
on cash inflows from an institutional investor and current stockholder led the
Company's independent registered public accounting firm, Daszkal Bolton, LLP to
include a statement in its audit report relating to the Company's audited
consolidated financial statements for the year ended December 31, 2005
expressing substantial doubt about the Company's ability to continue as a going
concern.
Additionally, the Company continues to address liquidity concerns because of
inadequate revenue growth. As a result, cash flow from operations is
insufficient to cover our liquidity needs for the immediate future. The Company
is in the process of aggressively seeking to raise capital and is exploring
financing availability and options with investment bankers, funds, private
sources, members of management and existing shareholders. The Company has
implemented further measures to preserve its ability to operate, including
organizational changes, deferral of salaries, reduction in personnel and
renegotiating creditor and collection arrangement. There can be no assurance
that the Company will be able to raise the additional capital needed or reduce
the level of expenditures in order to sustain operations.
On March 29, 2006, the stockholder amended the original loan agreements to
extend the payback dates to December 31, 2007 (see note 5). Previously, the
stockholder waived the funding requirement mandating maturity as such time as
the Company raised an additional $7.0 million over the $3.5 million previously
raised in the Company's recent private placement offering; or until such time as
the Company is operating within sufficient cash flow parameters, as defined, to
sustain its operations; or until a disposition of the Company occurs. As of June
30, 2006, the Company had drawn a total of $5.9 million of the available funds.
The Company anticipates increased cash flows from 2006 sales activity; however,
additional cash will still be needed to support operations. If additional
capital is not raised, budgeted sales levels are not achieved and/or significant
unanticipated expenditures occur, the Company will have to modify its business
plan, reduce or discontinue some of its operations or seek a buyer for part of
its assets to continue as a going concern through 2006. There can be no
assurance that the Company will be able to raise the additional capital needed
to continue as a going concern.
3. COMMON STOCK
On January 30, 2006, the Company issued 40,000 shares of common stock, at $.75
per share, to an employee in lieu of a cash bonus that was previously accrued
and deferred.
On February 26, 2006, the Company received cash proceeds of $910,000 from five
accredited investors for the purchase of 3,033,333 shares of common stock at
$0.30 per share.
The purchase price of $0.30, previously agreed upon and approved by the Board of
Directors, was discounted approximately 20% from the current market price as
part of the June 2005 Equity Placement Offering, wherein these five investors
funded 50% of their total predetermined contribution at that time. The 2005
funds were contributed with the understanding that the 50% balance of investment
would be priced at the same purchase price as the initial offering.
4. STOCK OPTIONS
During the six-months ended June 30, 2005, employees of the Company exercised
3,270 common stock options. No options were exercised during the six-months
ending June 30, 2006. The Company received $2,936 in cash proceeds in exchange
for the shares issued in 2005.
11
During the three-month and six month periods ended June 30, 2006, the Company
recognized compensation expense of approximately $120,000 and $157,000,
respectively. During the three-month and six-month periods ended June 30, 2005,
the Company recognized a credit to operations of approximately $78,000 and
$120,000, respectively.
For the three-month and six-month periods ended June 30, 2006, the Company
recorded stock-based compensation expense of $1,836 and $2,624. For the
three-month and six-month periods ended June 30, 2005, the Company recognized an
expense of approximately $12,000 and $34,000, respectively, of stock-based
compensation expense under the intrinsic value method.
The Company leases its employees from a payroll leasing company. The Company's
leased employees meet the definition of employees as specified by FIN 44 for
purposes of applying APB 25.
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 SFAS
123 and EITF 96-18, Accounting for Equity Investments That are Issued to Other
Than Employees for Acquiring or in Conjunction with Selling Goods or Services.
The related expense is recognized over the period the services are provided.
