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~~2018, including the risks described inPart 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.


							March 31,			December 31,
	September 30, 2017			December 31, 2016			2019			2018
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash	$	22,652		$	12,806		$	175,303		$	112,769
Accounts receivable, net of allowance for uncollectible accounts of $17,000 and $17,000, respectively		211,321			260,171			115,108			293,994
Inventories, net		420,653			682,108			1,074,978			834,708
Prepaid expenses and other current assets		80,744			55,447			53,985			66,290
Total current assets		735,370			1,010,532			1,419,374			1,307,761

Property and equipment, net		55,596			42,502			71,201			78,642
Operating Right of use asset							846,744			—
Other noncurrent assets		513,608			470,408			475,283			483,974
Total assets	$	1,304,574		$	1,523,442		$	2,812,602		$	1,870,377

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	178,836		$	147,584		$	540,374		$	416,790
Accrued liabilities		360,581			334,910			225,042			605,357
Sales incentives		30,708			—
Current portion of capital lease obligation		3,755			3,755
Operating lease liabilities							174,435			—
Deferred compensation		1,594,283			1,602,826			1,502,823			1,564,253
Notes Payable - stockholders		—			7,188,349			625,000			325,000
Total current liabilities		2,168,163			9,277,424
Total Current Liabilities							3,067,674			2,911,400

Capital lease obligation, less current portion		627			3,443
Long-term operating lease liabilities							743,651			—
Notes Payable - stockholders		7,688,349			—			8,385,132			7,989,622
Total Long Term Liabilities		7,688,976			3,443
Total Liabilities		9,857,139			9,280,867			12,196,457			10,901,022

Commitments and contingencies (Note 12)
Commitments and contingencies (Note 11)

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			69,016			69,016
Additional paid-in capital		53,562,512			53,504,744			53,691,930			53,678,000
Accumulated deficit		(62,184,093	)		(61,331,185	)		(63,144,801	)		(62,777,661	)
Total stockholders’ deficit		(8,552,565	)		(7,757,425	)		(9,383,855	)		(9,030,645	)
Total liabilities and stockholders’ deficit	$	1,304,574		$	1,523,442		$	2,812,602		$	1,870,377


	Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016			Three Months Ended March 31,
													2019			2018
Net sales	$	515,846		$	438,263		$	1,780,006		$	1,455,137		$	482,993		$	885,740
Cost of products sold		385,738			341,618			1,364,849			1,077,533			330,501			504,442
Gross profit		130,108			96,645			415,157			377,604
Gross Profit													152,492			381,298

Costs and expenses:
Salaries and wages		223,049			217,998			640,137			672,364			228,578			193,268
Selling and administrative		131,098			160,646			424,459			533,781			190,639			150,070
Loss on impairment of patents													11,417			—
Total operating costs		354,147			378,644			1,064,596			1,206,145			430,634			343,338
Loss from operations		(224,039	)		(281,999	)		(649,439)			(828,541	)

Income / (Loss) from operations													(278,142	)		37,960

Other income (expense):
Interest expense		(70,300	)		(94,434	)		(203,469	)		(269,862	)		(88,998	)		(74,703	)
Total other expense, net		(70,300	)		(94,434	)		(203,469	)		(269,862	)		(88,998	)		(74,703	)
Loss before income taxes		(294,339	)		(376,433	)		(852,908	)		(1,098,403	)
Income tax expense		—			—			—			—
Net loss before income tax expense													(367,140	)		(36,743	)

Provision for income taxes													—			—

Net loss	$	(294,339	)	$	(376,433	)	$	(852,908	)	$	(1,098,403	)	$	(367,140	)	$	(36,743	)

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

Weighted average common shares outstanding (basic and diluted)		69,016,468			48,683,135			69,016,468			48,683,135

Weighted average common shares outstanding basic and diluted													69,016,468			69,016,468


	Nine Months Ended September 30							Three Months Ended March 31,
	2017			2016				2019				2018
Operating activities
Net loss	$	(852,908	)	$	(1,098,403	)		$	(367,140	)		$	(36,743	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		24,938			28,013				12,850				8,762
Provision for slow moving inventory		121,998			2,950				(40,537	)
Compensation expense on stock-based arrangements with employees and consultants		31,396			80,861				13,930				10,341
Impairment of capitalized patent costs								11,417				—
Amortization of Operating right of use asset								40,265				—
Changes in operating assets and liabilities:
Accounts receivable		48,851			(139,212	)			178,886				(150,082	)
Inventories		139,457			71,844				(199,732	)			(53,342	)
Prepaid expenses and other current assets		(25,297	)		(19,011	)			12,305				6,874
Other assets								—				850
Sales incentives								—				(99,128	)
Accounts payable		31,247			38,092				123,583				87,663
Sales incentives		30,708			—
Accrued liabilities								89,881				4,099
Deferred compensation		(8,543	)		(33,043	)			(61,430	)			(51,051	)
Accrued liabilities		27,045			22,342
Operating lease liabilities								(43,609	)			—
Net cash used in operating activities		(431,108	)		(1,045,567	)			(229,331	)			(271,757	)

Investing activities
Capitalized patent costs		(53,385	)		(103,082	)			(8,135	)			(20,192	)
Purchases of property and equipment		(27,845	)		(3,180	)
Net cash used in investing activities		(81,230	)		(106,262	)			(8,135	)			(20,192	)


