0001553350-18-000914.txt : 20180809 0001553350-18-000914.hdr.sgml : 20180809 20180809100356 ACCESSION NUMBER: 0001553350-18-000914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 69 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180809 DATE AS OF CHANGE: 20180809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURADYN FILTER TECHNOLOGIES INC CENTRAL INDEX KEY: 0001019787 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 141708544 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11991 FILM NUMBER: 181003796 BUSINESS ADDRESS: STREET 1: 2017 HIGH RIDGE ROAD CITY: BOYNTON BEACH STATE: FL ZIP: 33426 BUSINESS PHONE: 5615479499 MAIL ADDRESS: STREET 1: 2017 HIGH RIDGE ROAD CITY: BOYNTON BEACH STATE: FL ZIP: 33426 FORMER COMPANY: FORMER CONFORMED NAME: T F PURIFINER INC DATE OF NAME CHANGE: 19960726 10-Q 1 pfti_10q.htm QUARTERLY REPORT Quarterly Report


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549


———————

FORM 10-Q

———————

(Mark One)

þ

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

 

 For the quarterly period ended: June 30, 2018

 

or

 

 

¨

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

 

 For the transition period from: _____________ to _____________

 


Commission File Number: 001-11991


PURADYN FILTER TECHNOLOGIES INCORPORATED

(Exact name of registrant as specified in its charter)


DELAWARE

14-1708544

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

2017 HIGH RIDGE ROAD, BOYNTON BEACH, FL

33426

(Address of principal executive offices)

(Zip Code)


(561) 547-9499

(Registrant's telephone number, including area code)


NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes   ¨ No


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes   ¨ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer   ¨

Accelerated filer   ¨

Non-accelerated filer     ¨

Smaller reporting company  þ

Emerging growth company  ¨

 


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


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes   þ No


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  69,016,468 shares of common stock are issued and outstanding as of August 6, 2018.

 

 






TABLE OF CONTENTS

 


 

 

Page No.

                  

PART I. FINANCIAL INFORMATION

                  

 

 

 

ITEM 1.

FINANCIAL STATEMENTS.

1

 

 

 

 

Condensed Balance Sheets – As of June 30, 2018 (unaudited) and December 31, 2017

1

 

Condensed Statements of Operations –Three months and Six months ended June 30, 2018and 2017 (unaudited)

2

 

Condensed Statements of Cash Flows –  Six months ended June 30, 2018 and 2017 (unaudited)

3

 

Notes to Condensed Financial Statements (Unaudited)

4

 

 

 

ITEM 2.

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

16

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

20

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

21

 

 

 

 

PART II.   OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS.

22

 

 

 

ITEM 1A.

RISK FACTORS.

22

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

22

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

22

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURE.

22

 

 

 

ITEM 5.

OTHER INFORMATION.

22

 

 

 

ITEM 6.

EXHIBITS.

23

 

OTHER PERTINENT INFORMATION


Our web site is www.puradyn.com.  The information which appears on our web site is not part of this report.


When used in this report, the terms "Puradyn," the "Company," "we," "our," and "us" refers to Puradyn Filter Technologies Incorporated, a Delaware corporation.  In addition, when used in this report, “second quarter of 2018” refers to the three months ended June 30, 2018, "second quarter of 2017" refers to the three months ended June 301, 2017, “2018” or “fiscal 2018” refers to the year ending December 31, 2018 and “2017” or “fiscal 2017”  refers to the year ended December 31, 2017.  




i



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to:


·

our history of losses and uncertainty that we will be able to continue as a going concern,

·

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

·

our need for additional financing and uncertainties related to our ability to obtain these funds,

·

our ability to repay the outstanding debt of approximately $8.3 million at July 31, 2018 due our Executive Chairman, the majority of which matures on December 31, 2019;

·

the significant amount of deferred compensation owed to two of our executive officers and one other employee and our ability to pay these amounts,

·

our ability to protect our intellectual property, and the potential impact of expiring patents on our business in future periods,

·

anti-takeover provisions of Delaware law and our Board's ability to issue preferred stock without stockholder consent,

·

potential dilution to our stockholders from the exercise of outstanding options and warrants,

·

the lack of sufficient liquidity in the market for our common stock, and

·

the application of penny stock rules to the trading in our common stock.


Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review our Annual Report on Form 10-K for the year ended December 31, 2017, including the risks described in Part I. Item 1A. Risk Factors, and this report together with our subsequent filings with the Securities and Exchange Commission in their entirety.  Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.





ii



 


PART I - FINANCIAL INFORMATION


ITEM 1.

FINANCIAL STATEMENTS.


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED BALANCE SHEETS


 

 

June 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

184,607

 

 

$

54,438

 

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

 

 

568,770

 

 

 

270,896

 

Inventories, net

 

 

512,923

 

 

 

400,764

 

Prepaid expenses and other current assets

 

 

147,575

 

 

 

69,355

 

Total current assets

 

 

1,413,875

 

 

 

795,453

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

35,274

 

 

 

45,327

 

Other noncurrent assets

 

 

576,412

 

 

 

532,540

 

Total assets

 

$

2,025,561

 

 

$

1,373,320

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

332,609

 

 

$

186,696

 

Accrued liabilities

 

 

420,734

 

 

 

362,804

 

Sales incentives

 

 

 

 

 

99,128

 

Capital lease obligation

 

 

1,567

 

 

 

3,443

 

Deferred compensation

 

 

1,577,271

 

 

 

1,626,003

 

Notes Payable - stockholders

 

 

600,000

 

 

 

7,988,349

 

Total Current Liabilities

 

 

2,932,181

 

 

 

10,266,423

 

 

 

 

 

 

 

 

 

 

Notes Payable - stockholders

 

 

7,989,622

 

 

 

 

Total Liabilities

 

 

10,921,803

 

 

 

10,266,423

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value:

 

 

 

 

 

 

 

 

Authorized shares – 500,000;

 

 

 

 

 

 

 

 

None issued and outstanding

 

 

 

 

 

 

Common stock, $.001 par value,

 

 

 

 

 

 

 

 

Authorized shares – 100,000,000;

 

 

 

 

 

 

 

 

Issued and outstanding 69,016,468 and 69,016,468, respectively

 

 

69,016

 

 

 

69,016

 

Additional paid-in capital

 

 

53,623,892

 

 

 

53,599,160

 

Accumulated deficit

 

 

(62,589,150

)

 

 

(62,561,279

)

Total stockholders’ deficit

 

 

(8,896,242

)

 

 

(8,893,103

)

Total liabilities and stockholders’ deficit

 

$

2,025,561

 

 

$

1,373,320

 



See accompanying notes to unaudited condensed financial statements




1



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)


 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net sales

 

$

1,152,462

 

 

$

575,170

 

 

$

2,038,202

 

 

$

1,264,160

 

Cost of products sold

 

 

690,959

 

 

 

536,399

 

 

 

1,195,401

 

 

 

979,111

 

Gross Profit

 

 

461,503

 

 

 

38,771

 

 

 

842,801

 

 

 

285,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and wages

 

 

196,450

 

 

 

204,151

 

 

 

389,718

 

 

 

417,088

 

Selling and administrative

 

 

175,513

 

 

 

150,021

 

 

 

325,583

 

 

 

293,361

 

Total operating costs

 

 

371,963

 

 

 

354,172

 

 

 

715,301

 

 

 

710,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income / (Loss) from operations

 

 

89,540

 

 

 

(315,401

)

 

 

127,500

 

 

 

(425,400

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(80,668

)

 

 

(67,624

)

 

 

(155,371

)

 

 

(133,169

)

Total other expense, net

 

 

(80,668

)

 

 

(67,624

)

 

 

(155,371

)

 

 

(133,169

)

Net income / (loss) before income tax expense

 

 

8,872

 

 

 

(383,025

)

 

 

(27,871

)

 

 

(558,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income / (loss)

 

$

8,872

 

 

$

(383,025

)

 

$

(27,871

)

 

$

(558,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income / (loss) per common share

 

$

0.00

 

 

$

(0.01

)

 

$

(0.00

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income / (loss) per common share

 

$

0.00

 

 

$

(0.01

)

 

$

(0.00

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

69,016,468

 

 

 

69,016,468

 

 

 

69,016,468

 

 

 

69,016,468

 



See accompanying notes to unaudited condensed financial statements




2



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)


 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(27,871

)

 

$

(558,569

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

20,611

 

 

 

15,887

 

Provision for slow moving inventory

 

 

13,610

 

 

 

121,998

 

Compensation expense on stock-based arrangements with employees and consultants

 

 

24,733

 

 

 

21,397

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(297,874

)

 

 

(72,538

)

Inventories

 

 

(125,769

)

 

 

86,629

 

Prepaid expenses and other current assets

 

 

(78,219

)

 

 

(1,798

)

Other assets

 

 

850

 

 

 

 

Sales incentives

 

 

(99,128

)

 

 

 

Accounts payable

 

 

145,910

 

 

 

(4,527

)

Deferred compensation

 

 

(48,732

)

 

 

7,819

 

Accrued liabilities

 

 

57,930

 

 

 

27,994

 

Net cash used in operating activities

 

 

(413,949

)

 

 

(355,708

)

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Capitalized patent costs

 

 

(55,279

)

 

 

(33,703

)

Purchases of property and equipment

 

 

 

 

 

(5,245

)

Net cash used in investing activities

 

 

(55,279

)

 

 

(38,948

)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of notes payable to stockholders

 

 

601,273

 

 

 

440,000

 

Repayment of note payable to stockholder

 

 

 

 

 

(50,000

)

Payment of capital lease obligations

 

 

(1,876

)

 

 

(1,878

)

Net cash provided by financing activities

 

 

599,397

 

 

 

388,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase / (decrease) in cash

 

 

130,169

 

 

 

(6,534

)

Cash at beginning of period

 

 

54,438

 

 

 

12,806

 

Cash at end of period

 

$

184,607

 

 

$

6,272

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

109,167

 

 

$

120,669

 

Forgiveness of stockholder loan and accrued interest

 

$

 

 

$

26,373

 



See accompanying notes to unaudited condensed financial statements





3



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)


1.

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


Organization


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


Basis of Presentation


The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.


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, 2017.


Revenue Recognition


The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services or installation by the Company are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying financial statements.


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


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 in during the six months ended June 30, 2018.


Use of Estimates


The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.


Cash and Cash Equivalents


Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At June 30, 2018 and December 31, 2017, the Company did not have any cash equivalents.



4



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


Fair Value of Financial Instruments


The carrying amounts of cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities and notes payable to stockholder approximate their fair values as of June 30, 2018 and December 31, 2017, respectively, because of their short-term natures.


Accounts Receivable


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


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


Inventories


Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.


Property and Equipment


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


Patents


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


Impairment of Long-Lived Assets


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




5



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


Product Warranty Costs


As required by FASB ASC 460, Guarantor’s Guarantees, the Company is including the following disclosure applicable to its product warranties.


