================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to
Commission File Number 0-29192
PURADYN FILTER TECHNOLOGIES INCORPORATED
(Exact name of small business issuer as specified in its charter)
DELAWARE 14-1708544
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3020 High Ridge Road, Suite 100, Boynton Beach, Florida 33426
- ------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(561) 547-9499
--------------
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
-----------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the court.
Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: May 5, 2000: 13,116,691 shares of Common Stock.
================================================================================
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Puradyn Filter Technologies Incorporated
Condensed Balance Sheet
<TABLE>
<CAPTION>
March 31, 2000 December 31,
(Unaudited) 1999
----------- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,960,733 $ 8,121
Short term investment 496,220 0
Trade accounts receivable, net 137,101 78,876
Inventories 167,032 209,531
Prepaid expenses and other current assets 3,758 4,031
------------ ------------
Total current assets 2,794,844 300,559
Property and equipment, net 173,420 182,347
Investments 598,723 0
Other assets 4,102 10,236
------------
Total assets $ 3,571,089 $ 493,142
============ ============
Liabilities and Capital Deficiency
Current Liabilities:
Accounts payable 151,450 179,544
Accounts payable and accrued expenses, related parties 487 194,240
Accrued expenses 70,436 97,263
Customer deposits 81,401 60,076
Current portion of capital lease obligations 6,510 12,537
Note payable to bank 0 525,000
Note payable to shareholder 0 150,000
Note payable and accrued interest to QIP, a shareholder 0 3,191,086
------------ ------------
Total current liabilities 310,284 4,409,746
------------ ------------
Total liablilites 310,284 4,409,746
Stockholders' Equity (Deficiency):
Preferred Stock, $.001 par value, 500,000 shares
authorized; none issued and outstanding 0 0
Common Stock, $.001 par value, 20,000,000
shares authorized; 13,096,378 and 5,998,628
issued and outstanding, respectively 13,107 5,999
Additional paid-in-capital 15,631,974 8,017,398
Loans receivable, net (50,931) (50,931)
Accumulated deficit (12,333,345) (11,889,070)
------------ ------------
Total stockholders' equity (deficiency) 3,260,805 (3,916,604)
------------ ------------
Total liabilities and stockholders' equity (deficiency) $ 3,571,089 $ 493,142
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
Puradyn Filter Technologies Incorporated
Condensed Statements of Operations
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Net sales $ 294,363 $ 129,814
Cost of sales 288,895 119,202
------------ ------------
Gross profit 5,468 10,612
------------ ------------
Operating expenses
Selling 188,756 73,394
General and administrative 179,974 95,073
Engineering and development 91,310 14,121
------------ ------------
Total operating expenses 460,040 182,588
------------
------------ ------------
Operating loss (454,572) (171,976)
------------ ------------
Other income (expense):
Interest income 22,882 281
Interest expense (38,882) (101,190)
Forgiveness of debt 25,504 0
------------ ------------
Total other income (expense) 10,297 (100,909)
------------ ------------
Net loss $ (444,275) $ (272,885)
============ ============
Basic and diluted loss per common share $ (.05) $ (.20)
============ ============
Weighted average common shares outstanding 10,286,547 5,223,493
============ ============
See accompanying notes to condensed financial statements.