Financing activities
Cash overdraft								—				38,449
Proceeds from issuance of notes payable to stockholders		575,000			1,113,912				300,000				200,000
Repayment of note payable to stockholder		(50,000	)		—
Proceeds from Stockholder loan		—			25,000
Payment of capital lease obligations		(2,816	)		(2,816	)			—				(938	)
Net cash provided by financing activities		522,184			1,136,096				300,000				237,511


Net (decrease ) /increase in cash		9,846			(15,733	)
Net increase / (decrease) in cash								62,534				(54,438	)
Cash at beginning of period		12,806			34,471				112,769				54,438
Cash at end of period	$	22,652		$	18,738			$	175,303			$	—

Supplemental cash flow information:
Cash paid for interest	$	180,317		$	258,356			$	—			$	61,164

Supplemental disclosure of non-cash transactions:
Forgiveness of stockholder loan and accrued interest	$	26,373		$	—
Cash paid for taxes							$	—			$	—
Noncash investing and financing activities:
Conversion of accrued interest into note payable							$	395,510			$	—
Operating right of use assets obtained in exchange for operating lease liabilities							$	890,009			$	—

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

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.

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~~period ended ~~September 30, 2017~~March 31, 2019 may not necessarily be indicative of the results that may be expected for the year ending December 31, ~~2017.~~2019.

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.~~2018.

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.~~assured. 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 unaudited condensed financial statements.

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

The Company accounts for revenue in accordance with Topic 606 which was adopted at the beginning of fiscal year 2018 using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company did not recognize any cumulative-effect adjustment to retained earnings upon adoption as the effect was immaterial. The adoption of these standards did not have a material impact on the Company's condensed statements of operations during the three months ended March 31, 2018.

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 accompanying unaudited condensed financial statements and accompanying notes. Actual results could differ from those estimates.

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~~March 31, 2019 and December 31, ~~2016,~~2018, the Company did not have any cash equivalents.

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~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, because of their short-term natures.

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 are stated at the lower of cost or ~~market~~net realizable value using the first in, first out (FIFO) method. Net realizable value is defined as sales price less cost of completion, disposable and transportation and a normal profit margin. 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 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 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~~approximately 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.

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.

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

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~~three months ended ~~September 30, 2017,~~March 2019, 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~~three months ended ~~September 30, 2017:~~March 31, 2019:


Balance as of December 31, 2016	$	20,000
Balance as of December 31, 2018			$	20,000
Less: Payments made		—			—
Add: Provision for current period warranties		—			—
Balance as of September 30, 2017 (unaudited)	$	20,000
Balance as of March 31, 2019 (unaudited)			$	20,000

Advertising costs are expensed as incurred. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, advertising costs incurred by the Company totaled approximately ~~$430, $731, $0,~~$4,670 and ~~$761,~~0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.

~~Research~~Engineering and development costs are expensed as incurred. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016, research~~2018, engineering and development costs incurred by the Company totaled ~~$4,970, $4,970, $4,766~~$2,365 and ~~$7,575,~~$1,429, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.

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.

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.~~March 31, 2019.

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 ~~withFASB ASC 505,~~with~~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.

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~~March 31, 2019 and December 31, ~~2016,~~2018, 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.

~~FASB~~The Company uses ASC ~~260,~~260-10,Earnings Per Share~~, requires a dual presentation of~~ for calculating the basic and diluted ~~earnings~~income (loss) per share. ~~However, because~~The Company computes basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding. As of March 31, 2019 and 2018, there were 12,558,336 and 3,956,412 shares, respectively, issuable upon the ~~Company's net losses, the effect~~exercise of ~~outstanding stock~~ options and warrants, ~~would be anti-dilutive and, accordingly, is~~respectively.

Common stock equivalent shares are excluded from the computation of ~~diluted loss per share. The number of such shares excluded from the computation of~~net loss per share ~~was 4,175,126 and 5,241,196~~if their effect is anti-dilutive. The Company had net income for the ~~nine months~~three month period ended ~~September 30, 2017~~March 31, 2019. A separate computation of diluted earnings per share is presented using the treasury stock method and ~~2016, respectively.~~the common stock equivalents did not have any effect on net income per share.

In connection with our lease agreement for our Office in Boynton Beach, Florida, the Company adopted the provisions of ASU 2016-02, Leases. As such, the Company recorded an operating right of use asset and an operating lease liability as of March 31, 2019.

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

~~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.

~~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.

The Company's unaudited condensed 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~~Company does not have sufficient revenues and income to fully fund the ~~nine-months~~operations. During the three months ended ~~September 30, 2017,~~March 31, 2019 and 2018 the Company used net cash in operations of ~~$431,108~~$229,331 and ~~$1,045,567 during the nine-months ended September 30, 2017 and 2016,~~$271,757, respectively. As a result, the Company has had to rely ~~principally~~ on stockholder loans and related parties 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~~two stockholders 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~~2018 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.