The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience.  The Company's warranty reserve is included in accrued liabilities in the accompanying condensed financial statements and is calculated as the gross sales multiplied by the historical warranty expense return rate. For the six months ended June 30, 2018, 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 six -months ended June 30, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of June 30, 2018 (unaudited)

 

$

20,000

 


Advertising Costs


Advertising costs are expensed as incurred. During the three and six months ended June, 2018 and 2017, advertising costs incurred by the Company totaled approximately $2,904 and $3,333, $0 and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Engineering and Development


Research and development costs are expensed as incurred. During the three and six months ended June 30, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,384 and $2,813, and $1,575 and $1,575, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Income Taxes


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


Stock Option Plans


We adopted FASB ASC 718, Compensation-Stock Compensation, effective January 1, 2006 using the modified prospective application method of adoption which requires us to record compensation cost related to unvested stock awards as of December 31, 2005 by recognizing the amortized grant date fair value in accordance with provisions of FASB ASC 718 on straight line basis over the service periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the year ended December 31, 2017 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 six months ended June 30, 2018.




6



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


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


Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, Compensation-Stock Compensation, including related amendments and interpretations. The related expense is recognized over the period the services are provided.


Credit Risk


The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. At June 30, 2018 and December 31, 2017, respectively, the Company did not have cash balances above the FDIC insured limit. The Company performs ongoing evaluations of its significant trade accounts receivable customers and generally does not require collateral. An allowance for doubtful accounts is maintained against trade accounts receivable at levels which management believes is sufficient to cover probable credit losses. The Company also has some customer concentrations, and the loss of business from one or a combination of these significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations.  Please refer to Note 15 for further details.


Basic and Diluted Loss Per Share


The Company uses ASC 260-10, "Earnings Per Share" for calculating the basic and diluted income (loss) per share. 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 June 30, 2018 and 2017, there were 13,276,412 and 4,497,662 shares issuable upon the exercise of options and warrants, respectively. Common stock equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive. The Company had net income for the three month period ended June 30, 2018. A separate computation of diluted earnings per share is presented using the treasury stock method and the common stock equivalents did not have any effect on net income per share.


Reclassifications


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


Recent Accounting Pronouncements


In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which supersedes the revenue recognition requirements in Accounting Standards Codification 605, "Revenue Recognition." This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the new revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are effective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method.




7



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


The Company adopted these standards 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 adoption of these standards did not have a material impact on the Company's Condensed Statements of Operations during the six months ended June 30, 2018.


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


2.

Going Concern


The Company's financial statements have been prepared on the assumption that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained losses since inception and used net cash in operations of $413,949 and $355,708 during the six-months ended June 30, 2018 and 2017, respectively. As a result, the Company has had to rely stockholder loans and related parties to fund its activities to date.


These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from 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, 2017 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.


3.

Inventories


Inventories consisted of the following at June 30, 2018 and December 31, 2017, respectively:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

1,036,774

 

$

901,600

 

Work In Progress

 

 

 

 

125,932

 

Finished goods

 

 

133,375

 

 

16,848

 

Valuation allowance

 

 

(657,226

)

 

(643,616

)

Inventory, net

 

$

512,923

 

$

400,764

 


4.

Prepaid Expenses and Other Current Assets


At June 30, 2018 and December 31, 2017, prepaid expenses and other current assets consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

86,740

 

$

26,648

 

Deposits

 

 

60,835

 

 

42,707

 

 

 

$

147,575

 

$

69,355

 




8



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


5.

Property and Equipment


At June 30, 2018 and December 31, 2017, property and equipment consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Machinery and equipment

 

$

1,045,217

 

$

1,045,217

 

Furniture and fixtures

 

 

56,558

 

 

56,558

 

Leasehold improvements

 

 

152,322

 

 

152,322

 

Software and website development

 

 

88,842

 

 

88,842

 

Computer hardware and software

 

 

153,249

 

 

153,249

 

 

 

 

1,496,188

 

 

1,496,188

 

Less accumulated depreciation and amortization

 

 

(1,460,914

)

 

(1,450,861

)

 

 

$

35,274

 

$

45,327

 


Depreciation and amortization expense of property and equipment for the three and six months ended June 30, 2018 and 2017 is $5,026 and $10,053, and $4,420 and $9,097, respectively.


6.

Patents


Included in other assets at June 30, 2018 and December 31, 2017 are capitalized patent costs as follows:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Patent costs

 

$

614,151

 

$

558,873

 

Less accumulated amortization

 

 

(72,709

)

 

(62,153

)

 

 

$

541,442

 

$

496,720

 


Amortization expense for the three and six months ended June 30, 2018 and 2017 amounted to $6,823, $10,558, and $3,395 and $6,790, respectively.


7.

Leases


The Company leases its office and warehouse facilities in Boynton Beach, Florida under a long-term non-cancellable lease agreement, which contains renewal options and rent escalation clauses. As of June 30, 2018, a security deposit of $34,970 is included in noncurrent assets in the accompanying balance sheet. On September 27, 2012 the Company entered into a non-cancellable six-year lease agreement for the same facilities commencing August 1, 2013 and expiring July 31, 2019. The total minimum lease payments over the term of the current lease amount to $180,826.


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 has agreed to reimburse the Company $58,000 towards the replacement of air conditioning units, upon written request. As of June 30, 2018 the Company has not requested or received any of the reimbursement.


In January 2015 the Company entered into a capital lease for office equipment in the amount of $15,020. As of June 30, 2018 and December 31, 2017 the balance under capital lease obligations was $1,567 and $3,443, respectively.



9



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


8.

Accrued Liabilities


At June 30, 2018 and December 31, 2017, accrued liabilities consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

68,107

 

$

69,025

 

Accrued expenses relating to vendors and others

 

 

156,309

 

 

136,681

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

160,591

 

 

115,039

 

Deferred rent

 

 

15,727

 

 

22,059

 

 

 

$

420,734

 

$

362,804

 


9.

Deferred Compensation


Deferred compensation represents amounts owed to three employees for salary. As there is no written agreement with these employees which memorializes the terms of the salary deferral, only a voluntary election to do so. It is possible that the employees could demand payment in full at any time. As of June 30, 2018 and December 31, 2017 the Company recorded deferred compensation of $1,577,271 and $1,626,003, respectively.


10.

Sales Incentives


The Company entered into an exclusive distribution agreement for the worldwide rights to sell its product in the oil and gas industry effective September 7, 2017. The agreement included an incentive program that rewarded credits toward future product redeemable only if targeted quarterly goals are achieved.  The incentive-earning period ended on June 30, 2018, and no incentives were earned. The exclusivity agreement continues at a minimum through the end of 2018.


11.

Notes Payable to Stockholders – Related Party


On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1 million. Under the terms of the 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 (3.79% and 3.61% per annum at June 30, 2018 and 2017 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, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007, to December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019.


During the six months ended June 30, 2018 we borrowed an additional $26,272 from our Executive Chairman, together with an $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of June 30, 2018 and December 31, 2017 we owed him an aggregate of $8,314,622 and $7,988,349, respectively, which represented approximately 75% and 78% of our total liabilities, respectively. On May 9, 2018 he extended the maturity date to December 31, 2019. While he has continued to fund our working capital needs at reduced levels and extend the due date of the obligation for an additional year, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.


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 and is due December 31, 2018.




10



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.


During the three and six months ended June 30, 2018 and 2017, the Company incurred interest expense of $80,354 and $65,083, and $154,719 and $131,841, respectively, on its loan from the Executive Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $310 and $620 for the three and six months ended June 30, 2018 related to the loan from one if its former Board members. These amounts, in addition to interest expense of $4 and $481, and $32 and $575 for the three and six months ended June 30, 2018 and 2017, respectively, related to capital lease obligations, financing and loans from a stockholder.


Notes payable and capital leases consisted of the following at June 30, 2018 and December 31, 2017:


 

 

June 30,

2018

 

December 31, 2017

 

Notes payable to stockholders

 

$

8,589,622

 

$

7,988,349

 

Capital lease obligation

 

 

1,567

 

 

3,443

 

 

 

 

8,591,189

 

 

7,991,792

 

Less: current maturities

 

 

(601,567

)

 

(7,991,792

)

Long-term maturities

 

$

7,989,622

 

$

 


Maturities of Long Term Obligations for Five Years and Beyond


The minimum annual principal payments of notes payable and capital lease obligations at June 30, 2018 were:


2018

 

$

601,567

 

2019

  

 

7,989,622

  

 

 

$

8,591,189

 


12.

Commitments and Contingencies  


Agreements


On May 18, 2018 we entered into a letter agreement with Mr. Edward S. Vittoria pursuant to 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 to prior to the expiration of such initial term.  Under the terms of the letter agreement we agreed to pay him: (i) an annual base salary of $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 minimum amount of $50,000; and (iii) granted him options to purchase 6,500,000 shares of our common stock, vesting one-third in arrears, at an exercise price equal to fair market value on the date of grant pursuant to the terms and conditions of our 2018 Equity Compensation Plan.  He is also entitled to: (i) participate in 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 length of service to us; and (iii) reimbursement for all reasonable, out of-pocket expenses incurred by him




11



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


On September 7, 2017 the Company entered into an exclusive distribution agreement with NOW, Inc. (“DNOW”) for the worldwide rights to sell its product in the oil and gas industry. As part of this agreement, the distributor could 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. Refer to Note 10. The incentive-earning period ended on June 30, 2018, and no incentives were earned. The exclusivity agreement continues at a minimum through the end of 2018.


On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. On June 29, 2018, the lease was extended an additional 5 years. The renewed lease commences August 1, 2019 and expiring on July 31, 2024 and requires an initial rent of $14,899 per month beginning in the second month of the first year, increasing in varying amounts 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 has agreed to reimburse the Company $58,000 towards the replacement of air conditioning units, upon written request. As of June 30, 2018 the Company has not requested or received any of the reimbursement.


On October 20, 2009, the Company entered into a consulting agreement for management and strategic development services with Boxwood Associates, Inc., pursuant to which the Company pays a $2,000 monthly service fee. The contract remains in effect until terminated by either party providing 30 days written notice. A former member of our board of directors and a significant stockholder is President of Boxwood Associates, Inc. Refer to Note 14.


13.

Stock Options and Warrants


For the three and six months ended June 30, 2018 and June 30, 2017, respectively, the Company recorded non-cash stock-based compensation expense of $14,392 and $24,733, and $10,517 and $21,397, respectively, 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 June 30, 2018 and 2017 for the options is $180,427 and $34,596, respectively, and will be recognized through June 30, 2019.


On April 12, 2018 the Board of Directors approved the adoption of a 2018 Equity Compensation Plan.  The Company has reserved 10,000,000 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, no more than five years after the date of the grant. Generally, under both plans, options to employees vest over three years at 33.33% per annum unless the Board of Directors designates a different vesting schedule.




12



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


On April 12, 2018, the Company granted employees and directors options to purchase 4,475,000 shares of the Company’s common stock, at exercise prices ranging from $0.0189 to $0.208 per share.  The options vest over a three-year period and expire April 12, 2028.   The fair value of the options totaled $69,989 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.64%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 217%. On April 30, 2018 our Chairman and Former CEO voluntarily cancelled the grant on April 12, 2018 of options awarded him to purchase an aggregate of 1,400,000 shares of the common stock.


On May 18, 2018, the Company, upon recommendation and approval by the compensation committee of the board of directors, granted its new Chief Executive Officer, options to purchase 6,500,000 shares of the Company’s common stock, at an exercise price of $0.017 per share. The options vest over a three-year period and expire May 18, 2028. The fair value of the options totaled $101,437 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.64%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 217%.