3
<PAGE>
Puradyn Filter Technologies Incorporated
Condensed Statements of Changes in Capital Deficiency
For The Three Months Ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional Stockholders'
Common Stock Paid-In Loans Accumulated Equity
Shares Amount Capital Receivable Deficit (Deficiency)
------ ------ ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 5,998,628 $ 5,999 $ 8,017,398 $ (50,931) $(11,889,070) $ (3,916,604)
Conversion of debt to stock 3,175,000 3,175 3,889,822 0 0 3,892,997
Issuance of stock for cash 3,672,000 3,672 3,590,568 0 0 3,594,240
Issuance of stock for services 10,000 10 29,365 0 0 29,375
Exercise of stock options 250,750 251 104,821 0 0 105,072
Net loss 0 0 0 0 (444,275) (444,275)
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000 13,106,378 $ 13,107 $ 15,631,974 $ (50,931) $(12,333,345) $ 3,260,805
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
Puradyn Filter Technologies Incorporated
Condensed Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Net loss $ (444,275) $ (272,885)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 27,534 24,279
Issuance of stock for services 29,375 0
Provision for doubtful accounts 7,000 0
Amortization of compensatory stock options 0 2,560
Changes in operating assets and liabilities:
Short term investments (598,723) 0
Trade accounts receivable, net (65,225) (5,123)
Inventories 42,499 36,362
Prepaid expenses and other current assets (29,727) (2,743)
Accounts payable, trade (28,094) (14,730)
Accounts payable and accrued expenses, related parties (193,753) 17,500
Accrued interest payable -QIP 26,911 85,946
Accrued expenses (26,827) (27,427)
Customer deposits and other 21,325 (14,266)
----------- -----------
Net cash used in operating activities (1,231,980) (170,527)
----------- -----------
Investing activities:
Increase in long term investments (496,220) 0
Purchases of property and equipment (12,473) 0
----------- -----------
Net cash used in investing activities (508,693) 0
----------- -----------
Financing activities:
Proceeds from issuance of common stock 3,594,240 0
Proceeds from exercise of stock options, net 105,072 0
Cancellation of notes payable and accrued interest to QIP (3,217,997) 0
Stock issued for conversion of debt 3,217,997 0
Proceeds from bank loan payable 0 275,000
Cancellation of bank loan payable (525,000) 0
Stock issued for conversion of debt 525,000 0
Cancellation of note payable to shareholder (150,000) 0
Stock issued for conversion of debt 150,000 0
Increase in deferred issuance and financing costs 0 1,533
Payment of notes payable and capital lease obligations (6,027) (5,895)
----------- -----------
Net cash provided by financing activities 3,693,285 270,638
----------- -----------
Increase (decrease) in cash and cash equivalents 1,952,612 100,111
Cash and cash equivalents at beginning of period 8,121 (77,693)
----------- -----------
Cash and cash equivalents at end of period $ 1,960,733 $ 22,418
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
Puradyn Filter Technologies Incorporated
Notes to Condensed Financial Statements
(Unaudited)
1. Basis of Presentation and Company
- ------------------------------------
The accompanying condensed financial statements as of March 31, 2000 and for the
three month period endeds March 31, 2000 and 1999 are unaudited and, in the
opinion of management, include all adjustments (consisting only of normal and
recurring adjustments) necessary for a fair presentation of financial position
and results of operations for these interim periods. Such interim financial
statements have been prepared on the basis of presentation as more fully
described in the Puradyn Filter Technologies Incorporated ("the Company") annual
financial statements and should be read in conjunction with the Company's
audited financial statements which are included in the Company's Form 10-KSB.
The results of operations for the three month period ended March 31, 2000 are
not necessarily indicative of the results to be expected for the entire year.
2. Basic and Diluted Loss Per Share.
- ------------------------------------
The Company has adopted Statement of Financial Accounting Standards Board No.
128, "Earnings Per Share" (FAS 128) which requires dual presentation of basic
and diluted earnings per share. However, because of losses from operations, the
effect of stock options, warrants and convertible debt (in 1999) is
anti-dilutive.
2. Inventories
- --------------
At March 31, 2000, inventories consist of the following:
Raw materials $ 149,128
Finished goods 17,903
---------
Total inventories $ 167,031
=========
3. Notes Payable to Shareholder
- -------------------------------
On May 21, 1998 and on June 24, 1998, Richard C. Ford, Chief Executive Officer,
member of the Board of Directors and significant shareholder of the Company,
loaned the Company $110,000 and $40,000, respectively. For each loan, the
Company issued notes payable due one year from the date of issuance at 12%
interest and secured by accounts receivable and inventories. On January 24,
2000, Mr. Ford converted these loans into 150,000 shares of common stock and the
related unpaid accrued interest to that date totaling $25,504 was forgiven by
Mr. Ford.