Inventories consisted of the following at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively:


	September 30, 2017			December 31, 2016				March 31, 2019			December 31, 2018
	(Unaudited)							(Unaudited)
Raw materials	$	917,189			1,074,156			$	1,082,954		$	1,053,147
Work In Progress		1,962			—
Finished goods		128,082			112,535				427,550			257,623
Valuation allowance		(626,580	)		(504,583	)			(435,526	)		(476,062	)
Inventory, net	$	420,653			682,108
Total inventory, net							$	1,074,978		$	834,708

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, prepaid expenses and other current assets consisted of the following:


	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
	(Unaudited)				(Unaudited)
Prepaid expenses	$	45,052		27,447	$	25,985	$	27,854
Deposits		35,692		28,000		28,000		38,436
	$	80,744		55,447	$	53,985	$	66,290

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, property and equipment consisted of the following:


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
Machinery and equipment	$	1,050,462		$	1,045,217		$	1,030,196		$	1,030,196
Furniture and fixtures		56,558			56,558			56,558			56,558
Leasehold improvements		152,322			129,722			188,012			188,012
Software and website development		88,842			88,842			88,842			88,842
Computer hardware and software		153,249			153,249			179,258			179,258
		1,501,433			1,473,588			1,542,866			1,542,866
Less accumulated depreciation and amortization		(1 ,445,837	)		(1,431,086	)		(1,471,665	)		(1,464,224	)
	$	55 ,596		$	42,502		$	71,201		$	78,642

Depreciation and amortization expense of property and equipment for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016 is $9,010, $14,751, $5,381~~2018 are $7,441 and ~~$17,363,~~$5,027, respectively.

Included in other noncurrent assets at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 are capitalized patent costs as follows:


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
Patent costs	$	535,527		$	482,142		$	530,214		$	533,496
Less accumulated amortization		(57,739	)		(47,555	)		(89,902	)		(84,429	)
	$	477,788		$	434,587		$	440,312		$	449,067

Amortization expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016 amounted to $3,394, $10,184, $3,395,~~2018 are $5,409 and ~~$10,647,~~$3,735, respectively. During the three months ended March 31, 2019 the Company impaired $11,417 of patent costs as it was determined that it had no future economic value.

Operating right of use assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating right of use assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases. As we have outstanding secured debt, we used the rate based on loan of 4%.

Our office lease contains rent escalations over the lease term. We recognize expense for this office lease on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

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,~~March 31, 2019, 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 remaining term of the current lease amount to ~~$302,639.~~$180,826.

~~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~~On June 29, 2018, the Company entered into a non-cancellable five-year lease for the same facilities commencing August 1, 2019 and expiring July 31, 2024. The lease will require an initial rent of $14,899 per month, beginning August 1, 2019 for the first year, increasing by 3% per year to $16,769 per month in the fifth year. In addition, the Company is responsible for all operating expenses and utilities. As part of the lease the landlord agreed to reimburse the Company $58,000 towards the replacement of air conditioning units, upon written request. As of December 31, 2018 the Company had received all of the reimbursement.

In September 2018, the Company entered into a new capital lease for office equipment in the amount of ~~$15,020.~~

~~At September 30, 2017 and~~$559, which commenced in December ~~31, 2016, accrued liabilities consisted~~2018 for a term of ~~the following:~~

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.

(1) Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate.

Supplemental disclosures of cash flow information related to leases were as follows:

At March 31, 2019 and December 31, 2018, accrued liabilities consisted of the following:

Deferred compensation represents amounts owed to two current employees and two former employees for salary. 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. As of March 31, 2019 and December 31, 2018, the Company recorded deferred compensation of $1,502,823 and $1,564,253, respectively.

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.

On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the Executive 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~~$6.1 million. Under the terms of the ~~agreements,~~agreement, 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%~~(4.01% and 3.678% per annum at ~~September 30, 2017)~~March 31, 2019 and 2018, respectively), 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~~annually, through February 2012, the maturity date for the ~~agreements~~agreement was extended annually from December 31, 2007, to ~~the agreements’ current maturity date of~~ December 31, 2018. ~~Refer~~On May 9, 2018 he extended the maturity rate to ~~Note 14.~~December 31, 2019.

~~During the year ended December 31, 2016~~On March 25, 2019 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~~entered into a note exchange agreement with our Executive Chairman pursuant to 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~~exchanged $7,989,622 of principal and $395,510 of accrued interest ~~was converted into 20~~,~~333,333 shares~~which would have been due on December 31, 2019 under an unsecured loan for a secured promissory note in the principal amount of ~~our common stock at a conversion price of $0.30 per share. This conversion was above the market price of our common stock.~~$8,385,132. The ~~balance of this loan,~~secured note which ~~is unsecured,~~ matures on December 31, ~~2018. While he has continued to fund~~2021, and bears interest at 4% per annum, payable monthly, is secured by a first position security interest in our assets.

From January 1, 2019 through March 31, 2019, the Company received additional loans in the amount of $275,000 from the Company’s Executive Chairman, as advances for working capital ~~needs and extend~~needs. The loans bear interest at the BBA Libor Daily Floating Rate plus 1.4 points. As of March 31, 2019 the total balance 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.was $600,000.

~~Additionally,~~In January 7, 2019, the Company ~~had unsecured loans outstanding~~received an additional loan in the amount of $25,000 from a stockholder and former member of the ~~board~~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.Directors. The ~~forgiveness was treated as a capital contribution. The notes bear~~loan bears interest at a rate of 5% per annum and ~~are~~is due ~~upon demand.~~January 7, 2020.

During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the Company incurred interest expense of ~~$111,555, $200,405, $93,759,~~$84,939 and ~~$268,139,~~$74,673, respectively, on its loan from the Executive Chairman of the Board, which is included in interest expense in the accompanying condensed statements of operations, as well as interest expense of $0$288 and ~~$753~~$308 for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and 2018, respectively, related to the loan from a former Board member. These amounts, in addition to interest expense of ~~$1,495, $1,996, $364,~~$4,059 and ~~$802,~~$30 for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, are related to ~~capital lease obligations,~~ financing and ~~loans from a stockholder.~~late fees.