A summary of the Company’s stock option plans as of June 30, 2018, and changes during the six month period then ended is presented below:


 

 

Six Months Ended

June 30, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2017

 

 

3,180,000

 

 

$

0.20

 

Options granted

 

 

10,975,000

 

 

$

0.02

 

Options exercised

 

 

 

 

 

 

Options forfeited

 

 

(1,408,334

)

 

$

0.02

 

Options expired

 

 

(291,666

)

 

$

0.25

 

Options at end of period

 

 

12,455,000

 

 

$

0.06

 

Options exercisable at June 30, 2018

 

 

2,860,000

 

 

$

0.19

 


Changes in the Company’s non-vested options for the six months ended June 30, 2018 are summarized as follows:


 

 

Six Months Ended

June 30, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Nonvested options at December 31, 2017

 

 

270,840

 

 

$

0.15

 

Granted

 

 

10,975,000

 

 

$

0.02

 

Vested

 

 

(242,506

)

 

$

0.16

 

Forfeited

 

 

(1,408,334

)

 

$

0.22

 

Nonvested options at June 30, 2018

 

 

9,595,000

 

 

$

0.18

 


 

 

 

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

 

$0.017- $0.30

 

 

 

12,445,000

 

 

 

8.36

 

 

$

0.06

 

 

 

2,860,000

 

 

$

0.19

 

Totals

 

 

 

12,445,000

 

 

 

8.36

 

 

$

0.06

 

 

 

2,860,000

 

 

$

0.19

 




13



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


A summary of the Company’s warrant activity as of June 30, 2018 and changes during the six-month period then ended is presented below:


 

 

Six months ended

June 30, 2018

 

  

 

Warrants

 

 

Weighted
Average
Exercise Price

 

Warrants outstanding at December 31, 2017

 

 

990,162

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Expired

 

 

(168,750

)

 

$

0.35

 

Warrants outstanding at June 30, 2018

 

 

821,412

 

 

$

0.17

 


 

 

 

Warrants Outstanding

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average

Exercise Price

 

 

 

 

 

821,412

 

 

 

1.80

 

 

$

0.17

 

Totals

 

 

 

821,412

 

 

 

1.80

 

 

$

0.17

 


14.

Related Party Transactions


On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1 million. Under the terms of the agreements, the Company can draw amounts as needed to fund operations. Amounts drawn bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points (3.78% per annum at June 30, 2018), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or consummation of any other financing over $7.0 million. Beginning in March 2006, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007, to December 31, 2018. On May 9, 2018, he extended the maturity date to December 31, 2019. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.


During the six months ended June 30, 2018 we borrowed an additional $26,272 from our Executive Chairman, together with an $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of June 30, 2018 and December 31, 2017 we owed him an aggregate of $8,314,622 and $7,988,349, respectively, which represented approximately 75% and 78% of our total liabilities, respectively. On May 9, 2018 he extended the maturity date to December 31, 2019. While he has continued to fund our working capital needs at reduced levels and extend the due date of the obligation for an additional year, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.


On April 12, 2018, the Company granted our Chairman and Former CEO options to purchase 1,400,000 shares of the Company’s common stock, at exercise price of $0.208 per share. The options vest over a three-year period and expire April 12, 2028. On April 30, 2018 our Chairman and Former CEO voluntarily cancelled the grant on April 12, 2018 of options awarded him to purchase an aggregate of 1,400,000 shares of the common stock.




14



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

 


On May 18, 2018, the Company, upon recommendation and approval by the compensation committee of the board of directors, granted its new Chief Executive Officer, options to purchase 6,500,000 shares of the Company’s common stock, at an exercise price of $0.017 per share. The options vest over a three-year period and expire May 18, 2028.


On May 18, 2018 Mr. Edward S. Vittoria was appointed Chief Executive Officer of Puradyn Filter Technologies Incorporated and as a member of its Board of Directors. Immediately prior to such appointment, Mr. Joseph V. Vittoria resigned from his position as Chief Executive Officer, and has been appointed Executive Chairman of the Board of Directors.


Since December 2017 Mr. Edward Vittoria has been providing advisory services to our company. He is the son of Mr. Joseph V. Vittoria.


In November 2017, the Company received an additional loan in the amount of $25,000 from a former member of the Board of Directors and a significant stockholder. The loan bears interest at a rate of 5% per annum and is due December 31, 2018.


On October 20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract remains in effect until terminated by either party providing 30 days written notice. During each of three and six months ended June 30, 2018 and 2017, we paid Boxwood Associates, Inc. $12,000 and $6,000, respectively under this agreement. A former member of our board of directors is President of Boxwood Associates, Inc.


15.

Major Customers


There are concentrations of credit risk with respect to accounts receivables due to the amounts owed by two customers at June 30, 2018 whose balances each represented approximately 65%, and 22%, for a total of 87% of total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed by two customers at December 31, 2017 whose balances each represented approximately 53%, and 30%, for a total of 83% of total accounts receivables. Sales to two customers for the six months ended June 30, 2018 and 2017 were 66% and 32% of total sales. The loss of business from one or a combination of the Company’s significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations.


16.

Subsequent Events


Only July 15, 2018 the Company repaid a loan in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its CEO.





15



 


ITEM 2.

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


The following discussion of our unaudited condensed consolidated financial condition and results of operations for the three and six months ended June 30, 2018 and 2017 should be read in conjunction with the unaudited condensed consolidated 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, 2017 as filed with the Securities and Exchange Commission on April 10, 2018 (the “2017 10-K”). 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 and six months ended June 30, 2018 and 2017 is unaudited and derived from the unaudited condensed consolidated financial statements appearing elsewhere in this report; unless otherwise noted, all information for the year ended December 31, 2017 is derived from our audited consolidated financial statements appearing in the 2017 10-K.


OVERVIEW


Our company


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, the Puradyn system 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. The Puradyn system 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. Because Puradyn-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 patented Puradyn bypass 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. All Puradyn systems 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 of Puradyn replacement filter elements for the Puradyn system. 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 global distribution network that will not only sell, but also install and support our product. DistributionNow (DNOW) joined the Puradyn distributor network in 2016 and became exclusive distributor for the oil and gas 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. In addition to the DNOW network, we currently have approximately 45 distributors and dealers and manufacturer representatives that sell and/or service the Puradyn system in the U.S. and internationally. Today our products are found around the world in a number of industries, including oil and gas, power generation, construction and forestry, commercial marine, mining, and transportation.


Second quarter of 2018 business highlights


 

·

Continued growth in sales to end users in the oil and gas industry with additional installations on rigs and new expansion into pressure pumping and pipeline operations;

 

 

 

 

·

Renewed interest and installations by OEMs; and

 

 

 

 

·

Accelerating growth in the commercial marine segment.




16



 


Second quarter of 2018 financial highlights:


 

·

Sales growth of 100% during the second quarter of 2018 compared to the same period in 2017;

 

 

 

 

·

Gross profit growth of over 1,000% during the second quarter of 2018 compared to the same period in 2017; and

 

 

 

 

·

A net income of $8,872 for the second quarter of 2018 compared to a loss of $(383,025) in the same period in 2017.


Key strategies:


During the balance of 2018 we are focusing our sales and marketing efforts on:


 

·

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

 

 

 

 

·

Increased marketing focus on the commercial marine segment; and

 

 

 

 

·

Continued discussions with OEMs.


In addition, from an operating standpoint we are placing additional emphasis on:


 

·

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

 

 

 

 

·

Restructuring our distributor network and pricing levels; and

 

 

 

 

·

Increasing operating capacity and efficiency.


Outlook


We attribute the increase in sales in the second quarter of 2018 and the six months then ended over the comparable periods in 2017 to a number of customers in targeted markets experiencing revived business outlook with apparent stability in the economy and oil pricing. We are also encouraged that the revenue growth derives from multiple customer segments, including continued growth in the sales to end users in the oil and gas industry, renewed interest by OEMs, and continued growth in the commercial marine segment. We have also seen increased demand for installations on pressure pumping fleets, which we estimate could represent a market for Puradyn that is two to three times the size of the traditional rig market.  


The recent rebound in oil prices has driven both increased utilization by existing customers in the oil and gas industry as more rigs come back on line as well as new installations by companies who are once again able to make capital investments. We believe Puradyn systems are now active on at least 35% of all U.S. onshore rigs. We continue to work on closing a few remaining industry leaders, and we benefit from existing customers that advocate for us by sharing the results they are experiencing. Nabors Industries reaffirmed that because of their use of Puradyn filtration systems they not only are reducing oil changes by 80%, they are also skipping mid-cycle top-end engine overhauls, which can cost up to $85,000 per engine. Scandrill, Inc. has also standardized Puradyn on their entire fleet and credit our systems with enabling them to safely extend oil drain intervals to 5,000 hours from their previous practice of 1,000 hours.



17



 


RESULTS OF OPERATIONS


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


 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

% change

 

 

2018

 

 

2017

 

 

% change

 

 

 

(unaudited)

 

 

 

 

 

(unaudited)    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,152,462

 

 

$

575,170

 

 

 

100%

 

 

$

2,038,202

 

 

$

1,264,160

 

 

 

61%

 

Gross profit

 

 

461,503

 

 

 

38,771

 

 

 

1,090%

 

 

 

842,801

 

 

 

285,049

 

 

 

196%

 

Total operating costs

 

 

371,963

 

 

 

354,174

 

 

 

5%

 

 

 

715,301

 

 

 

710,449

 

 

 

1%

 

Income (loss) from operations

 

$

89,540

 

 

$

(315,401

)

 

 

(128)%

 

 

$

127,500

 

 

$

(425,400

)

 

 

(130)%

 

Total other expense, net

 

 

(80,668

)

 

 

(67,624)

 

 

 

19%

 

 

 

(155,372

)

 

 

(133,169

)

 

 

17%

 

Net income (loss)

 

$

8,872

 

 

$

(383,025

)

 

 

(102)%

 

 

$

(27,871

)

 

$

(558,569

)

 

 

(95)%

 

Basic and diluted earnings (loss) per share

 

$

0.00

 

 

$

(0.01

)

 

 

 

 

 

$

(0.00

)

 

$

(0.01

)

 

 

 

 


Net sales in the 2018 periods includes reversal during the second quarter of 2018 of a previous sales credit of $99,128 recorded for a distributor.


Gross profit


Our gross profit margins for the second quarter of 2018 increased 33.3%, from 6.7% in the second quarter of 2017 to 40% in the second quarter of 2018, and by 18.8% for the first six months of 2018, from 22.5% for the first six months of 2017 to 41.4% for the first six months of 2018.  The increase in our gross profit margins in the 2018 periods is attributable to operating efficiencies due to increased sales in the first quarter of 2018 and a significant decrease in the expense for slow moving inventory from amounts recorded in 2017. Subsequent to the end of the second quarter 2018 we have been advised by several of our suppliers that prices for various raw materials are being increased, both as a result of the loss of primary suppliers and higher prices with the secondary suppliers. We also expect to be impacted by recently enacted tariffs by the Trump Administration, however, at this time we are unable to quantify this impact on our costs. We will continue to review cost of materials increases, some of which may be passed through to our customers as product price increases in the future.