A summary of the Company's stock option plans as of June 30, 2006, and changed
during the six month period then ended is presented below:
Six Months Ended
June 30, 2006
-----------------------------
Number of Weighted Average
Options Exercise Price
------------ ---------
Options outstanding at beginning of period 2,152,070 $ 3.18
Options granted 35,000 1.11
Options exercised -- --
Options expired 70,000 8.17
------------ ---------
Options at end of period
2,117,070 $ 3.10
------------ ---------
Options exercisable at end of period 2,043,320 $ 3.18
============ =========
A summary of the Company's stock option plans as of June 30, 2006, and changed
during the three month period then ended is presented below:
Three Months Ended
June 30, 2006
-----------------------------
Number of Weighted Average
Options Exercise Price
------------ ---------
Options outstanding at beginning of period
2,134,570 $ 3.18
Options granted 10,000 1.40
Options exercised -- --
Options expired 27,500 8.62
------------ ---------
Options at end of period 2,117,070 $ 3.10
------------ ---------
Options exercisable at end of period 2,043,320 $ 3.18
============ =========
12
Changes in the Company's unvested options for the six months ended June 30, 2006
are summarized as follows:
Six Months Ended
June 30, 2006
-----------------------------
Number of Weighted Average
Options Exercise Price
------------ ---------
Options unvested at beginning of period 38,750 .34
Options granted 35,000 1.11
Options exercised -- --
Options expired -- --
------------ ---------
Options unvested at end of period 73,750 $ .84
============ =========
Changes in the Company's unvested options for the three months ended June 30,
2006 are summarized as follows:
Three Months Ended
June 30, 2006
-----------------------------
Number of Weighted Average
Options Exercise Price
------------ ---------
Options unvested at beginning of period
63,750 .47
Options granted 10,000 1.40
Options exercised -- --
Options expired -- --
------------ ---------
Options unvested at end of period
73,750 $ .84
============ =========
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ---------------------------
REMAINING
AVERAGE WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF NUMBER LIFE (IN EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING YEARS) PRICE EXERCISABLE PRICE
---------------- ----------- -------- ----------- ----------- ----------
$ .21 - $ 1.70 1,101,900 5.68 $ .88 1,029,400 $ .89
1.86 - 4.50 549,295 3.31 2.50 548,045 2.50
4.81 - 6.81 3,375 .40 6.00 3,375 6.00
8.50 - 9.25 462,500 1.87 9.07 462,500 9.07
----------- -------- --------- ------------ ---------
2,117,070 4.01 $ 3.10 2,043,320 $ 3.18
Totals =========== ======== ========= ============ ==========
------------
(1) A Black-Scholes option-pricing model was used to develop the fair values of
the options granted.
A summary of the Company's warrant activity as of June 30, 2006, and changed
during the six month period then ended is presented below:
2006
----------------------
WEIGHTED AVERAGE
EXERCISE
----------------------
OPTIONS PRICE
--------- ----------
Warrants outstanding at the beginning of
period 955,000 $ 1.53
Granted -- --
Exercised -- --
Expired -- --
--------- ----------
Warrants outstanding at end of period 955,000 $ 1.53
========= ==========
13
2006
----------------------
WEIGHTED AVERAGE
EXERCISE
----------------------
OPTIONS PRICE
--------- ----------
Warrants unvested at the beginning of
period 480,000 $ .80
Granted -- --
Exercised -- --
Expired -- --
--------- ----------
Warrants unvested at end of period 480,000 $ .80
============== ==========
WARRANTS OUTSTANDING
-----------------------------------------
REMAINING
AVERAGE WEIGHTED
CONTRACTUAL AVERAGE
RANGE OF NUMBER LIFE (IN EXERCISE
EXERCISE PRICE OUTSTANDING YEARS) PRICE
---------------- ----------- --------- ---------
$ .80 - $ .95 580,000 2.57 $ .83
2.00 - 2.25 275,000 2.17 2.11
4.05 100,000 .74 4.05
----------- --------- ---------
955,000 2.13 $ 1.53
Totals ============ ========= =========
5. NOTES PAYABLE TO STOCKHOLDER
As of June 30, 2006, the Company had drawn an aggregate of approximately $5.9
million of the $6.15 million from its available line-of-credit, provided by a
stockholder, who is also a Board Member, of the Company (see note 2). Amounts
drawn bear interest at the prime rate (8% as of June 30, 2006) payable monthly
and become due and payable on December 31, 2007; or until such time as the
Company has raised an additional $7.0 million over the $3.5 million raised in
the Company's recent private placement offering; or until such time as the
Company is operating within sufficient cash flow parameters, as defined, to
sustain its operations; or until a disposition of the Company occurs. In
February 2006, the Company used the funds received from a private placement to
pay down $747,000 of the outstanding loan balance. During the three month period
ended June 30, 2006, the Company had drawn an additional $390,000 of the
available balance, leaving an available balance of $249,000. On March 29, 2006,
the maturity date of the stockholder loan was extended from December 31, 2006 to
December 31, 2007.