Notes payable and ~~capital leases~~operating lease liabilities consisted of the following at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:

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

~~In January 2017,~~On May 18, 2018 we entered into a letter agreement with Mr. Edward S. Vittoria pursuant to which he agreed to be employed by us as our Chief Executive Officer for an initial term ending May 31, 2019, which such term may be extended by mutual agreement upon terms and conditions to be mutually agreed upon prior to the ~~Company renewed~~expiration of such initial term. Under the ~~lease at~~terms of the letter agreement we agreed to pay him: (i) an annual ~~expense~~base salary of ~~$8,500 on~~$200,000, payable in accordance with our normal payroll practices; (ii) an annual cash bonus to be awarded by our Board of Directors in January in a ~~condominium in Ocean Ridge, Florida until December 20, 2017.~~

~~On March 7, 2016, the Company entered into an Advisory Agreement for duration~~minimum amount of ~~six months with an outside consultant, who is also a stockholder. We issued the consultant five year warrants~~$50,000; and (iii) granted him options to purchase ~~350,000~~6,500,000 shares of ~~the Company's~~our common stock, ~~with~~vesting one-third in arrears, at an exercise price equal to fair market value on the date of ~~$0.05 per share. These warrants vested immediately.~~

~~On September 27, 2012,~~grant pursuant to the ~~Company entered into a 72 month lease for its corporate offices~~terms and ~~warehouse facility~~conditions of our 2018 Equity Compensation Plan. He is also entitled to: (i) participate in ~~Boynton Beach, Florida. The renewed lease commences August 1, 2013~~all of our benefit programs currently existing or hereafter made available to executive and/or salaried; (ii) an amount of annual paid vacation consistent with his position and ~~requires an initial rent~~length of ~~$12,026 per month beginning in the second month of the first year, increasing in varying amounts~~service to ~~$13,941 per month in the sixth year. In addition, the Company is responsible~~us; and (iii) reimbursement for all ~~operating~~reasonable, out of-pocket expenses ~~and utilities.~~incurred by him.

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~~Board of ~~directors~~Directors and a significant stockholder is President of Boxwood Associates, Inc. Refer to Note ~~14.~~13.

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~2018, respectively, the Company recorded non-cash stock-based compensation expense of ~~$9,999, $31,396, $17,699,~~$13,930 and ~~$80,861,~~$10,341, relating to employee stock options and warrants issued for consulting services.

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~~March 31, 2019 and ~~2016~~2018 for the options is ~~$24,705~~$110,662 and ~~$73,697,~~$4,027, respectively, and will be recognized through ~~September~~June 30, ~~2019.~~2021.

~~A summary~~On April 12, 2018 the Board of Directors approved the adoption of a 2018 Equity Compensation Plan. The Company has reserved 20,000,000 shares of our common stock for grants under this plan.

The 2018 Plan provides for the granting of both incentive and non-qualified stock options to key personnel, including officers, directors, consultants and advisors to the Company, at the discretion of the Board of Directors. Each plan limits the exercise price of the options at no less than the quoted market price of the common stock on the date of grant. The option term is determined by the Board of the Directors, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the Company’s common stock, ~~option~~no more than five years after the date of the grant. Generally, under both plans, asoptions to employees vest over three years at 33.33% per annum unless the Board of ~~September 30, 2017, and changes during the nine month period then ended is presented below:~~Directors designates a different vesting schedule.

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

On March 28, 2019, the Company filed a definitive information statement on Schedule 14C with the Securities and Exchange Commission to notify our common shareholders that effective March 27, 2019, the holders of 35,713,727 shares of our common stock, representing 51.7% of the outstanding shares of our common stock, executed a written consent in lieu of a special meeting of shareholders ratifying the adoption of our 2018 Equity Compensation Plan, as amended.

A summary of the Company’s stock option plans as of March 31, 2019, and changes during the three-month period then ended is presented below:

Changes in the Company’s non-vested options for the three months ended March 31, 2019 are summarized as follows:

A summary of the Company’s warrant activity as of ~~September 30, 2017~~March 31, 2019 and changes during the ~~nine month~~three-month period then ended is presented below:


	Nine months ended September 30, 2017				Three months ended March 31, 2019
	Weighted Average Exercise				Warrants			Weighted Average Exercise Price
	Warrants		Price
Warrants outstanding at December 31, 2016		1,315,340	$	0.24
Warrants outstanding at December 31, 2018					773,336		$	0.16
Granted		—		—		—			—
Expired		325,178		0.35		—			—
Warrants outstanding at September 30, 2017		990,162	$	0.20
Warrants outstanding and exercisable at March 31, 2019					773,336		$	0.16


	Warrants Outstanding						Warrants Outstanding and Exercisable
Range of Exercise Price	Number Outstanding		Remaining Average Contractual Life (In Years)		Weighted Average Exercise Price		Number Outstanding		Remaining Average Contractual Life (In Years)		Weighted Average Exercise Price
$0.05-$0.35		990,162		2.17	$	0.20
$0.05 - $0.25								773,336		1.15	$	0.16
Totals		990,162		2.17	$	0.20		773,336		1.15	$	0.16

On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the Executive 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~~$6.1 million. Under the terms of the ~~agreements,~~agreement, 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%~~(4.01% and 3.678% per annum at ~~September 30, 2017)~~March 31, 2019 and 2018, respectively), 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~~annually, through February 2012, the maturity date for the ~~agreements~~agreement was extended annually from December 31, 2007, to ~~the agreements’ current maturity date of~~ December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019.