4. Note Payable to Bank
- -----------------------
On August 21, 1998, the Company borrowed $250,000 from its bank under a
revolving note payable due one year from the date of issuance with interest at
8.75%, payable monthly. The note was secured by substantially all assets of the
Company and by certificates of deposit in the name of Richard C. Ford, and the
note was personally guaranteed by Mr. Ford. On January 21, 1999, the Company
converted its loan to a $350,000 revolving line of credit with interest at the
bank's prime rate (7.75% at inception). The collateral and guarantee remained
the same. On January 21, 1999, the Company borrowed an additional $100,000 under
the new revolving line of credit. On March 25, 1999, the company increased the
line of credit to $525,000 and extended the repayment date to March 25, 2000. On
that date the company borrowed an additional $175,000 to increase the aggregate
borrowing to $525,000.
7
<PAGE>
On January 24, 2000, Mr. Ford and his daughter, Traci Ford, personally repaid
the bank and simultaneously converted the loan into 525,000 shares of the
Company's common stock.
5. Notes Payable to QIP, a Shareholder
- -----------------------------------------
On January 26, 1998, the Company and Quantum Industrial Partners LDC ("QIP")
entered into a Note Exchange Agreement whereby a $2,000,000 promissory note
issued June 19, 1997 to QIP was exchanged for a $2,000,000 12% Senior
Subordinated Convertible Note (the "Note") due 2003.
Also on January 26, 1998, the Company and QIP entered into a Note Purchase
Agreement whereby the Company issued QIP a 12% Senior Subordinated Convertible
Note in the aggregate principal amount of $500,000. The terms and conditions of
this $500,000 Note are identical to the $2,000,000 Note as described below.
Terms of both Notes include the following. Interest was payable quarterly
commencing April 1, 1998, provided however that at the option of the Company,
unpaid interest may be added to the principal balance of the Notes in lieu of a
cash payment which the Company has elected to do each quarter through December
31, 1999. Such unpaid interest bears interest at 15% and was payable on demand.
The Notes are senior to all indebtedness of the Company, except bank or
financial institution debt. The Notes can be redeemable at the option of QIP on
or after the earlier of January 1, 2001 or the date on which the Company raises
cash proceeds aggregate $10 million involving the sale of debt, equity or
assets. As long as the Notes are outstanding, the Company cannot, without the
consent of QIP, declare or pay any dividends, purchase, redeem or acquire any of
its Common Stock, retire its existing indebtedness other than existing required
periodic payments, or enter into transactions with any affiliate. Prior to
January 1, 2003, at the option of QIP, the principal amount can be converted
into Common Stock of the Company at a conversion price of $2.75 per share. Under
certain circumstances, the Notes are subject to anti-dilution provisions and the
Company will register the securities.
On January 24, 2000, QIP converted the principal balance of the Notes totaling
$2,500,000 together with accrued interest (which the company had elected to add
to the principal amount of the Notes) totaling $717,997 into 2,500,000 shares of
the Company's common stock. In addition, on that date, QIP agreed to surrender
warrants to purchase 500,000 shares of the Company's common stock that were
exercisable at $2,75 per share and which would have expired on December 31,
2000.
6. Contingencies
- ----------------
TF Systems, Inc. ("Systems"), a related party (previously under common ownership
with the Company), formerly owned the manufacturing and marketing rights to the
Purifiner and transferred or sold such rights to the Company in 1995. In June
1997, the former law firm of Systems filed a complaint against the Company,
Systems, Richard C. Ford (individually) and an
8
<PAGE>
inactive company controlled by Mr. Ford, demanding payment of approximately
$313,000 of legal fees plus interest and attorney fees, related primarily to
obtaining the manufacturing and marketing rights to the Purifiner for Systems
and the Company. Systems was awaiting the judgment of an appellate court which,
if adjudicated in Systems' favor, would have provided it with sufficient funds
to pay such legal fees and other possible legal fee claims aggregating
approximately $75,000. On February 26, 1997, the appellate court ruled against
Systems and, accordingly, the funds discussed above are not currently available
to Systems to satisfy such claims. Puradyn did not assume these obligations as
part of its purchase of Systems in 1995 and management believes such amounts are
not the responsibility of Puradyn. However, Systems is an inactive company whose
only asset is the claim that was reversed on appeal and maybe retried by
Systems. Accordingly, the ability to collect such funds from Systems is
uncertain. The ultimate outcome of this litigation and other unasserted claims
against the Company cannot be determined at this time; however, based upon the
opinion of the Company's counsel, a favorable outcome is likely. No liability
has been recorded for these claims in the accompanying balance sheet.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Form 10-KSB.
