Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Commitments and Contingencies

10. Commitments and Contingencies

Agreements

On July 7, 2009 the Company filed a lawsuit against former Chief Executive Officer, Richard C. Ford, alleging non-payment of three promissory notes totaling $756,250 with interest at a rate of 5.63% per annum since July 25, 2001, the execution date of the notes. The case has been preliminary set for trial during the eight week period beginning on September 4, 2012.

On October 20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract will remain in effect until terminated by either party providing 30 days written notice. Mr. Telesco, a member of our board of directors, and a significant stockholder, is President of Boxwood Associates, Inc. Refer to Notes 8 and 14.

On April 28, 2011, the Company terminated the month-to-month agreement with Emerging Markets, LLC.

On May 19, 2011, we entered into a consulting agreement with Monarch Communications, Inc. for services rendered as public relations firm and media relations consultants for the Company. The term of the agreement is for twelve months. As compensation for their services, Monarch will receive a fee of $6,000 per month, payable as $2,000 cash and $4,000 in shares of common stock. Either party may terminate the agreement with 30 days’ notice. The recipient is an accredited or otherwise sophisticated investor who had such knowledge and experience in business matters and was capable of evaluating the merits and risks of the prospective investment in our securities. The issuance of the shares is exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

Litigation

On July 7, 2009 the Company filed a lawsuit in the Circuit Courts in 15th Judicial District in and for Palm Beach County, Florida, styled Puradyn Filter Technologies, Inc. versus Richard C. Ford case number 502009CA023128 MB AG. In this action against Mr. Ford, our former Chief Executive Officer, the Company is alleging non-payment of three promissory notes totaling $756,250 with interest at a rate of 5.63% per annum since July 25, 2001, the execution date of the notes. As of November 13, 2009 interest on all three notes amounts to $353,796, for an aggregate amount owing of $1,110,046. At the time of the execution of these promissory notes, Mr. Ford was Chief Executive Officer of the Company and these notes were drafted under Mr. Ford’s direction. The Company is seeking payment of the promissory notes and accrued interest. Mr. Ford has admitted under oath that he signed the three promissory notes, stated that he has no money to repay his debt to the company, and has testified under oath that he has disposed of all but 6,000 shares of the company stock collateralizing the promissory notes.

On December 27, 2011 the Company filed a Notice of Readiness for Jury Trial. A jury trial has been set for the eight week period beginning September 4, 2012. Although mediation is mandatory, Mr. Ford has not yet responded to a settlement offer tendered by the Company.