~~During the year ended December 31, 2016~~On March 25, 2019 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,~~entered into a note exchange agreement with our Executive Chairman pursuant to 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~~exchanged $7,989,622 of principal and $395,510 of accrued interest ~~was converted into 20~~,~~333,333 shares~~which would have been due on December 31, 2019 under an unsecured loan for a secured promissory note in the principal amount of ~~our common stock at a conversion price of $0.30 per share. This conversion was above the market price of our common stock.~~$8,385,132. The ~~balance of this loan,~~secured note, which ~~is unsecured,~~ matures on December 31, ~~2018. While he has continued~~2021, and bears interest at 4% per annum, payable monthly, is secured by a first position security interest in our assets. (Refer to ~~fund our~~Note 10).

From January 1, 2019 through March 31, 2019, the Company received additional loans in the amount of $275,000 from the Company’s Executive Chairman, as advances for working capital ~~needs and extend~~needs. The loans bear interest at the BBA Libor Daily Floating Rate plus 1.4 points. As of March 31, 2019, the total balance 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.was $600,000.

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~~the three month periods ended March 31, 2019 and ~~nine months ended September 30, 2017 and 2016,~~2018, we paid Boxwood Associates, Inc. $6,000 and ~~$18,000,~~$6,000, respectively, under this agreement. A former member of our ~~board~~Board of ~~directors~~Directors is President of Boxwood Associates, Inc.

There are concentrations of credit risk with respect to accounts receivables due to the amounts owed by ~~five~~two customers at ~~September30, 2017~~March 31, 2019 whose balances each represented approximately ~~11%, 12%, 13%, 20%~~69% and ~~30%~~15%, for a total of ~~86%~~84% of total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed by ~~three~~two customers at December 31, ~~2016~~2018 whose balances each represented approximately ~~50%~~53%, ~~18%~~and 30%, ~~and13%~~, for a total of ~~81%~~83% of total accounts receivables. ~~The loss of business from one or a combination of the Company’s significant~~Sales to two customers ~~or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations. During~~for the three months ended ~~September 30, 2017 sales from four customers represented 33%, 17%, 16%~~March 31, 2019 were 56% and ~~11%~~25% for a total of ~~77%~~81% of sales. During the three months ended ~~September 30, 2016~~March 31, 2018 sales from three customers represented ~~17%~~46%, 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%16%, and 10% for a total of ~~47%~~72% of ~~sales~~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.

~~From October 1, 2017 through November 17, 2017,~~Subsequent to March 31, 2019, the Company received additional loans in the amount of ~~$80,000~~$200,000 from the Company’s Executive 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.~~

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

The following discussion of our unaudited condensed financial condition and results of operations for the three months ended March 31, 2019 and 2018 should be read in conjunction with the unaudited condensed financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission on April 10, 2018 (the “2018 10-K”), and our subsequent filings with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All information in this section for the three months ended March 31, 2019 and 2018 is unaudited and derived from the unaudited condensed financial statements appearing elsewhere in this report; unless otherwise noted, all information for the year ended December 31, 2018 is derived from our audited financial statements appearing in the 2018 10-K.

We design, manufacture, market and distribute worldwide the Puradyn® bypass oil filtration system for use with substantially all internal combustion engines and hydraulic equipment that use lubricating oil. Working in conjunction with the equipment’s primary oil filter, thePuradynsystem cleans oil by providing a second circuit of oil filtration and treatment to continually remove solid and liquid contaminants from the oil through a sophisticated and unique filtration and absorption process. ThePuradynsystem consists of a base filtration unit or housing that is connected via hoses or steel tubing to the engine or hydraulic system, along with filter elements that reside inside the filtration unit and are replaced periodically to maintain top performance. We believe that our filter is unique in that it incorporates an additive package to replenish depleted base additive levels in engine lubricating oil. BecausePuradyn-filtered lubricating oil is kept in a continually clean state and within engine manufacturers’ specification, our system has been used effectively to safely and significantly extend oil-drain intervals and to extend the time between engine overhauls.

Our core product, the patentedPuradynbypass oil filtration system, is offered in two primary applications, MTS engine systems and custom-engineered MTS hydraulic systems, which can be attached to almost any engine or hydraulic application. AllPuradynsystems are compatible with virtually all standard and synthetic oils on the market, and they work with engines using gasoline, diesel, propane or natural gas. We are also the sole manufacturer and provider ofPuradynreplacement filter elements for thePuradynsystem. Our products are marketed to numerous industries that include hydraulic applications, and other users of engines or equipment that utilize up to 50 weight oil for lubrication. We focus our sales strategy on individual sales and distribution efforts as well as on the development of a ~~worldwide~~global distribution network that will not only sell, but also 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~~became exclusive ~~Master Distributor~~distributor for the oil and gas ~~industry. We believe that~~industry in September 2017. With 300 locations worldwide, DNOW provides the potential to reach to new markets and customers which we would otherwise not be able to effectively reach, and consistently support our product on a global basis. MNI Diesel, LLC (MNI) joined the Puradyn distributor network in 2012, and in August 2018, they became the exclusive distributor of Puradyn products to the commercial marine industry for the Ohio and Mississippi River Valleys and the U.S. Gulf Coast of Texas, Louisiana, Mississippi and Alabama. In addition to the DNOW ~~has~~network and MNI, we currently have approximately ~~300 outlets worldwide~~45 distributors and dealers and manufacturer representatives that ~~have the potential to~~ sell and/or service thePuradyn ~~system. As exclusive global distributor for~~system in the U.S. and internationally. Today our products are found around the world in a number of industries, including oil and gas, ~~services~~power generation, construction and forestry, commercial marine, mining, and transportation.