Total operating costs

 

Our total operating costs include salaries and wages and selling and administrative expenses. The reduction salaries and wages in each of the 2018 periods from the comparable 2017 periods reflects lower staffing levels from a reallocation of internal resources in an effort to increase operating efficiencies, and the impact of one employee who has lowered his salary in lieu of being paid from deferred compensation. We anticipate that our salaries and wages will increase during the balance of 2018. The increases in selling and administrative expenses during the second quarter of 2018 and the six months then ended from the comparable periods in 2017 is attributable to increases in non-cash expenses associated with stock compensation to employees. We anticipate that our selling and administration expenses will increase slightly throughout 2018, inclusive of communication costs, office supplies, and other components of administrative expenses.


Total other expense, net


Total other expense, net represents interest we pay to related parties on amounts advanced to us for working capital.




18



 


LIQUIDITY AND CAPITAL RESOURCES  


We had cash on hand of $184,607 and a working capital deficit of $1,518,306 at June 30, 2018 as compared to cash on hand of $54,438 and a working capital deficit of $9,470,970 at December 31, 2017. Our current ratio (current assets to current liabilities) was .48 to 1 at June 30, 2018 as compared to .08 to 1 at December 31, 2017. The decrease in negative working capital is primarily attributable to our Executive Chairman extending the maturity date of his working capital loans to December 31, 2019, thereby reclassifying these amounts from current liabilities to long-term liabilities, together with increases in inventory and accounts receivable which were offset by decreases in deferred compensation and sales incentives which were offset by decrease in cash and increase in accounts payable. 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. In 2018 we have borrowed an additional $325,000 from him under short term demand notes, and at June 30, 2018 we owed him an aggregate of $8,314,622. We do not have the funds necessary to satisfy these obligations. While he has continued to fund our working capital needs and extend the due date of the obligation, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to Mr. Vittoria prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation. However, he is under no obligation to do so.


We also owe certain of our employees $1,577,271 and $1,626,003, respectively in deferred cash compensation at June 30, 2018 and December 31, 2017, which represents 54% and 16%, respectively of our current liabilities on that date. Since 2005, Mr. Kroger, our President and COO, and two other employees have deferred a portion of the compensation due them to assist us in managing our cash flow and working capital needs. As there is no written agreement with these employees which memorializes the terms of salary deferral, only an election to do so, it is possible the employees could demand payment in full at any time or elect to no longer defer their salaries, or reduce the amount they currently defer. We do not have sufficient funds to satisfy these obligations.


We do not have any external sources of liquidity at this time, and our 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 Mr. Vittoria. In an effort to improve our ability to raise capital, on November 11, 2016 he converted $6,100,000 of principal and interest due him into shares of our common stock at a conversion price which was a premium to the market value of our common stock. However, following such conversion, the hoped for change in our potential financing sources looked at our company and risks associated with it have not changed. There can be no assurance we will be able to raise additional capital or generate enough to repay our debt holders, and it is possible that stockholders could lose their entire investment in our company.


Summary cash flows


 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

Net cash (used) by operating activities

 

$

(413,949

)

 

$

(355,708

)

Net cash (used) by investing activities

 

$

(55,729

)

 

$

(38,948

)

Net cash provided by financing activities

 

$

599,397

 

 

$

388,122

 


During the first six months of 2018 net cash used by our operating activities was principally related to funding our net loss, together with increases in inventory, accounts receivable and prepaid expenses offset by increase in accounts payable and accrued liabilities. The increases in accounts receivable as well as the corresponding 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 six months of 2017, cash used by operating activities was primarily used to fund our net loss together with increase in accounts receivable were partially offset by decrease in inventory as well a provision for slow moving inventory and increase in accrued liabilities.




19



 


During the first six months of 2018, net cash used by investing activities represented capitalized patent costs. For the six months of 2017, net cash was used in investing activities for the purchase of equipment and capitalized patent costs.


During the first six months of 2018 and 2017, net cash provided by financing activities represented loans from related parties, net of capital lease payments.


Going concern


Our financial statements have been prepared on the basis that we will operate as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred net losses each year since inception and have relied on loans from related parties to fund our operations. These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from our principal stockholder, as set forth above, have led our independent registered public accounting firm Liggett & Webb, P.A. to include a statement in its audit report relating to our audited financial statements for the years ended December 31, 2017 and 2016 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.


Critical accounting policies and estimates


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


Recent accounting pronouncements


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


Off balance sheet arrangements


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


ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


Not applicable for a smaller reporting company.




20



 


ITEM 4.

CONTROLS AND PROCEDURES.


Evaluation of Disclosure Controls and Procedures


Our management, which includes our CEO and 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 June 30, 2018 (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 principal financial and accounting officer have concluded that our disclosure controls and procedures were 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 principal financial and accounting officer, to allow timely decisions regarding required disclosure.


Changes in Internal Control over Financial Reporting


There have been no changes in our internal controls over financial reporting identified in connection with the evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.




21



 


PART II.   OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS.


None.


ITEM 1A.

RISK FACTORS.


In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2017 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.


WE NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE TERMS. IF WE CANNOT RAISE ADDITIONAL CAPITAL AS NEEDED, OUR ABILITY TO FUND OUR ONGOING OPERATIONS WILL BE IN JEOPARDY AND WE WILL BE UNABLE TO CONTINUE AS A GOING CONCERN.


As described elsewhere herein, 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. 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 at historic levels. Given our history of losses and debt levels, we face a 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 existing business and operations is in jeopardy. In this event, we would no longer be able to continue as a going concern and you could lose all of your investment in our company.


WE OWE APPROXIMATELY $8.3 MILLION, THE MAJORITY OF WHICH IS DUE BY DECEMBER 31, 2019.


At June 30, 2018, we owed our Executive Chairman approximately $8.3 million. This obligation is unsecured. Substantially all of this amount is due on December 31, 2019, however, $325,000 of which is due on demand. We do not have sufficient funds to repay these obligations. If our Executive Chairman does not consent to further extensions of the due date of these amount, we will be unable to repay these obligations when due.


ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


None, except as previously reported.


ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4.

MINE SAFETY DISCLOSURE.


Not Applicable.


ITEM 5.

OTHER INFORMATION.


None.  



22



 



ITEM 6. 

EXHIBITS.


 

 

 

 

Incorporated by Reference

 

Filed

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

 

 

10.1

 

Letter agreement dated May 18, 2018 by and between Puradyn Filter Technologies Incorporated and Edward S. Vittoria

 

8-K

 

5/21/18

 

10.1

 

 

10.2

 

Lease agreement between Puradyn and Duke Realty

 

 

 

 

 

 

 

Filed

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




23



 


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





 

PURADYN FILTER TECHNOLOGIES INCORPORATED

 

 

 

 

 

 

Date:  August 9, 2018

By:

/s/ Edward S. Vittoria

 

 

Edward S. Vittoria, Chief Executive Officer, principal executive officer

  

 

 

Date:  August 9, 2018

By:

/s/ Martin Scott

 

 

CFO Consultant, principal financial and accounting officer






24


EX-10.2 2 pfti_ex10z2.htm LEASE AMENDMENT Lease Amendment

 


EXHIBIT 10.2


FIRST AMENDMENT TO LEASE


THIS FIRST AMENDMENT TO LEASE (this "Amendment") is made as of the 29th day of June, 2018, by and between DUKE PGC AT QUANTUM 1-9, LLC, a Delaware limited liability company ("Landlord"), and PURADYN FILTER TECHNOLOGIES INCORPORATED, a Delaware corporation ("Tenant").


W I T N E S S E T H:


WHEREAS, Landlord and Tenant heretofore entered into that certain Lease dated September 27, 2012 (the "Lease") for the lease of approximately 25,541 square feet of space, located at 2017 High Ridge Road, Boynton Beach, Florida 33426, within Gateway Center, said space being more particularly described therein (the "Leased Premises"); and


WHEREAS, Landlord and Tenant desire to amend the Lease to, among other things, extend the Lease Term, which is scheduled to expire by the terms of the Lease on July 31, 2019.


NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration in hand paid by each party hereto to the other, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:


1.

Incorporation of Recitals and Definitions.  The above recitals are hereby incorporated into this Amendment as if fully set forth herein.  All capitalized terms used herein but undefined shall have the meaning as defined in the Lease.


2.

Lease Term.  The Lease Term is hereby extended through and including July 31, 2024.


3.

Minimum Annual Rent.  Commencing as of August 1, 2019 (the "Extension Date"), Section 1.01(d) of the Lease is hereby modified to reflect that Minimum Annual Rent shall be as follows:


08/01/2019 – 07/31/2020

$178,787.04

08/01/2020 – 07/31/2021

$184,150.56

08/01/2021 – 07/31/2022

$189,675.12

08/01/2022 – 07/31/2023

$195,365.40

08/01/2023 – 07/31/2024

$201,226.32


(Note:  Minimum Annual Rent does not include applicable Florida state sales tax or Additional Rent, which sums shall be the sole responsibility of Tenant.)


4.

Monthly Rental Installments.  Commencing as of the Extension Date, Section 1.01(e) of the Lease is hereby modified to reflect that Monthly Rental Installments shall be as follows:


08/01/2019 – 07/31/2020

$14,898.92

08/01/2020 – 07/31/2021

$15,345.88

08/01/2021 – 07/31/2022

$15,806.26

08/01/2022 – 07/31/2023

$16,280.45

08/01/2023 – 07/31/2024

$16,768.86


(Note:  Monthly Rental Installments do not include applicable Florida State Sales Tax or Additional Rent, which sums shall be the sole responsibility of Tenant.)




1



 


5.

Landlord's Addresses.  Section 1.01(l) of the Lease is hereby modified to reflect that Landlord's addresses for notice and payment purposes are as follows:


Landlord:

Duke PGC at Quantum 1-9, LLC

c/o Duke Realty Corporation

Attn:

Florida Market, Vice President,

Regional Asset Manager

2400 North Commerce Parkway, Suite 405

Weston, FL  33326


With Payments to:

Duke PGC at Quantum 1-9, LLC

c/o Duke Realty Limited Partnership

75 Remittance Drive, Suite 3205

Chicago, IL  60675-3205


6.

Options to Extend.  Tenant's options to extend the Lease Term as set forth in Section 17.03 of the Lease are hereby deleted in their entirety and shall be of no further force or effect.


7.

Right of First Offer.  Tenant's right of first offer set forth in Section 17.04 of the Lease is hereby deleted in its entirety and shall be of no further force or effect.


8.

Allowance.  Tenant acknowledges and agrees that Tenant may make leasehold improvements to the Leased Premises only in accordance with the provisions of Section 7.03 of the Lease.  Landlord shall reimburse Tenant for all expenses incurred in connection with (a) the replacement of two (2) 10-ton heating, ventilation and air conditioning ("HVAC") units serving the Leased Premises installed in 2017, and (b) replacement of additional HVAC unit(s) serving the Leased Premises, up to the amount of Fifty-Eight Thousand and No/100 Dollars ($58,000.00) (the "Allowance").  Said reimbursement shall be paid by Landlord to Tenant within thirty (30) days following Tenant's written request therefor (which request shall be accompanied by reasonable evidence of such expenses), provided that (y) this Amendment has been executed by Tenant and (z) Tenant requests all such reimbursements on or before December 31, 2019.  If Tenant fails to exercise such right as aforesaid, Tenant shall be deemed to have waived its rights pursuant to this Section 8.


9.