For the three-months ended June 30, 2006 and 2005, the Company recorded
approximately $113,000 and $91,000, respectively, and for the six-months ended
June 30, 2006 and 2005, the Company recorded approximately $219,000 and
$169,000, respectively, of interest expense related to the notes payable to
stockholder, which is included in interest expense in the accompanying condensed
consolidated statements of operations.
6. COMMITMENTS AND CONTINGENCIES
INVESTMENT BANKING AGREEMENTS
On April 24, 2006, the Company entered into a one-year non-exclusive agreement
with CapitalLink, L.C., an investment banking firm, to assist in additional
financing. The company agreed to pay a fee of 7% of gross proceeds received by
the Company as a result of services performed under the contract, as well as
reimbursement of pre-approved out of pocket expenses.
7. SUBSEQUENT EVENTS
On July 10, 2006, the Company entered into a maximum 90-day agreement with TN
Capital Equities, Ltd., a subsidiary of TerraNova Capital Partners, Inc., and
investment banking firm, to assist the Company in obtaining additional
financing. The company agreed to pay a fee of 10% of the gross proceeds received
by the Company as a result of services performed under the contract, as well as
reimbursement of pre-approved out of pocket expenses.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Form 10-KSB for the year ended December 31, 2005.
Other than historical and factual statements, the matters and items discussed in
this Quarterly Report on Form 10-QSB are forward-looking statements that involve
risks and uncertainties. Actual results of the Company may differ materially
from the results discussed in the forward-looking statements. Certain factors
that could contribute to such differences are discussed with the forward-looking
statements throughout this report. Except as required by law or regulation, we
do not undertake any obligation to publicly update forward-looking statements to
reflect events or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events.
Going Concern
Our 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. We have incurred net losses
each year since inception and have 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 institutional investors and current stockholders have led
our independent registered public accounting firm Daszkal Bolton, LLP to include
a statement in its audit report relating to our audited consolidated financial
statements for the year ended December 31, 2005 expressing substantial doubt
about our ability to continue as a going concern.
Additionally, we continue to address liquidity concerns because of inadequate
revenue growth. As a result, cash flow from operations is insufficient to cover
our liquidity needs for the immediate future. We are in the process of
aggressively seeking to raise capital and is exploring financing availability
and options with investment bankers, funds, private sources and existing
stockholders. We have implemented further measures to preserve its ability to
operate, including organizational changes, a reduction and/or deferral of
salaries, reduction in personnel and renegotiating creditor and collection
arrangement. There can be no assurances that we will be able to raise the
additional capital needed or reduce the level of expenditures in order to
sustain operations.
General
Sales of our products will depend principally upon end user demand for such
products and acceptance of the Company's products by OEMs. The oil filtration
industry has historically been competitive and, as is typically the case with
innovative products, the ultimate level of demand for our products subject to a
high degree of uncertainty. Developing market acceptance for our existing and
proposed products will require substantial marketing and sales efforts and the
expenditure of a significant amount of funds to inform customers of the
perceived benefits and cost advantages of its products.
Through industry data research, we have been able to identify the potential
applications where management believes market penetration is most accessible.