Other than historical and factual statements, the matters and items discussed in
this Quarterly Report on Form 10-QSB are forward-looking statements that involve
risks and uncertainties. Actual results of the Company may differ materially
from the results discussed in the forward-looking statements. Certain factors
that could contribute to such differences are discussed with the forward-looking
statements throughout this report.
General
- -------
The Company was formed in 1987 and commenced limited operations in 1991 when it
obtained worldwide manufacturing and marketing rights to the Purifiner(R)
product, now called the Puradyn Onboard Oil Filtration System or "Puradyn
system". The Puradyn system can be attached to any internal combustion engine to
filter impurities from the oil in the engine. Acceptance of the Puradyn products
is dependent on various factors, including the desire of potential users to
extend the oil change intervals to reduce maintenance costs, to extend engine
life and to preserve the envrionment.
Through 1997, the Company had been unable to significantly increase it revenues
through its distribution network which caused the Company to change its sales
strategy. In 1998, it began to refocus its sales effort toward the development
of commercial relationships with original equipment manufacturers ("OEMs") and
companies having medium to large fleets of vehicles.
The sales effort not only involves educating the benefits to the potential
customer, but allowing the customer to test the Puradyn system on its fleet
vehicles. Consequently the sales cycle is relatively long. The Company is
currently working with several large OEM's and a large number of companies
having large vehicle fleets to enable them to evaluate the benefits of the
Puradyn system. In the case of OEM's, the goal is to obtain their approval to
eventually install the Puradyn system on their products at their factories and
distribute the Puradyns system throughout their dealer networks. In the case of
large vehicle fleets, the goal is to obtain performance approval and to retrofit
existing fleet vehicles with the Puradyn system and to have the Puradyn system
installed on all new vehicle engines.
Largely as a result of the Company's sales efforts there is increasing awareness
on the part of vehicle and engine manufacturers and vehicle fleet managers of
the cost benefits of the Puradyn system, the Company's warranties, and the
environmental benefits of conserving oil and reducing the disposal of waste oil.
The credibility of the Puradyn system and the concept of extended oil
replacement intervals is now becoming more readily accepted. The Company
believes that this increasing acceptance is also due to third-party testing of
the product and awards and other recognition the Puradyn system has received.
However, there can be no assurance that such efforts to develop commercial OEM
and major fleet business relationships will result in significant sales
revenues.
10
<PAGE>
Increasing operating losses and negative cash flow caused the Company to make a
change in management personnel in March 1998 underwhich several key employees
and directors were either terminated or resigned from their positions. The
Company curtailed its operations and reduced its remaining workforce to key
personnel. These actions were taken to reduce the amount of cash required to
maintain operations of the Company. At the same time, the Company sought to
arrange additional financing.
In November, 1999, the Company formulated a plan to convert all of its
outstanding notes payable into common stock and to sell additional common stock
to raise cash in excess of $3,500,000. On January 24, 2000, the Company
completed the conversion of $3,175,000 of principal amount of debt of five notes
payable (together with accrued interest of $718,000 that had been added to
principal of two of the notes payable) into 3,175,000 shares if its common
stock. The Company also obtained forgiveness of $26,000 in unpaid interest on
two other notes payable. On March 6, 2000, the Company completed the sale of
4,172,000 shares of its Common Stock with net proceeds of approximately
$4,100,000 (of which $500,000 had been paid in December, 1999).
While this debt restructuring and sale of stock will improve the balance sheet
of the Company and provide cash for the foreseeable future, there is no
assurance that sales will increase to the level required to generate profitable
operations and to provide positive cash flow from operations, and there is no
assurance that the Company will not have to seek additional financing in the
future.