During the balance of 2019 we will continue to focus our ~~relationship with DNOW increased our potential reach to new markets~~sales and ~~customers within this industry, which~~marketing efforts on:

In addition, from an operating standpoint we ~~had not previously been able to effectively develop. Sales to DNOW represented 39% of our net~~are placing additional emphasis on:

We attribute the decrease in sales in the ~~nine~~first quarter of 2019 compared to the three months then ended ~~September 30, 2017.~~

~~We have found~~in 2018 to a few customers delaying orders due to the ~~price~~rapid decline of ~~oil not only affects our customers~~market certainty, especially in the oil and gas ~~industry but all ancillary industries~~segment, that began in December 2018 and continued through the first quarter. Nevertheless, we continue to engage more prospective customers than we have had traditionally. Evaluations continue to increase, however these can run between 3 and 12 months. Our focus on the pressure pumping and midstream segments, both of which we believe may provide double the opportunity of our existing land rig business, will be supported by expanded marketing efforts through our DNOW relationship and the sharing of positive results by early adopters, such as Legend Energy Services who proceeded to make Puradyn standard on their entire fleet of pressure pumping engines within a few months of beginning testing in 2018. We believe our efforts to drive further growth in the commercial marine segment will be led by MNI Diesel, who is our exclusive distributor along the U.S. Gulf Coast and up through the Mississippi and Ohio River valleys. MNI has installed hundreds of Puradyn systems and has witnessed their performance first hand, which makes them a very credible advocate. MNI’s customers ~~serve.~~ have experienced oil life extensions of more than 5 times, saving an average of $7,000 annually per vessel.

The ~~oil~~applicability of Puradyn bypass filtration to a wide range of industrial engine uses and ~~gas industry,~~hydraulic systems is becoming clearer, and people responsible for the maintenance and cost mitigation of this machinery are increasingly interested in ~~particular,~~the proven results of our systems.

The following table provides certain selected financial information for the periods presented:

Our gross profit margins for the first quarter of 2019 decreased from 43% in the first quarter of 2018 to 32% in the first quarter of 2019. The decrease in our gross profit margins in the first quarter of 2019 is attributable to reduced facility utilization due to decreased sales which was ~~hardest hit~~partial offset by a decrease in the reserve for slow moving inventory of $40,537 during the three months ended March 31, 2019 compared to $0 for the three months ended March 31, 2018 We have been advised by several of our suppliers that prices for various raw materials are being increased as a result of the loss of some of their primary suppliers and higher prices with their secondary suppliers and the unknown impact of recently enacted tariffs by the ~~downturn in oil prices in 2015 and 2016 but as oil drilling rigs return to service and oil prices level off,~~current administration. However, we are ~~resumed orders for replacement filters~~exploring and implementing measures to help mitigate the impact on our costs. We notified our customers of pricing increases effective October 1, 2018 which varied by product, and we will continue to review cost of materials increases and adopt further pricing action in the future as warranted.

Our total operating costs which include salaries and wages and selling and administrative expenses increased during the three months ended March 31, 2019 and 2018 due to primarily to the hiring of our new ~~installations. Based on industry intelligence~~CEO in May 2018. The additional expense was offset by the decision not fill a position vacated voluntarily and the impact of two employees who are now being paid only from ~~oil field services firm Baker Hughes as published online weekly on its website, the number of US oil rigs~~deferred compensation. The increases in ~~service increased 41%~~selling and administrative expenses during the first ~~nine months~~quarter 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~~2019 from the comparable period in ~~2016,~~2018 is also attributable to increases in non-cash expenses associated with stock compensation to employees and our ~~revenues remain insufficient~~decision to ~~fund~~restart targeted advertising. We anticipate that our ~~operating~~selling and administration 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~~will increase slightly throughout 2019, inclusive of ~~raw materials, payment~~communication costs, office supplies, and other components of ~~salaries and general overhead~~administrative expenses. ~~Our liquidity issues are also adversely impacting our ability to ship product in a timely fashion~~.

Total other expense, net represents interest we ~~borrowed an additional $575,000 from him, which included $135,000during 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~~pay to ~~September 30, 2017, he has~~related parties on amounts 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.

We had cash on hand of $175,303 and a working capital deficit of $1,648,300 at March 31, 2019 as compared to cash on hand of $112,769 and a working capital deficit $1,603,639 at December 31, 2018. Our current ratio (current assets to current liabilities) was .46 to 1 at March 31, 2019 as compared to .45 to 1 at December 31, 2018. The increase in negative working capital is primarily attributable to a decrease in accounts receivable and an increases in accounts payable and operating lease liabilities which were offset by decreases in accrued liabilities and deferred compensation and increase in inventory. We do not currently have any commitments for capital expenditures.