Currently no bypass oil filtration system has captured a substantial share of
the estimated recurring $13 billion potential industry. We believe we are in a
unique position to capitalize on the growing acceptance of bypass oil filtration
given that our product and our Company are positioned as, including, but not
limited to:
15
o A competitively priced, value-added product offering a unique
selling concept based on an advanced, patented technology to
safely extend factory-specified engine oil drain intervals
o An alternative solution to the rising costs and increasing
dependence on foreign oil
o Providing an operational maintenance solution to end users in
conjunction with existing and reasonable foreseeable federal
environmental applications
We continue to incorporate the focus of our sales strategy on individual sales
and distribution efforts as well as on the development of a strong nationwide
distribution network that will not only sell but also install and support our
product.
Additionally, we continue to focus our sales and marketing efforts to target
areas and issues specific to the bypass oil filtration industry, cultivating an
innovative outlook on oil maintenance, specifically, that oil does not need to
be changed on a regular basis if kept in a clean state.
This strategy includes:
o The expansion of existing strategic relationships
o Continued development and expansion of our distribution network
with qualified distributors in order to establish a sales- and
service-oriented nationwide infrastructure
o Continuing to target existing and new medium-to-large sized
fleets, industrial/construction business and major diesel engine
and generator set OEMs
o Creating customer `pull-through', a sustained level of request
for our product on the OEM level
o Closely monitoring customer evaluations to ensure the salient
aspects of our system are perceived and accepted on a timely
basis
o Converting customer evaluations into sales, both immediate and
long term
While this is a long-term and ongoing commitment, we believe we have achieved a
limited amount of industry acceptance based on recent accomplishments:
- 2006 announcement that the PURADYN has been approved for use by
one of the largest international diversified energy resource
companies for retrofit of equipment used at one of its key coal
mine facilities in the Southwestern U.S.
- 2006 final results released by the U.S. Department of Energy of a
three-year evaluation (2002-2005) of the cost analysis and
benefits of bypass filtration technology show 89% oil savings on
heavy-duty diesel engines.
- 2006 announcement that the U.S. Military has ordered the PURADYN
system installed on new trucks supplied by Freightliner LLC for
foreign military sales.
- 2006 continued testing with the U.S. Military on use of the
PURADYN system on several other applications.
- Recognition by several engine manufacturers for specific
application concerning Puradyn's ability to safely extend drain
intervals by providing acceptable clean oil as verified through
oil analysis.
16
We believe that the renewed interest shown in the technology of bypass oil
filtration as an economic alternative to rising oil prices, dependence upon
foreign oil, with the added benefit of being environmentally beneficial, will
timely and favorable position the Company as a manufacturer of this type of
product. We also believe that industry acceptance resulting in sales will
continue to grow in 2006; however, there can be no assurance that any of our
sales efforts or strategic relationships will meet management's expectations or
result in actual revenues.
Our sales effort not only involves educating the potential customer on the
benefits of our product, but also allowing the customer to test and evaluate the
PURADYN system on its fleet vehicles. While set for a specific period of time,
typically ranging from three to twelve months, evaluations are often influenced
by a number of variables including equipment applications downtime or servicing,
which may extend the evaluation period. Consequently, the sales cycle can be
relatively long. Management believes that this evaluation period will continue
to be shortened as our products gain wider acceptance, support and usage from
well-known customers and OEMs.
We utilize our wholly owned subsidiary, Puradyn Filter Technologies, Ltd.
("Ltd"), in the United Kingdom to sell our products in Europe, the Middle East
and Africa.
International sales are especially well suited to our product given that
environmental controls are not as regulated in countries outside North America.
Certain applications representing a higher return on investment are more
prevalent in use outside of North America and end-users consequently are more
receptive to the total maintenance package, including the use of oil analysis,
which the PURADYN system represents. In first six months of 2006, total
international sales accounted for 36.9% of the Company's consolidated net sales.