Results of Operations for the Three Months Ended March 31, 2000 Compared to the
Three Months Ended March 31, 1999 The following table sets forth for the amount
of increase or decrease represented by certain items reflected in the Company's
statements of operations in comparing the three months ended March 31, 2000
("2000") to the three months ended March 31, 1999 ("1999"), in thousands.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(in thousands)
----------------
Increase
2000 1999 (Decrease)
---- ----- ----------
<S> <C> <C> <C>
Net sales $ 294 $ 130 $ 164
--- --- ---
Operating costs and expenses:
Cost of sales 289 119 170
Selling expenses 189 74 115
General and administrative expenses 180 95 85
Engineering and development 91 14 77
----- ---- ----
Total operating costs and expenses 749 302 447
---- ---- ----
Operating loss (455) (172) 283
Interest income 23 23
Interest (expense) (38) (101) (63)
Forgiveness of debt 26 ____ 26
------ ------
Net loss $ (444) $ (273) $ 171
===== ===== ===
</TABLE>
11
<PAGE>
Net Sales. Net sales increased by approximately $164,000 from $129,814 in 1999
to $294,363 in 2000. The Company had experienced declining sales from the latter
part of 1997 through the first half of 1999 due to problems which began in 1997
related to product quality. These problems were fixed in 1998, but had a
negative effect on sales after that time. Also during that period, the Company
changed the focus of its sales efforts toward OEMs and companies having large
fleets of trucks. Effects of this change in focus began to show late in 1999 and
carried through the first quarter of 2000. Management feels it now has a good
base of potential customers with very satisfactory product performance results,
however there can be no assurance these will produce continued improvements in
sales.
Cost of Sales. Cost of sales increased by approximately $170,000 from $119,202
in 1999 to $288,895 in 2000. The Company's gross margin decreased from 8.2% to
1.9% in 2000 due primarily to costs of excess manufacturing capacity. The
Company is now in the process of re-engineering its Puradyn system to further
improve its efficiency among other things. During the 2000 period, the Company
wrote off approximately $27,000 of inventory that is expected to be obsoleted by
engineering changes that have recently been made. Unless the Company can
increase its revenues, its gross margins may continue to be adversely affected
by its excess manufacturing capacity.
Selling Expenses. Selling expenses increased by approximately $115,000 from
$73,394 in 1999 to $188,756 in 2000. The Company has increased its sales staff
in 2000 and increased promotional efforts to reach additional potential
customers. Sales efforts had been curtailed during 1998 and 1999 due to the
Company's limited cash flow and cash resources.
General and Administrative Expenses. General and administrative expenses
increased by approximately $85,000 from $95,073 in 1999 to $179,974 in 2000. As
noted with Selling Expenses above, the Company had curtailed its spending in
1998 and 1999 due to limited cash resources. In 2000, the Company increased its
staff and salary amounts to existing executives and staff.
Engineering and Development Expenses. Engineering and development expenses
increased by approximately $77,000 from $14,121 in 1999 to $91,310 in 2000. This
increase is due to expenses paid for outside engineering work on the re-design
of the filtration product referred to above.
Interest Income and Interest Expense and Forgiveness of Debt. Interest income
increased by approximately $23,000 in 2000 from 1999 due to income from the
investment of funds received from the stock sold in the first quarter of 2000.
Interest expense decreased by approximately $63,000 due to the cancellation of
all outstanding notes payable (having a principal balance of approximately
$3,900,000) in January, 2000. Forgiveness of debt of approximately $26,000 is
related to interest on two notes payable that were converted to common stock in
January, 2000 that were discussed above.
12
<PAGE>
Liquidity and Capital Resources.
- --------------------------------
The Company's capital requirements in connection with its business activities
have been and will continue to be significant. To fund its activities, the
Company has been dependent upon the proceeds of sales of its securities to
investors and stockholders and other loans, including the $2,000,000 loan from
QIP in June, 1997 and $500,000 from QIP in January, 1998 (which were converted
to stock in January, 2000, as discussed below). The Company also borrowed
$250,000 in 1998 and $275,000 in 1999 from its bank and borrowed $150,000 in
1998 from a major shareholder (all of which were converted to stock in January,
2000, as discussed below).