Historically, we have been materially reliant on working capital advances from our Executive Chairman to address our liquidity and working capital issues through the utilization of the borrowing agreement with him. On March 25, 2019 we entered into a note exchange agreement with our Executive Chairman pursuant to which he exchanged $7,989,622 of principal and $395,510 of accrued interest which was due on December 31, 2019 under an unsecured loan for a secured promissory note in the principal amount of $8,385,132. The note, which matures on December 31, 2021, bears interest at 4% per annum, payable monthly, and is secured by a first position security interest in our assets. In addition, ~~the amounts~~ we owe him $600,000 for other working capital advances which are due ~~at December 31, 2018 and we do not have sufficient funds to repay these unsecured obligations.~~

We also owe certain of our employees ~~$1,594,283~~$1,502,823 and $1,564,253, respectively, in deferred cash compensation at ~~September 30, 2017,~~March 31, 2019 and December 31, 2018, which represents ~~15%~~49% and 54%, respectively, of our current liabilities on that date. ~~Since 2005, Messrs. Sandler~~These current and ~~Kroger, two of our executive officers, and two other~~former employees ~~elected~~agreed to defer a portion of ~~the~~their compensation ~~due them~~ to assist us in managing our cash flow and working capital needs. As there is no written agreement with these current and former employees which memorializes the terms of salary deferral, only ~~a voluntary~~an election to do so, it is possible ~~that the employees~~these individuals could demand payment in full at any ~~time.~~time or elect to no longer defer their salaries, or reduce the amount they currently defer. We do not have ~~the~~sufficient funds to ~~pay~~satisfy 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.obligations.

Our net sales are not sufficient to pay our operating expenses. Our capital requirements depend on a number of factors, including our ability to internally grow our revenues, manage our business and control our expenses. We do not have any external sources of liquidity at this time, and ~~without outside financing,~~ our ~~working capital~~discussions over the past few years with third parties for potential investments have not been successful. We historically have encountered resistance from potential investors on a variety of fronts, including our operating losses, and the amount of debt due to our Executive Chairman. He is not ~~sufficient~~obligated to ~~fund~~lend us any additional funds and the amounts we owe him, which are secured by our ~~business. The inability of our Chief Executive Officer~~assets, mature in December 2021. He has advised us that he does not expect to continue to ~~advance funds~~provide working capital advances to usthe Company at historic levels. Given our history of losses and debt levels, ~~is beginning to have~~we face a ~~material impact on~~number of challenges in our ability to raise capital. If we do not significantly increase our net sales or raise funds as needed, our ability to provide for current working capital needs, pay our obligations as they become due, grow our company, and 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 ourexisting business and operations is in jeopardy. In this event, we would no longer be able to continue as a going concern and ~~we may be forced to cease operations. In that event our stockholders would likely~~you could lose ~~their entire~~all of your investment in our company.

During the first three months of 2019 net cash used by our operating activities was principally related to increases in inventory, which were offset by reduced accounts receivable, prepaid expenses and an increase in accounts payable. The increases in inventory and accounts payable were a result of the Company’s expected increase in sales and timing of receiving raw materials. During the first three months of 2018, cash used by operating activities was primarily used to fund our net loss together with increases in accounts receivable and inventories and decreases in sales incentives and deferred compensation were partially offset by an increase in accounts payable.

During the first three months of 2019 and 2018, net cash used by investing activities represented capitalized patent costs and purchases of equipment.

During the first three months of 2019 and 2018, net cash provided by financing activities represented loans from related parties, net of capital lease payments.

Our unaudited condensed 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. The Company does not have sufficient revenues and income to fund the 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~~2018 and ~~2015~~2017 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 continue 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.~~

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~~unaudited condensed financial statements appearing elsewhere in this report.

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

~~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 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 theOff balance ~~of 2017, we are unable at this time to predict if the stabilization trend will continue during the balance of the year.~~

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 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 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 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.

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.

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.

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.

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.

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.

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.

Our management, which includes our CEO and our ~~Vice President, who serves as our~~ principal financial and accounting 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~~March 31, 2019 (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 and accounting 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 and accounting 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. disclosure.

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.

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~~2018 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.results.

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.

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.

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.None.

~~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.~~

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.


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~~March 31, 2019

or

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

For the transition period from: _____________ to _____________


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)


Large accelerated filer	o¨	Accelerated filer	o¨
Non-accelerated filer	oþ	Smaller reporting company	þ
		Emerging growth company	o¨


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
COMMON STOCK, PAR VALUE $.001 PER SHARE	PFTI	NONE


		Page No.
	PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS.	1

	Condensed Balance Sheets – As of ~~September 30, 2017~~March 31, 2019 (unaudited) and December 31, ~~2016~~2018	1
	Condensed Statements of Operations –Three months ended March 31, 2019 and ~~Nine months ended September 30, 2017 and 2016~~2018 (unaudited)	2
	Condensed Statements of Cash Flows – ~~Nine~~Three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 (unaudited)	3
	Condensed Statements of Stockholders’ Deficit– Three months ended March 31, 2019 and 2018 (unaudited)	4
	Notes to Condensed Financial Statements (Unaudited)	45

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	1617

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	1921

ITEM 4.	CONTROLS AND PROCEDURES.	2021

	PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS.	2122

ITEM 1A.	RISK FACTORS.	2122

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	2122

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	22

ITEM 4.	MINE SAFETY DISCLOSURE.	22

ITEM 5.	OTHER INFORMATION.	22

ITEM 6.	EXHIBITS.	2223


									Additional					Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit

Balance at December 31, 2017		—	$	—		69,016,468	$	69,016	$	53,599,160	$	(62,561,279	)	$	(8,893,103	)
Net loss		—		—		—		—		—		(36,743	)		(36,743	)
Compensation expense associated with unvested option awards		—		—		—		—		10,341		—			10,341
Balance at March 31, 2018		—	$	—		69,016,468	$	69,016	$	53,609,501	$	(62,598,022	)	$	(8,919,505	)