We recognize revenue from product sales to customers, distributors and resellers
when products that do not require further services or installation by us are
shipped, when there are no uncertainties surrounding customer acceptance and for
which collectibility is reasonably assured in accordance with Staff Accounting
Bulletin (SAB) No. 104, Revenue Recognition in Financial Statements, as amended
and interpreted. Cash that we received prior to shipment is recorded as deferred
revenue. Sales are made to certain 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 consolidated
financial statements. Management believes, based on past experience and future
expectations, that such limited return rights and warranties will not have a
material adverse effect our financial statements.
RESULTS OF OPERATIONS FOR THE THREE-MONTHS ENDED JUNE 30, 2006 COMPARED TO THE
THREE-MONTHS ENDED JUNE 30, 2005
The following table sets forth the amount of increase or decrease represented by
certain items reflected in our condensed consolidated statements of operations
in comparing the three-months ended June 30, 2006 to the three-months ended June
30, 2005:
(In thousands) Three Months Ended June 30,
---------------------------------------
2006 2005 Change
---------- --------- ---------
Net sales 855 $ 639 216
---------- --------- ---------
Costs and expenses:
Cost of products sold 649 633 16
Salaries and wages 355 339 16
Selling and administrative 251 325 (74)
Stock-based compensation 119 (34) 153
---------- --------- ---------
Total costs and expenses 1,374 1,263 111
---------- --------- ---------
Other (expense) income:
Interest income 12 13 1
Interest expense (124) (112) 12
---------- --------- ---------
Total other expense (112) (99) 13
---------- --------- ---------
Net loss (631) (723) (92)
========== ========= =========
NET SALES
Net sales increased by approximately $216,000 or 34% from approximately $639,000
in 2005 to approximately $855,000 in 2006. Approximately $101,000 and $29,000 of
the increase is attributable to an increase in unit and filter sales
respectively, for the three-months ended June 30, 2006 as compared to the
six-months ended June 30, 2005. Approximately $39,000 of the increase is
attributable to sales of a new product, which we distribute, a Rentar fuel
catalyst.
Sales to two customers accounted for approximately 36% and 12% (for a total of
48%) of the consolidated net sales for the three-months ended June 30, 2006. For
the three-months ended June 30, 2005, sales to three customers accounted for
approximately 24%, 16% and 15% of the consolidated net sales. The UK
subsidiary's sales increased by approximately $68,000 (36%), from $188,000 to
$256,000 for the three-month period ended June 30, 2006 compared to the
three-month period ended June 30, 2005.
COST OF PRODUCTS SOLD
Cost of products sold increased by approximately 3% from approximately $633,000
in 2005 to approximately $649,000 in 2006. Cost of products sold, as a
percentage of sales, decreased from 99% in 2005 to 76% in 2006. The decrease is
primarily due to improvements in raw material sourcing, reductions in product
bills of materials and product price increases.
SALARIES AND WAGES
Salaries and wages increased approximately $16,000, or 5%. This increase is the
result of salary increases to three employees and cost of living wage increases,
partially deferred, to all employees.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased by approximately $74,000, or 23%.
This decrease is due to a reduction in travel, entertainment and lodging
expenses, deferred finance costs and license and fees by approximately $17,000,
$23,000 and $20,000 respectively.
STOCK-BASED COMPENSATION
In May 2006 we incurred an expense of approximately $87,600 when we extended the
expiration date of an employee's stock options. Also during the three-months
ended June 30, 2006, we expensed approximately $30,000 related to amortization
of warrants over their vesting period and approximately $2,000 related to
unvested options. During the three-months ended June 30, 2005, we recorded a
credit to operations of approximately $34,000 due to the decline in our stock
price from $.99 at March 31, 2005 to $.65 at June 30, 2005. As stock-based
compensation expense related to variable awards is subject to changes in the
quoted market value of our common stock, we cannot predict the impact of
stock-based compensation expense on operations in the future. During the
three-months ended June 30, 2006, our stock declined from $1.40 at March 31,
2006 to $1.28 at June 30, 2006.