Brokers.  Except for CBRE, Inc. and Duke Realty Services, LLC each representing Landlord, whose commissions shall be paid by Landlord, Landlord and Tenant each represents and warrants to the other that neither party has engaged or had any conversations or negotiations with any broker, finder or other third party concerning the matters set forth in this Amendment who would be entitled to any commission or fee based on the execution of this Amendment.  Landlord and Tenant each hereby indemnifies the other against and from any claims for any brokerage commissions and all costs, expenses and liabilities in connection therewith, including, without limitation, reasonable attorneys' fees and expenses, for any breach of the foregoing.  The foregoing indemnification shall survive the termination of the Lease for any reason.


10.

Representations and Warranties.  


(a)

Tenant hereby represents and warrants that (i) Tenant is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the jurisdiction under which it was organized; (ii) Tenant is authorized to do business in the jurisdiction where the Leased Premises is located; and (iii) the individual(s) executing and delivering this Amendment on behalf of Tenant has been properly authorized to do so, and such execution and delivery shall bind Tenant to its terms.




2



 


(b)

Landlord hereby represents and warrants that (i) Landlord is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the jurisdiction under which it was organized; (ii) Landlord is authorized to do business in the jurisdiction where the Leased Premises is located; and (iii) the individual(s) executing and delivering this Amendment on behalf of Landlord has been properly authorized to do so, and such execution and delivery shall bind Landlord to its terms.


11.

Examination of Amendment.  Submission of this instrument for examination or signature to Tenant does not constitute a reservation or option, and it is not effective until execution by and delivery to both Landlord and Tenant.


12.

Incorporation.  This Amendment shall be incorporated into and made a part of the Lease, and all provisions of the Lease not expressly modified or amended hereby shall remain in full force and effect.  As amended hereby, the Lease is hereby ratified and confirmed by Landlord and Tenant.  To the extent the terms hereof are inconsistent with the terms of the Lease, the terms hereof shall control.



(SIGNATURES CONTAINED ON THE FOLLOWING PAGE(S))



3



 


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first set forth above.




WITNESSES:



/s/ Olga Stanley

Printed Name: Olga Stanley



/s/ J Rodriguez

Printed Name: J Rodriguez

LANDLORD:


DUKE PGC AT QUANTUM 1-9, LLC,

a Delaware limited liability company


By:

Duke Realty Limited Partnership,

an Indiana limited partnership, its managing member


By:

Duke Realty Corporation, an Indiana corporation, its general partner



By: /s/ Edward P. Mitchell

Edward P. Mitchell

Senior Vice President

Florida Operations



Date of execution: June 29, 2018




WITNESSES:



/s/ Elaine Hilton

Printed Name: Elaine Hilton



/s/Joseph V, Vittoria

Printed Name: Joseph V. Vittoria

TENANT:


PURADYN FILTER TECHNOLOGIES INCORPORATED, a Delaware corporation



By: /s/ Edward Vittoria

Name: Edward Vittoria

Title:  Chief Executive Officer



Attest: /s/ Kathryn Morris

Name: Kathryn Morris

Title:



Date of execution: June 26, 2018



 

 





4


EX-31.1 3 pfti_ex31z1.htm RULE 13A-14(A)/15D-14(A) CERTIFICATION Certification

EXHIBIT 31.1


Rule 13a-14(a)/15d-14(a) Certification


I, Edward S. Vittoria, certify that:


1.

I have reviewed this report on Form 10-Q for the period ended June 30, 2018 of Puradyn Filter Technologies Incorporated;


2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated:  August 9, 2018

 

/s/ Edward S. Vittoria

Edward S. Vittoria, Chief Executive Officer, principal executive officer






EX-31.2 4 pfti_ex31z2.htm RULE 13A-14(A)/15D-14(A) CERTIFICATION Certification

EXHIBIT 31.2


Rule 13a-14(a)/15d-14(a) Certification


I, Martin Scott, certify that:


1.

I have reviewed this report on Form 10-Q for the period June 30, 2018 of Puradyn Filter Technologies Incorporated;


2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated: August 9, 2018

 

/s/ Martin Scott

Martin Scott, CFO Consultant, principal financial and accounting officer




EX-32.1 5 pfti_ex32z1.htm SECTION 1350 CERTIFICATION Certification

EXHIBIT 32.1


Section 1350 Certification


In connection with the Quarterly Report of Puradyn Filter Technologies Incorporated (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Edward S. Vittoria, Chief Executive Officer of the Company, and Martin Scott, principal financial and accounting officer of the Company, each certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.

 

 


Dated: August 9, 2018

/s/ Edward S. Vittoria

 

Edward S. Vittoria,

 

Chief Executive Officer, principal financial officer

 

 

Dated: August 9, 2018

/s/ Martin Scott

 

Martin Scott,

 