		March 31,
Operating Leases	Classification	2019
Right-of-use assets	Operating right of use assets	$	846,744

Current lease liabilities	Current operating lease liabilities		174,435
Non-current lease liabilities	Long-term operating lease liabilities		743,651
Total lease liabilities		$	918,086


	March 31,
	2019
Weighted average remaining lease term (years)		5.29
Weighted average discount rate		4	%


	Three months ended March 31,
	2019
Operating lease cost	$	46,669
Variable lease cost (1)		26,915
Total lease costs	$	73,584


	March 31,
	2019
Cash paid for operating lease liabilities	$	43,616
Operating right of use assets obtained in exchange for operating lease liabilities	$	890,009


	Operating
	Leases

Remainder of 2019	$	135,639
2020		188,196
2021		193,627
2022		197,427
2023		197,807
2024		117,383
Total		1,030,079
Less: Imputed interest		(111,993	)
Present value of lease liabilities	$	918,086


	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


	March 31, 2019			December 31, 2018
Notes payable to stockholders	$	9,010,132		$	8,314,622
Operating lease liabilities		918,086			—
		9,928,218			8,314,622
Less: current maturities		(799,435	)		(325,000	)
Long-term maturities	$	9,128,783		$	7,989,622


	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


	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


~~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 *


		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date Filed	Number	Herewith

3.1	Amended and Restated Certificate of Incorporation dated July 24, 1996	10-SB	7/30/96	3.1
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation dated December 13, 1996	8-K	1/9/97	3.(I)
3.3	Certificate of Amendment to Amended and Restated Certificate of Incorporation dated February 3, 1998	8-K/A	2/12/98	3.1
3.4	Certificate of Amendment to Amended and Restated Certificate of Incorporation dated March 5, 2009	8-K	3/16/09	3.4
3.5	Certificate of Amendment to the Certificate of Incorporation dated July 7, 2011	10-Q	8/15/11	3.4
3.6	Bylaws	10-SB	7/30/96	3.2
10.3	Promissory Note Forgiveness Agreement dated January 9, 2019	10-K	3/26/19	10.26
10.4	Note Exchange Agreement dated March 25, 2019 by and between Puradyn Filter Technologies Incorporated and Joseph V. Vittoria	10-K	3/26/19	10.27
10.5	Senior Secured Promissory Note dated March 25, 2019 to Joseph V. Vittoria	10-K	3/26/19	10.28
10.6	Security Agreement dated March 25, 2019	10-K	3/26/19	10.29
10.7	Amendment No. 1 to the 2018 Equity Compensation Plan	10-K	3/26/19	10.30
31.1	Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer				Filed
31.2	Rule 13a-14(a)/15d-14(a) certification of principal financial and accounting officer				Filed
32.1	Section 1350 certification of Chief Executive Officer and principal financial and accounting officer				Filed
101.INS	XBRL Instance Document				Filed
101.SCH	XBRL Taxonomy Extension Schema Document				Filed
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				Filed
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				Filed
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				Filed
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				Filed


	·	Revenues in the quarter were negatively impacted by decisions from a few customers to delay orders of new systems beginning in early November 2018 and continuing through the first quarter, due to the market uncertainty driven by a precipitous drop and slow rebound in oil prices and equity shares overall during that period,

	·	The delay of one single customer’s order of new systems, which would have fulfilled the second half of their order that began in the fourth quarter of 2018, represents almost the entire difference in sales between this quarter and the same period in 2018.

	·	Filter sales were lower compared to the first quarter of 2018 due to two customers who were replenishing filter inventories with large orders in early 2018 and rig count declines that began in the fourth quarter of 2018 and are not expected to rebound until later in the second quarter of this year.

	·	Despite the lower than expected sales recognized this quarter, we believe we continue to make progress in engaging many more prospective customers across the pressure pumping and midstream categories within oil and gas, and we believe the stabilization of the oil and gas industry in the second quarter will result in more trials and eventual roll-outs.


	·	Further adoption of Puradyn in the pressure pumping and midstream/pipeline segments of the oil and gas industry;

	·	Increased marketing focus on the commercial marine segment, with focus on geographies not currently covered by MNI; and

	·	Further expansion in key international markets through new and existing distributors.


	·	Managing materials costs and preparing for any impacts from new tariffs;

	·	Restructuring our distributor network and pricing levels; and

	·	Optimizing operating capacity and efficiency.


	PURADYN FILTER TECHNOLOGIES INCORPORATED


Date: ~~November 20, 2017~~May 15, 2019	By:	/s/ ~~Joseph V.~~Edward S. Vittoria
		~~Joseph V.~~Edward S. Vittoria, ~~Chairman and~~ Chief Executive Officer, principal executive officer

Date: ~~November 20, 2017~~May 15, 2019	By:	/s/ ~~Alan J. Sandler~~Martin Scott
		~~Alan J. Sandler, Secretary to the Board,~~ ~~Vice President and~~CFO Consultant, principal financial ~~officer~~ and ~~principal~~ accounting officer