INTEREST EXPENSE
Interest expense increased by approximately $12,000, or 11%, as a result of the
increase in the interest rate. We pay interest monthly on the notes payable to
stockholder at the prime rate, which was 8% as of June 30, 2006, compared to 6%
17
at June 30, 2005. This increase was partially offset by the higher average
principal balances of $5,733,000 in the period ended June 30, 2005 compared to
an average principal balance of $5,706,000 for the period ended June 30, 2006.
RESULTS OF OPERATIONS FOR THE SIX-MONTHS ENDED JUNE 30, 2006 COMPARED TO THE
SIX-MONTHS ENDED JUNE 30, 2005
The following table sets forth the amount of increase or decrease represented by
certain items reflected in the our condensed consolidated statements of
operations in comparing the six-months ended June 30, 2006 to the six-months
ended June 30, 2005:
(in thousands) Six Months Ended June 30,
----------------------------------------
2006 2005 Change
----------- --------- ---------
Net sales 1,678 1,237 441
----------- --------- ---------
Costs and expenses:
Cost of products sold 1,264 1,257 7
Salaries and wages 690 708 (18)
Selling and administrative 519 685 (166)
Stock-based compensation 157 (68) 225
----------- --------- ---------
Total costs and expenses 2,630 2,582 48
----------- --------- ---------
Other income (expense):
Interest income 25 26 1
Interest expense (254) (226) 28
----------- --------- ---------
Total other expense (229) (200) 29
----------- --------- ---------
Net loss (1,181) (1,545) (364)
=========== ========= =========
NET SALES
Net sales increased by approximately 36% from approximately $1,237,000 in 2005
to approximately $1,678,000 in 2006. Approximately $245,000 and $35,000 of the
increase is attributable to an increase in unit and filter sales respectively,
for the six-months ended June 30, 2006 as compared to the six-months ended June
30, 2005. Approximately $64,000 of the increase is attributable to sales of a
new product, which we distribute, the Rentar fuel catalyst.
Sales to two customers individually accounted for approximately 36% and 12% (for
a total 48%) and 35% and 10% (for a total of 45%) of net sales for the
six-months ended June 30, 2006 and 2005, respectively. The UK subsidiary's sales
increased by approximately $10,000, or 2%, from approximately $402,000 for the
six-month period ended June 30, 2005 compared to approximately $412,000 for the
six-month period ended June 30, 2006.
COST OF PRODUCTS SOLD
Cost of products sold increased by approximately $7,000, or 1%, from
approximately $1,257,000 in 2005 to approximately $1,264,000 in 2006. Cost of
products sold, as a percentage of sales, decreased from 102% for the six-months
ended June 30, 2005 to 75% for the six-months ended June 30, 2006. This decrease
in cost of products sold is attributable to improvements in raw material
sourcing, reductions in product bills of materials and product price increases.
SALARIES AND WAGES
Salaries and wages decreased approximately $18,000, or 3%, as the result of a
net reduction of three employees for a portion of the period.
18
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased by approximately $166,000 or 24%
from approximately $685,000 for the six months ended June 30, 2005 to
approximately $519,000 for the six months ended June 30, 2006, due primarily to
a reduction in exchange losses, travel, entertainment and lodging expenses,
deferred finance costs and license fees by approximately $126,000 $17,000,
$23,000 and $20,000 respectively.
STOCK-BASED COMPENSATION
We recorded stock based compensation expense and credit of $157,000 and $68,000
for the six-months ended June 30, 2006 and 2005, respectively, related to
certain variable equity awards and other stock based compensation. Approximately
$88,000 is due to the extension in May 2006 of the expiration date of the
exercise period of 270,000 fully vested stock options for a retired employee who
left us in August 2003. Our Stock Option Plan permits an employee to exercise
their stock options for up to one month after their termination date, at which
time they expire. The exercise price of the options ranges from $1.00 to $8.50.