CFO Consultant, principal financial and accounting officer


A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



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text-align: right">147,575</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #FFFFFF 1px solid; border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">69,355</p> </td></tr></table> <p style="margin-top: 0px; margin-bottom: -2px; width: 32px; float: left"><b>5. </b></p> <p style="margin: 0px; text-indent: -2px"><b>Property and Equipment</b></p> <p style="margin: 0px; clear: left"><br /></p> <p style="margin: 0px; text-indent: 48px">At June 30, 2018 and December 31, 2017, property and equipment consisted of the following:</p> <p style="margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" style="margin-top: 0px; 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font-size: 8pt; text-align: center"><b>December 31, </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2017</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16.93px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 86.13px"><p style="margin: 0px; font-size: 8pt; text-align: center">(Unaudited)</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 85.66px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; 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background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">8,591,189</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">7,991,792</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; padding: 0px">&#160;</p></td></tr> <tr><td style="margin-top: 0px; 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background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">&#151;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; padding: 0px">&#160;</p></td></tr> </table> <p style="margin: 0px"><br /></p> <p style="margin: 0px"><b><i>Maturities of Long Term Obligations for Five Years and Beyond</i></b></p> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px">The minimum annual principal payments of notes payable and capital lease obligations at June 30, 2018 were:</p> <p style="margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" style="margin-top: 0px; font-size: 10pt; width: 100%"><tr style="height: 0px; font-size: 0"><td /><td style="width: 17px" /><td style="width: 6.66px" /><td style="width: 76px" /><td style="width: 6.66px" /></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">2018</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">601,567</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">2019</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">7,989,622</p> </td><td style="margin-top: 0px; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">8,591,189</p> </td></tr></table> <p style="margin-top: 0px; margin-bottom: -2px; width: 32px; float: left"><b>12. </b></p> <p style="margin: 0px; text-indent: -2px"><b>Commitments and Contingencies &#160;</b></p> <p style="margin: 0px; clear: left"><br /></p> <p style="margin: 0px"><b><i>Agreements</i></b></p> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On May 18, 2018 we entered into a letter agreement with Mr. Edward S. Vittoria pursuant to 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 to prior to the expiration of such initial term. &#160;Under the terms of the letter agreement we agreed to pay him: (i) an annual base salary of $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 minimum amount of $50,000; and (iii) granted him options to purchase 6,500,000 shares of our common stock, vesting one-third in arrears, at an exercise price equal to fair market value on the date of grant pursuant to the terms and conditions of our 2018 Equity Compensation Plan. &#160;He is also entitled to: (i) participate in 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 length of service to us; and (iii) reimbursement for all reasonable, out of-pocket expenses incurred by him&#160;</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On September 7, 2017 the Company entered into an exclusive distribution agreement with NOW, Inc. (&#147;DNOW&#148;) for the worldwide rights to sell its product in the oil and gas industry. As part of this agreement, the distributor could 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. Refer to Note 10. The incentive-earning period ended on June 30, 2018, and no incentives were earned. The exclusivity agreement continues at a minimum through the end of 2018. </p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. 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The contract remains in effect until terminated by either party providing 30 days written notice. A former member of our board of directors and a significant stockholder is President of Boxwood Associates, Inc. Refer to Note 14.</p> <p style="margin-top: 0px; margin-bottom: -2px; width: 32px; float: left"><b>13. </b></p> <p style="margin: 0px; text-indent: -2px"><b>Stock Options and Warrants</b></p> <p style="margin: 0px; clear: left"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">For the three and six months ended June 30, 2018 and June 30, 2017, respectively, the Company recorded non-cash stock-based compensation expense of $14,392 and $24,733, and $10,517 and $21,397, respectively, relating to employee stock options and warrants issued for consulting services.</p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 505, <i>Equity, </i>and FASB ASC 718,<i> Compensation &#150; Stock Compensation</i>. 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Each plan limits the exercise price of the options at no less than the quoted market price of the common stock on the date of grant. The option term is determined by the Board of the Directors, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the Company&#146;s common stock, no more than five years after the date of the grant. 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vertical-align: bottom"><p style="margin: 0px">Granted</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 19.93px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 3.4px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">10,975,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76.6px"><p style="margin: 0px; text-align: right">0.02</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7.46px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; 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text-align: right">9,595,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 76.6px"><p style="margin: 0px; text-align: right">0.18</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 7.46px"><p style="margin: 0px; padding: 0px">&#160;</p></td></tr> </table> <p style="margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" align="center" style="margin-top: 0px; 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padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 77.93px"><p style="margin: 0px; text-align: right">2,860,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 8.73px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 8.73px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 8.73px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 79.13px"><p style="margin: 0px; text-align: right">0.19</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; 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padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; vertical-align: bottom; width: 119.53px"><p style="margin: 0px; text-align: right">821,412</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; vertical-align: bottom; width: 119.53px"><p style="margin: 0px; text-align: right">1.80</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 13.26px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 119.53px"><p style="margin: 0px; text-align: right">0.17</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 13.2px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom; width: 132.8px"><p style="margin: 0px; padding-left: 8px; text-indent: -8px"><b>Totals</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 13.26px"><p style="margin: 0px"><b>&#160;</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 13.26px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; border-top: #000000 1px solid; border-bottom: #000000 3px double; 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border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 13.26px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 13.26px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 119.53px"><p style="margin: 0px; text-align: right">0.17</p> </td><td>&#160;</td></tr></table> <p style="line-height: 11pt; margin-top: 0px; margin-bottom: -2px; width: 32px; float: left"><b>14. </b></p> <p style="line-height: 11pt; margin: 0px; text-indent: -2px"><b>Related Party Transactions </b></p> <p style="line-height: 8pt; margin: 0px; clear: left; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1&#160;million. Under the terms of the agreements, the Company can draw amounts as needed to fund operations. Amounts drawn bear interest at the BBA LIBOR Daily Floating Rate plus 1.4&#160;percentage points (3.78% per annum at June 30, 2018), payable monthly and were to become due and payable on December&#160;31, 2005 or upon a change in control of the Company or consummation of any other financing over $7.0&#160;million. Beginning in March&#160;2006, annually, through February&#160;2012, the maturity date for the agreement was extended annually from December&#160;31, 2007, to December&#160;31, 2018. On May 9, 2018, he extended the maturity date to December&#160;31, 2019. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.</p> <p style="line-height: 8pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">During the six months ended June 30, 2018 we borrowed an additional $26,272 from our Executive Chairman, together with an $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of June 30, 2018 and December 31, 2017 we owed him an aggregate of $8,314,622 and $7,988,349, respectively, which represented approximately 75% and 78% of our total liabilities, respectively. On May 9, 2018 he extended the maturity date to December 31, 2019. While he has continued to fund our working capital needs at reduced levels and extend the due date of the obligation for an additional year, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.</p> <p style="line-height: 11pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to both the Company&#146;s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.</p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On April 12, 2018, the Company granted our Chairman and Former CEO options to purchase 1,400,000 shares of the Company&#146;s common stock, at exercise price of $0.208 per share. The options vest over a three-year period and expire April 12, 2028. On April 30, 2018 our Chairman and Former CEO voluntarily cancelled the grant on April 12, 2018 of options awarded him to purchase an aggregate of 1,400,000 shares of the common stock.&#160;</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On May 18, 2018, the Company, upon recommendation and approval by the compensation committee of the board of directors, granted its new Chief Executive Officer, options to purchase 6,500,000 shares of the Company&#146;s common stock, at an exercise price of $0.017 per share. The options vest over a three-year period and expire May 18, 2028. </p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On May 18, 2018 Mr. Edward S. Vittoria was appointed Chief Executive Officer of Puradyn Filter Technologies Incorporated and as a member of its Board of Directors. Immediately prior to such appointment, Mr. Joseph V. Vittoria resigned from his position as Chief Executive Officer, and has been appointed Executive Chairman of the Board of Directors. </p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Since December 2017 Mr. Edward Vittoria has been providing advisory services to our company. He is the son of Mr. Joseph V. Vittoria.</p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">In November 2017, the Company received an additional loan in the amount of $25,000 from a former member of the Board of Directors and a significant stockholder. The loan bears interest at a rate of 5% per annum and is due December 31, 2018.</p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">On October&#160;20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract remains in effect until terminated by either party providing 30 days written notice. During each of three and six months ended June 30, 2018 and 2017, we paid Boxwood Associates, Inc. $12,000 and $6,000, respectively under this agreement. A former member of our board of directors is President of Boxwood Associates, Inc.</p> <p style="margin-top: 0px; margin-bottom: -2px; width: 32px; float: left"><b>15. </b></p> <p style="margin: 0px; text-indent: -2px; text-align: justify"><b>Major Customers </b></p> <p style="margin: 0px; clear: left; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">There are concentrations of credit risk with respect to accounts receivables due to the amounts owed by two customers at June 30, 2018 whose balances each represented approximately 65%, and 22%,&#160;for a total of 87% of total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed by two customers at December 31, 2017 whose balances each represented approximately 53%, and 30%, for a total of 83% of total accounts receivables. Sales to two customers for the six months ended June 30, 2018 and 2017 were 66% and 32% of total sales. The loss of business from one or a combination of the Company&#146;s significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company&#146;s operations.</p> <p style="margin-top: 0px; margin-bottom: -2px; width: 32px; float: left"><b>16.</b></p> <p style="margin: 0px; text-indent: -2px; text-align: justify"><b>Subsequent Events</b></p> <p style="margin: 0px; clear: left"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Only July 15, 2018 the Company repaid a loan in the amount of $250,000 from a related party to both the Company&#146;s Executive Chairman and its CEO.</p> <p style="margin: 0px; clear: left; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Organization</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Puradyn Filter Technologies Incorporated (the &#147;Company&#148;), a Delaware corporation, is engaged in the manufacturing, distribution and sale of bypass oil filtration systems under the trademark Puradyn<sup>&#174;</sup> 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.</p> <p style="margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Basis of Presentation</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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 six-month periods ended June 30, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.</p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px">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, 2017.</p> <p style="margin: 0px; text-align: justify"><i>Revenue Recognition</i></p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">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. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying financial statements. </p> <p style="line-height: 11pt; margin: 0px; text-align: justify"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">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.</p> <p style="line-height: 11pt; margin: 0px; text-align: justify"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">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 in during the six months ended June 30, 2018. </p> <p style="margin: 0px; text-align: justify"><i>Use of Estimates</i></p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.</p> <p style="line-height: 10pt; margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Cash and Cash Equivalents</i></p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At June 30, 2018 and December 31, 2017, the Company did not have any cash equivalents.</p> <p style="margin: 0px; text-align: justify"><i>Fair Value of Financial Instruments</i></p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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 June 30, 2018 and December&#160;31, 2017, respectively, because of their short-term natures.</p> <p style="margin: 0px; text-align: justify"><i>Accounts Receivable</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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. </p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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. </p> <p style="margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Inventories</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value. </p> <p style="margin: 0px; text-align: justify"><i>Property and Equipment</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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&#146;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.</p> <p style="margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Patents</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Patents are stated at cost. Amortization is provided using the straight-line method over the estimated useful lives of the patents. The estimated useful lives of patents are 17 to 20 years. Upon retirement, the cost and related accumulated amortization are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. </p> <p style="margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Impairment of Long-Lived Assets</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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&#146; 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. </p> <p style="margin: 0px; text-align: justify"><i>Product Warranty Costs</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">As required by FASB ASC 460, <i>Guarantor&#146;s Guarantees</i>, the Company is including the following disclosure applicable to its product warranties.</p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. 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During the three and six months ended June, 2018 and 2017, advertising costs incurred by the Company totaled approximately $2,904 and $3,333, $0 and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations. </p> <p style="margin: 0px; text-align: justify"><i>Engineering and Development</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Research and development costs are expensed as incurred. During the three and six months ended June 30, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,384 and $2,813, and $1,575 and $1,575, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.</p> <p style="margin: 0px; text-align: justify"><i>Income Taxes</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">The Company accounts for income taxes under FASB ASC 740, <i>Income Taxes</i>. 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.</p> <p style="margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Credit Risk</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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 June 30, 2018 and December 31, 2017, 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&#146;s operations. &#160;Please refer to Note 15 for further details.</p> <p style="margin: 0px"><i>Basic and Diluted Loss Per Share</i></p> <p style="margin: 0px"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">The Company uses ASC 260-10, &#34;Earnings Per Share&#34; for calculating the basic and diluted income (loss) per share. 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 June 30, 2018 and 2017, there were 13,276,412 and 4,497,662 shares issuable upon the exercise of options and warrants, respectively. Common stock equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive. The Company had net income for the three month period ended June 30, 2018. A separate computation of diluted earnings per share is presented using the treasury stock method and the common stock equivalents did not have any effect on net income per share.</p> <p style="margin: 0px"><i>Reclassifications</i></p> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px">Certain prior year amounts have been reclassified to conform to the current year presentation. </p> <p style="margin: 0px"><i>Recent Accounting Pronouncements</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">In May 2014, the FASB issued ASU No. 2014-09, &#34;<i>Revenue from Contracts with Customers (Topic 606)</i>,&#34; which supersedes the revenue recognition requirements in Accounting Standards Codification 605, &#34;<i>Revenue Recognition</i>.&#34; This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the new revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are effective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method.&#160;</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">The Company adopted these standards 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 adoption of these standards did not have a material impact on the Company's Condensed Statements of Operations during the six months ended June 30, 2018. </p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.</p> <p style="margin: 0px; text-indent: 48px; text-align: justify">The following table shows the changes in the aggregate product warranty liability for the six -months ended June 30, 2018:</p> <p style="margin: 0px; text-align: justify"><br /></p> <table cellpadding="0" cellspacing="0" style="margin-top: 0px; font-size: 10pt; width: 100%"><tr style="height: 0px; font-size: 0"><td /><td style="width: 23.93px" /><td style="width: 16.06px" /><td style="width: 56.06px" /><td style="width: 7.86px" /></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px"><b>Balance as of December 31, 2017</b></p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 23.93px"><p style="margin: 0px">&#160;&#160;&#160;&#160;&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 16.06px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 56.06px"><p style="margin: 0px; text-align: right">20,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7.86px"><p style="margin: 0px; padding: 0px">&#160;</p></td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; text-indent: 10.4px">Less: Payments made</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 23.93px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 16.06px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 56.06px"><p style="margin: 0px; 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vertical-align: bottom"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 86px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>June 30, </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2018</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 85.66px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>December 31, </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2017</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; 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vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">42,707</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 3.33px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">147,575</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #FFFFFF 1px solid; border-bottom: #FFFFFF 3px double; vertical-align: bottom; 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vertical-align: bottom"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16.93px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 86.13px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>June 30, </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2018</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 85.66px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>December 31, </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2017</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16.93px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 86.13px"><p style="margin: 0px; font-size: 8pt; text-align: center">(Unaudited)</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 85.66px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">Machinery and equipment</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; 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font-size: 0"><td /><td style="width: 17px" /><td style="width: 6.66px" /><td style="width: 79px" /><td style="width: 17px" /><td style="width: 6.66px" /><td style="width: 79px" /><td style="width: 4.46px" /></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 85.66px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>June 30, </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2018</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 85.66px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>December 31, 2017</b></p> </td><td style="margin-top: 0px; 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border-bottom: #000000 1px solid; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">3,443</p> </td><td style="margin-top: 0px; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; padding: 0px">&#160;</p></td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">8,591,189</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; 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border-bottom: #000000 1px solid; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">(7,991,792</p> </td><td style="margin-top: 0px; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 4.46px"><p style="margin: 0px">)</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">Long-term maturities</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">7,989,622</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">&#151;</p> </td><td></td></tr></table> <p style="margin: 0px; text-indent: 48px">The minimum annual principal payments of notes payable and capital lease obligations at June 30, 2018 were:</p> <p style="margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" style="margin-top: 0px; font-size: 10pt; width: 100%"><tr style="height: 0px; font-size: 0"><td /><td style="width: 17px" /><td style="width: 6.66px" /><td style="width: 76px" /><td style="width: 6.66px" /></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">2018</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">601,567</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">2019</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">7,989,622</p> </td><td style="margin-top: 0px; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">8,591,189</p> </td><td></td></tr></table> <p style="margin: 0px; text-indent: 48px">A summary of the Company&#146;s stock option plans as of June 30, 2018, and changes during the six month period then ended is presented below:</p> <p style="margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" style="margin-top: 0px; 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font-size: 8pt">&#160;&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 15.93px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 84px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>Number of </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>Options</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 84.4px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>Weighted </b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>Average</b></p> <p style="margin: 0px; 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padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 8px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 76.4px"><p style="margin: 0px; text-align: right">0.20</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7.6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">Options granted</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 15.