In November, 1999, the Company formulated a plan to convert all of its
outstanding notes payable into common stock and to sell additional common stock
to raise cash in excess of $3,500,000. On January 24, 2000, the Company
completed the conversion of $3,175,000 of principal amount of debt of five notes
payable (together with accrued interest of $718,000 that had been added to
principal of two of the notes payable) into 3,175,000 shares if its common
stock. The Company also obtained forgiveness of $26,000 in unpaid interest on
two other notes payable. On March 6, 2000, the Company completed the sale of
4,172,000 shares of its Common Stock with net proceeds of approximately
$4,100,000 (of which $500,000 had been paid in December, 1999).
At March 31, 2000, the Company had working capital of approximately $2,485,000
and with current ratio (current assets to current liabilities) of 9.0 to 1. In
addition, the Company has long term investments of approximately $496,000. The
Company believes it has sufficient cash for the foreseeable future, however
there is no assurance that sales will increase to the level required to generate
profitable operations and to provide positive cash flow from operations, and
there is no assurance that the Company will not have to seek additional
financing in the future.
Management believes the favorable response from potential customers it has seen
in 1999 and to date in 2000 will result in improved sales in 2000, however,
there can be no assurance such improvements will occur or that such improvements
will be sufficient to generate positive cash flow from its operations.
Consistent with industry practices, the Company may accept product returns or
provide other credits in the event that a distributor holds excess inventory of
the Company's products. The Company's sales are made on credit terms which vary
significantly depending on the nature of the sale. The Company believes it has
established sufficient reserves to accurately reflect the amount or likelihood
of product returns or credits and uncollectible receivables. However, there can
be no assurance that actual returns and uncollectible receivables will not
exceed the Company's reserves.
Sales of the Company's products will depend principally on end user demand for
such products and acceptance of the Company's products by original equipment
manufacturers ("OEM's"). The oil filtration industry has historically been
competitive and, as is typically the case with
13
<PAGE>
innovative products, the ultimate level of demand for the Company's products is
subject to a high degree of uncertainty. Developing market acceptance,
particularly worldwide, for the Company's existing and proposed products will
require substantial marketing and sales efforts and the expenditure of a
significant amount of funds to inform customers of the perceived benefits and
cost advantages of its products.
Impact of Inflation
- -------------------
Inflation has not had a significant impact on the Company's operations. However,
any significant decrease in the price for oil or labor, environmental compliance
costs, and engine replacement costs could adversely impact the Company's end
users cost/benefit analysis as to the use of the Company's products.
Quarterly Fluctuations
- ----------------------
The Company's operating results may fluctuate significantly from period to
period as a result of a variety of factors including product returns, purchasing
patterns of consumers, the length of the Company's sales cycle to key customers
and distributors, the timing of the introduction of new products and product
enhancements by the Company and its competitors, technological factors,
variations in sales by product and distribution channel, and competitive pricing
and general economic conditions throughout the industrialized world.
Consequently, the Company's product revenues may vary significantly by quarter
and the Company's operating results may experience significant fluctuations.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
Exhibit 27 - Financial Data Schedule (Electronic filing only)
b) Reports on Form 8-K.
On March 3, 2000, the Company reported the conversion of certain
indebtedness to common stock, the appointment of a member of the
Board of Directors and the completion of a private offering of its
common stock.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PURADYN FILTER TECHNOLOGIES INCORPORATED
(Registrant)
Date: May 9, 2000
By /s/ Alan J. Sandler
----------------------------------
Alan J. Sandler
Vice President and Chief
Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,960,733
<SECURITIES> 496,220
<RECEIVABLES> 152,101
<ALLOWANCES> (15,000)
<INVENTORY> 167,032
<CURRENT-ASSETS> 2,794,844
<PP&E> 564,528
<DEPRECIATION> (391,108)
<TOTAL-ASSETS> 3,751,089
<CURRENT-LIABILITIES> 310,284
<BONDS> 0
0
0
<COMMON> 13,107
<OTHER-SE> 3,247,698
<TOTAL-LIABILITY-AND-EQUITY> 3,571,089
<SALES> 294,363
<TOTAL-REVENUES> 294,363
<CGS> 288,895
<TOTAL-COSTS> 748,935
<OTHER-EXPENSES> (48,386)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,882
<INCOME-PRETAX> (444,275)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444,275)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