In accordance with FAS123R, we compared the options' fair value on the
modification date to the fair value on the date immediately prior to the
modification and recorded the corresponding charge to compensation expense.
INTEREST EXPENSE
Interest expense increased by approximately $28,000, or 12%, as a result of an
increase in the interest rate on the outstanding balance of the stockholder
notes payable. We pay interest monthly on the notes payable to stockholder at
the prime rate, which was 8.0% as of June 30, 2006, as compared to 6.0% as of
June 30, 2005.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2006, we had cash and cash equivalents of approximately $46,000.
For the six-month period ended June 30, 2006, net cash used in operating
activities was approximately $776,000, which primarily resulted from the net
loss of approximately $1,181,000. Net cash used in investing activities was
approximately $8,000 for the purchase of property and equipment. Net cash
provided by financing activities was approximately $738,000 for the period, due
to net proceeds of $910,000 in a private placement offering, offset by the net
repayment of approximately $747,000 of the stockholder loan.
We have incurred net losses each year since its inception and have relied on the
sale of our stock from time to time and loans from third parties and from
related parties to fund our operations.
On March 28, 2002, we executed a binding agreement with one of our stockholders,
who is also a Board Member, to fund up to $6.1 million. On March 29, 2006, the
maturity date of the loan was extended from December 31, 2006 to December 31,
2007. As of June 30, 2006, we had drawn $5.901 million of the $6.150 million of
the available funds.
At June 30, 2006, we had working capital of approximately $692,000 and our
current ratio (current assets to current liabilities) was 1.55 to 1. We
anticipate increased cash flows from 2006 sales activity; however, additional
cash will still be needed to support operations and meet working capital needs.
If budgeted sales levels are not achieved and/or significant unanticipated
expenditures occur, 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 2006. 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.
19
Our wholly owned subsidiary, Puradyn Filter Technologies, Ltd., rents office
space in Devon, England under a lease that expires in September 2010.
Consistent with industry practices, we may accept product returns or provide
other credits in the event that a distributor holds excess inventory of our
products. Our sales are made on credit terms, which vary depending on the nature
of the sale. We believe we have established sufficient reserves to accurately
reflect the amount or likelihood of product returns or credits and uncollectible
receivables. However, there can be no assurance that actual returns and
uncollectible receivables will not exceed our reserves.
Sales of our product will depend principally on end user demand for such
products and acceptance of the our products by original equipment manufacturers
("OEMs"). The oil filtration industry has historically been competitive and, as
is typically the case with innovative products, the ultimate level of demand for
our products is subject to a high degree of uncertainty. Developing market
acceptance, particularly worldwide, for our existing and proposed products will
require substantial marketing and sales efforts and the expenditure of a
significant amount of funds to inform customers of the perceived benefits and
cost advantages of its products.
Impact of Inflation
Inflation has not had a significant impact on our operations. However, any
significant decrease in the price for oil or labor, environmental compliance
costs, and engine replacement costs could adversely impact the our end users
cost/benefit analysis as to the use of our products. The impact of fluctuations
in foreign currency has not been significant. The exchange rate, the Great
British pound to the U.S. dollar fluctuated from 1.7208 on December 31, 2005 to
1.8163 on June 30, 2006 as compared to 1.9266 on December 31, 2004 to 1.8048 on
June 30, 2005.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Puradyn Filter Technologies Incorporated's Chief Executive Officer and Chief
Financial Officer have evaluated the Company's disclosure controls and
procedures as of June 30, 2006, and they concluded that these controls and
procedures are effective.
(b) Changes in Internal Controls
There are no significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to June 30, 2006.
20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
a) Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
21
SIGNATURES
In accordance with the requirements of the Exchange Act, Puradyn Filter
Technologies Incorporated caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PURADYN FILTER TECHNOLOGIES INCORPORATED
(Registrant)
By /s/ Cindy Lea Gimler
--------------------------------------
Cindy Lea Gimler,
Chief Financial Officer
Date: August 15, 2006