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">10,975,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76.4px"><p style="margin: 0px; text-align: right">0.02</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7.6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">Options exercised</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 15.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 8px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">&#151;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 76.4px"><p style="margin: 0px; text-align: right">&#151;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7.6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">Options forfeited </p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 15.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">(1,408,334</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px">)</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 8px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 76.4px"><p style="margin: 0px; text-align: right">0.02</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7.6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px">Options expired</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 15.93px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 8px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">(291,666</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 8px"><p style="margin: 0px">)</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 8px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 76.4px"><p style="margin: 0px; text-align: right">0.25</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 7.6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">Options at end of period</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 15.93px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 8px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">12,455,000</p> </td><td style="margin-top: 0px; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 8px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 20px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 8px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; 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text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Puradyn Filter Technologies Incorporated (the &#147;Company&#148;), a Delaware corporation, is engaged in the manufacturing, distribution and sale of bypass oil filtration systems under the trademark Puradyn<sup>&#174;</sup> 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.</p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-align: justify"><i>Basis of Presentation</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">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 six-month periods ended June 30, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.</p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px">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, 2017.</p> <p style="line-height: 10pt; margin: 0px"><br /></p> <p style="margin: 0px; text-align: justify"><i>Revenue Recognition</i></p> <p style="line-height: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">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. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying financial statements. </p> <p style="line-height: 11pt; margin: 0px; text-align: justify"><br /></p> <p style="line-height: 11pt; margin: 0px; text-indent: 48px; text-align: justify">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. 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Related Party Commitments and Contingencies Disclosure [Abstract] Commitments and Contingencies Disclosure of Compensation Related Costs, Share-based Payments [Abstract] Stock Options and Warrants Related Party Transactions [Abstract] Related Party Transactions Risks and Uncertainties [Abstract] Major Customers Subsequent Events [Abstract] Subsequent Events Organization Basis of Presentation Principles of Consolidation Revenue Recognition Use of Estimates Cash and Cash Equivalents Fair Value of Financial Instruments Accounts Receivable Inventories Deferred Financing Costs Property and Equipment Patents Impairment of Long-Lived Assets Sales Incentives and Consideration Paid to Customers Product Warranty Costs Comprehensive Income Advertising Costs Engineering and Development Foreign Currency Translation Income Taxes Stock Option Plans Credit Risk Basic and Diluted Loss Per Share Reclassifications Recent Accounting Pronouncements Schedule of Product Warrant Liability Schedule of Inventories Schedule of Prepaid Expenses and Other Current Assets Schedule of Property and Equipment Schedule of capitalized patent costs included in other assets Schedule of Future Minimum Lease Commitments Schedule of Accrued Liabilities Schedule of Notes Payable and Capital Leases Schedule of Maturities of Long-Term Obligations Summary of Stock Options Activity Schedule of Nonvested Options Activity Summary of Options Outstanding by Price Range Schedule of Fair Value Assumptions Summary of Warrants Activity Summary of Warrants Outstanding by Price Range Statement [Table] Statement [Line Items] Cash equivalents Amortization of deferred financing costs Accumulated amortization of deferred financing costs Property and equipment, estimated useful life Estimated useful lives of patents Advertising costs Engineering and development costs FDIC insured limit Shares excluded from computation loss per share Effect on earning per share Balance as of December 31, 2017 Less: Payments made Add: Provision for current period warranties Balance as of June 30, 2018 Net cash used in operating activities Notes payable owed to stockholder Raw materials Work In Progress Finished goods Valuation allowance Inventory, net Prepaid expenses Deposits Prepaid expenses and other current assets Property, Plant and Equipment [Table] Property, Plant and Equipment [Line Items] Income Statement Location [Axis] Property and equipment, gross Less accumulated depreciation and amortization Property and equipment, net Depreciation and amortization expense of property and equipment Patent costs Less accumulated amortization Patent costs, less accumulated amortization Amortization expense Schedule of Operating Leased Assets [Table] Operating Leased Assets [Line Items] Security deposit Aggregate total minimum lease payments Annual increase percentage Lease expiration date Capital leased assets - office equipment, gross Rent expense in fifth year Lease reimburse amount that is agreed by landlord Rent expense Capital lease obligations Accrued vacation and benefits Accrued expenses relating to vendors and others Accrued warranty costs Accrued interest payable relating to stockholder notes Deferred rent Accrued liabilities Targeted quarterly sales revenue for the period August 1, 2017 and June 30, 2018 Actual sales revenue achieved under agreement Product liability accrual Schedule of Long-term Debt Instruments [Table] Debt Instrument [Line Items] Short-term Debt, Type [Axis] Face amount of debt instrument Percent in addition to BBA LIBOR Interest rate on outstanding term loan Maturity date Maximum amount of additional financing the company may obtain that will affect the repayment provisions of the debt instrument Proceeds from stockholder loan Percentage of total liabilities Proceeds from related party loan Repayments of related party loan Interest expense, debt Interest expense related to capital lease obligations Notes payable to stockholders Capital lease obligation Total obligations Less: current maturities Long-term maturities 2018 2019 Purchase Commitment, Excluding Long-term Commitment [Table] Purchase Commitment, Excluding Long-term Commitment [Line Items] Annual base salary Options granted Monthly fee under agreement Issuance of common shares for exercise of warrants for compensation of services Issuance of warrants, term Cash portion of payment Share-based portion of payment Term of agreement Monthly service fee payable for services rendered as investor relations counsel for the Company Number of warrants that can be purchased in each lot during the month Exercise price of warrants Notice period to terminate the agreement Lease term Initial monthly rent paid Increase in monthly rent Rent expense Schedule of Share-based Compensation Arrangements by Share-based Payment Award [Table] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Compensation expense Unrecognized compensation cost Common stock reserved for future issuance Exercisable period Percentage of common stock own by employee Grants period Vesting period Vesting percentage Warrants to purchase common stock Exercise price Expiration date Fair value of the options Risk free interest rate Expected life Dividend yield Expected volatility Options cancelled Options Options outstanding at December 31, 2017 Options exercised Options forfeited Options expired Options at end of period Options exercisable at June 30, 2018 Weighted Average Exercise Price Options outstanding at December 31, 2017 Options granted Options exercised Options forfeited Options expired Options at end of period Options exercisable at June 30, 2018 Non-Vested stock option activity, shares: Nonvested options at December 31, 2017 Granted Vested Forfeited Nonvested options at June 30, 2018 Non-Vested stock option activity, weighted average exercise price: Nonvested options at December 31, 2017 Granted Vested Forfeited Nonvested options at June 30, 2018 Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table] Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] Range of Exercise Price, lower limit Range of Exercise Price, upper limit Number Outstanding Remaining Average Contractual Life Weighted Average Exercise Price, Outstanding Number Exercisable Weighted Average Exercise Price, Exercisable Warrant activity, number of shares: Warrants outstanding at December 31, 2017 Granted Exercised Expired Warrants outstanding at June 30, 2018 Warrant activity, weighted average exercise price: Warrants outstanding at December 31, 2017 Granted Exercised Expired Warrants outstanding at June 30, 2018 Schedule Of Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options By Exercise Price Range [Table] Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items] Range of exercise price, lower limit Range of exercise price, upper limit Number outstanding Remaining Average Contractual Life Weighted average exercise price, outstanding Schedule of Related Party Transactions, by Related Party [Table] Related Party Transaction [Line Items] Payments to consultants Concentration Risk [Table] Concentration Risk [Line Items] Customer [Axis] Concentration risk percentage Number of customers representing concentration risk percentage Subsequent Event [Table] Subsequent Event [Line Items] Repayment of related party loan Actual sales revenue achieved under agreement. Represents information pertaining to Catalyst Global LLC. Term of warrants, in PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Amount of common stock returned by related party. Consultant member. ConsultingAgreementWithBoxwoodAssociatesIncorporatedMember Customer Five [Member] Customer Four [Member] Customer One [Member] Customer Three [Member] Customer Two [Member] Debt Instrument One [Member] Debt Instrument Three [Member] Debt Instument Two [Member] Document and Entity Information [Abstract]. Former Board of Directors [Member] Going Concern [Abstract] Increase (decrease) in sales incentives. The increase of monthly rent for the lease. The maximum amount of additional financing the company may obtain that will effect the repayment provisions of the debt instrument. Initial monthly rent paid under operating lease agreement for property. Monthly service fee payable for services rendered as investor relations counsel for the Company. The notice period to terminate the agreement, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Number of customers representing concentration risk percentage. Number of warrants that can be purchased in each lot during the month. Ocean Ridge Florida Condominium [Member] Operating Lease [Axis] Operating Lease Condominium [Member] Operating Lease [Domain] Operating Lease Office And Warehouse [Member] The percentage of annual increase on the operating lease. Disclosure of accounting policy for organization. Payments to consultants. Percentage Of Total Liabilities The accounting policy for sales incentives and consideration paid to customers. Sales incentives classified as current. The entire disclosure for sales incentives. Tabular disclosure of future minimum commitments required under capital and operating lease agreements. Schedule Of Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options By Exercise Price Range [Table] Tabular disclosure of outstanding warrants by price range. Weighted average price at which holders acquired shares when converting equity instruments other than options into shares. Weighted average price at which grantees could have acquired the underlying shares with respect to equity instrument other than options that have expired. Weighted average per share amount at which grantees can acquire shares of common stock by exercise of equity instruments other than options. Weighted average price at which grantees can acquire the shares reserved for issuance for equity instruments other than options. Share Based Compensation Arrangement By Share Based Payment Award Non Option Equity Instruments Outstanding Weighted Average Exercise Price Roll Forward [Abstract] Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options By Exercise Price Range [Axis] Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Domain] Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items] The floor of a customized range of exercise prices for purposes of disclosing shares potentially issuable under equity instruments other than options and other required information pertaining to awards in the customized range. The number of shares reserved for issuance pertaining to the outstanding equity instruments other than options as of the balance sheet date in the customized range of exercise prices. The ceiling of a customized range of exercise prices for purposes of disclosing shares potentially issuable under equity instruments other than options and other required information pertaining to awards in the customized range. The weighted average price as of the balance sheet date at which grantees could acquire the underlying shares with respect to all outstanding equity instruments other than options which are in the customized range of exercise prices. Weighted average remaining contractual term of outstanding equity instruments other than options, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Cash portion of obligated payment amount. The monthly amount as of the balance sheet date that the entity must expend to satisfy the terms of disclosed arrangements (excluding long-term commitments) in which the entity has agreed to expend funds to procure goods or services from one or more suppliers, other than under a long-term purchase commitment or an unconditional purchase obligation. The amount by which stockholders' equity will increase by the transaction in which equity securities will be issued to pay for goods or nonemployee services. Period the commitment is effective, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Number of shares issued in for exercise of warrants for compensation services contributed to the entity. Number of shares includes, but is not limited to, shares issued for services contributed by vendors and founders. Stock Option Exercise Range One [Member] Stockholder [Member] Targeted quarterly sales revenue for the period August 1, 2017 and June 30, 2018. Warrant Exercise Price Range One [Member] Chairman and Chief Executive Officer [Member] Executive Chairman and CEO [Member] Customers [Member] Demand note [Member] Executive Chairman and Chief Executive Officer [Member] Chairman and Former CEO [Member] New Chief Executive Officer [Member] Number of options or other stock instruments for which the right to exercise has cancelled under the terms of the plan agreements. Lease reimburse amount that is agreed by landlord. Letter agreement with Mr. Edward S. Vittoria [Member] 2018 Equity Compensation Plan [Member] Employees and directors [Member] Period from grant date that an equity-based award exercisable, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Warrant Exercise Price Range One [Member] Prepaid Expense and Other Assets, Current Assets, Current Assets Accrued Liabilities, Current Liabilities, Current Notes Payable, Related Parties, Noncurrent Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Costs and Expenses Operating Income (Loss) Interest Expense Nonoperating Income (Expense) Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Other Operating Assets Number of warrants that can be purchased in each lot during the month [Default Label] Increase (Decrease) in Accounts Payable Increase (Decrease) in Deferred Compensation Increase (Decrease) in Accrued Liabilities Net Cash Provided by (Used in) Operating Activities Payments to Acquire Intangible Assets Payments to Acquire Property, Plant, and Equipment Net Cash Provided by (Used in) Investing Activities Repayments of Other Debt Repayments of Debt and Capital Lease Obligations Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Compensation Related Costs, General [Text Block] Inventory, Policy [Policy Text Block] Property, Plant and Equipment, Policy [Policy Text Block] Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block] Advertising Expense Standard and Extended Product Warranty Accrual Standard and Extended Product Warranty Accrual, Decrease for Payments Inventory Valuation Reserves Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Finite-Lived Intangible Assets, Accumulated Amortization Finite-Lived Intangible Assets, Net Capital Lease Obligations Debt and Capital Lease Obligations Long-term Debt and Capital Lease Obligations, Current Long-term Debt and Capital Lease Obligations Operating Leases, Rent Expense, Net Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested Options Forfeited, Number of Shares Share-based Compensation Arrangement by Share-based Payment Award, Option, Nonvested, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Expirations ShareBasedCompensationArrangementByShareBasedPaymentAwardInstrumentsOtherThanOptionsOutstandingWeightedAverageExercisePrice ShareBasedCompensationArrangementByShareBasedPaymentAwardInstrumentsOtherThanOptionsGrantsInPeriodWeightedAverageExercisePrice ShareBasedCompensationSharesAuthorizedUnderEquityInstrumentsOtherThanOptionsExercisePriceRangeLowerRangeLimit ShareBasedCompensationSharesAuthorizedUnderEquityInstrumentsOtherThanOptionsExercisePriceRangeUpperRangeLimit ShareBasedCompensationSharesAuthorizedUnderEquityInstrumentsOtherThanOptionsExercisePriceRangeNumberOfOutstandingWarrants SharebasedCompensationSharesAuthorizedUnderEquityInstrumentsOtherThanOptionsExercisePriceRangeOutstandingWarrantsWeightedAverageRemainingContractualTerm2 SharebasedCompensationSharesAuthorizedExercisePriceRangeOutstandingEquityInstrumentOtherThanOptionsWeightedAverageExercisePriceBeginningBalance1 EX-101.PRE 11 pfti-20180630_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.10.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Aug. 06, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name PURADYN FILTER TECHNOLOGIES INC  
Entity Central Index Key 0001019787  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   69,016,468
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2018  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED BALANCE SHEETS - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Current assets:    
Cash $ 184,607 $ 54,438
Accounts receivable, net of allowance for uncollectible accounts of $17,000 and $17,000, respectively 568,770 270,896
Inventories, net 512,923 400,764
Prepaid expenses and other current assets 147,575 69,355
Total current assets 1,413,875 795,453
Property and equipment, net 35,274 45,327
Other noncurrent assets 576,412 532,540
Total assets 2,025,561 1,373,320
Current liabilities:    
Accounts payable 332,609 186,696
Accrued liabilities 420,734 362,804
Sales incentives 99,128
Capital lease obligation 1,567 3,443
Deferred compensation 1,577,271 1,626,003
Notes Payable - stockholders 600,000 7,988,349
Total Current Liabilities 2,932,181 10,266,423
Notes Payable - stockholders 7,989,622
Total Liabilities 10,921,803 10,266,423
Commitments and contingencies (Note 12)
Stockholders' deficit:    
Preferred stock, $.001 par value: Authorized shares - 500,000; None issued and outstanding
Common stock, $.001 par value, Authorized shares - 100,000,000; Issued and outstanding 69,016,468 and 69,016,468, respectively 69,016 69,016
Additional paid-in capital 53,623,892 53,599,160
Accumulated deficit (62,589,150) (62,561,279)
Total stockholders' deficit (8,896,242) (8,893,103)
Total liabilities and stockholders' deficit $ 2,025,561 $ 1,373,320
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Allowance for uncollectible accounts of accounts receivable $ 17,000 $ 17,000
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares authorized 500,000 500,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value per share $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 69,016,468 69,016,468
Common stock, shares outstanding 69,016,468 69,016,468
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Net sales $ 1,152,462 $ 575,170 $ 2,038,202 $ 1,264,160
Cost of products sold 690,959 536,399 1,195,401 979,111
Gross Profit 461,503 38,771 842,801 285,049
Costs and expenses:        
Salaries and wages 196,450 204,151 389,718 417,088
Selling and administrative 175,513 150,021 325,583 293,361
Total operating costs 371,963 354,172 715,301 710,449
Income / (Loss) from operations 89,540 (315,401) 127,500 (425,400)
Other income (expense):        
Interest expense (80,668) (67,624) (155,371) (133,169)
Total other expense, net (80,668) (67,624) (155,371) (133,169)
Net income / (loss) before income tax expense 8,872 (383,025) (27,871) (558,569)
Provision for income taxes
Net Income / (loss) $ 8,872 $ (383,025) $ (27,871) $ (558,569)
Basic income / (loss) per common share $ 0.00 $ (0.01) $ (0.00) $ (0.01)
Diluted income / (loss) per common share $ 0.00 $ (0.01) $ (0.00) $ (0.01)
Weighted average common shares outstanding (basic and diluted) 69,016,468 69,016,468 69,016,468 69,016,468
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Operating activities    
Net loss $ (27,871) $ (558,569)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 20,611 15,887
Provision for slow moving inventory 13,610 121,998
Compensation expense on stock-based arrangements with employees and consultants 24,733 21,397
Changes in operating assets and liabilities:    
Accounts receivable (297,874) (72,538)
Inventories (125,769) 86,629
Prepaid expenses and other current assets (78,219) (1,798)
Other assets 850
Sales incentives (99,128)
Accounts payable 145,910 (4,527)
Deferred compensation (48,732) 7,819
Accrued liabilities 57,930 27,994
Net cash used in operating activities (413,949) (355,708)
Investing activities    
Capitalized patent costs (55,279) (33,703)
Purchases of property and equipment (5,245)
Net cash used in investing activities (55,279) (38,948)
Financing activities    
Proceeds from issuance of notes payable to stockholders 601,273 440,000
Repayment of note payable to stockholder (50,000)
Payment of capital lease obligations (1,876) (1,878)
Net cash provided by financing activities 599,397 388,122
Net increase / (decrease) in cash 130,169 (6,534)
Cash at beginning of period 54,438 12,806
Cash at end of period 184,607 6,272
Supplemental cash flow information:    
Cash paid for interest 109,167 120,669
Forgiveness of stockholder loan and accrued interest $ 26,373
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies

1.

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


Organization


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


Basis of Presentation


The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.


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, 2017.


Revenue Recognition


The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services or installation by the Company are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying financial statements.


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


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 in during the six months ended June 30, 2018.


Use of Estimates


The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.


Cash and Cash Equivalents


Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At June 30, 2018 and December 31, 2017, the Company did not have any cash equivalents. 


Fair Value of Financial Instruments


The carrying amounts of cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities and notes payable to stockholder approximate their fair values as of June 30, 2018 and December 31, 2017, respectively, because of their short-term natures.


Accounts Receivable


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


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


Inventories


Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.


Property and Equipment


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


Patents


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


Impairment of Long-Lived Assets


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


Product Warranty Costs


As required by FASB ASC 460, Guarantor’s Guarantees, the Company is including the following disclosure applicable to its product warranties.


The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience.  The Company's warranty reserve is included in accrued liabilities in the accompanying condensed financial statements and is calculated as the gross sales multiplied by the historical warranty expense return rate. For the six months ended June 30, 2018, 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 six -months ended June 30, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of June 30, 2018 (unaudited)

 

$

20,000

 


Advertising Costs


Advertising costs are expensed as incurred. During the three and six months ended June, 2018 and 2017, advertising costs incurred by the Company totaled approximately $2,904 and $3,333, $0 and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Engineering and Development


Research and development costs are expensed as incurred. During the three and six months ended June 30, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,384 and $2,813, and $1,575 and $1,575, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Income Taxes


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


Stock Option Plans


We adopted FASB ASC 718, Compensation-Stock Compensation, effective January 1, 2006 using the modified prospective application method of adoption which requires us to record compensation cost related to unvested stock awards as of December 31, 2005 by recognizing the amortized grant date fair value in accordance with provisions of FASB ASC 718 on straight line basis over the service periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the year ended December 31, 2017 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 six months ended June 30, 2018. 


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


Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, Compensation-Stock Compensation, including related amendments and interpretations. The related expense is recognized over the period the services are provided.


Credit Risk


The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. At June 30, 2018 and December 31, 2017, respectively, the Company did not have cash balances above the FDIC insured limit. The Company performs ongoing evaluations of its significant trade accounts receivable customers and generally does not require collateral. An allowance for doubtful accounts is maintained against trade accounts receivable at levels which management believes is sufficient to cover probable credit losses. The Company also has some customer concentrations, and the loss of business from one or a combination of these significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations.  Please refer to Note 15 for further details.


Basic and Diluted Loss Per Share


The Company uses ASC 260-10, "Earnings Per Share" for calculating the basic and diluted income (loss) per share. 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 June 30, 2018 and 2017, there were 13,276,412 and 4,497,662 shares issuable upon the exercise of options and warrants, respectively. Common stock equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive. The Company had net income for the three month period ended June 30, 2018. A separate computation of diluted earnings per share is presented using the treasury stock method and the common stock equivalents did not have any effect on net income per share.


Reclassifications


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


Recent Accounting Pronouncements


In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which supersedes the revenue recognition requirements in Accounting Standards Codification 605, "Revenue Recognition." This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the new revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are effective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method. 


The Company adopted these standards 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 adoption of these standards did not have a material impact on the Company's Condensed Statements of Operations during the six months ended June 30, 2018.


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

XML 18 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Going Concern
6 Months Ended
Jun. 30, 2018
Going Concern [Abstract]  
Going Concern

2.

Going Concern


The Company's financial statements have been prepared on the assumption that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained losses since inception and used net cash in operations of $413,949 and $355,708 during the six-months ended June 30, 2018 and 2017, respectively. As a result, the Company has had to rely stockholder loans and related parties to fund its activities to date.


These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from 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, 2017 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.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories
6 Months Ended
Jun. 30, 2018
Inventory Disclosure [Abstract]  
Inventories

3.

Inventories


Inventories consisted of the following at June 30, 2018 and December 31, 2017, respectively:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

1,036,774

 

$

901,600

 

Work In Progress

 

 

 

 

125,932

 

Finished goods

 

 

133,375

 

 

16,848

 

Valuation allowance

 

 

(657,226

)

 

(643,616

)

Inventory, net

 

$

512,923

 

$

400,764

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Prepaid Expenses and Other Current Assets
6 Months Ended
Jun. 30, 2018
Prepaid Expense and Other Assets, Current [Abstract]  
Prepaid Expenses and Other Current Assets

4.

Prepaid Expenses and Other Current Assets


At June 30, 2018 and December 31, 2017, prepaid expenses and other current assets consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

86,740

 

$

26,648

 

Deposits

 

 

60,835

 

 

42,707

 

 

 

$

147,575

 

$

69,355

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment

5.

Property and Equipment


At June 30, 2018 and December 31, 2017, property and equipment consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Machinery and equipment

 

$

1,045,217

 

$

1,045,217

 

Furniture and fixtures

 

 

56,558

 

 

56,558

 

Leasehold improvements

 

 

152,322

 

 

152,322

 

Software and website development

 

 

88,842

 

 

88,842

 

Computer hardware and software

 

 

153,249

 

 

153,249

 

 

 

 

1,496,188

 

 

1,496,188

 

Less accumulated depreciation and amortization

 

 

(1,460,914

)

 

(1,450,861

)

 

 

$

35,274

 

$

45,327

 


Depreciation and amortization expense of property and equipment for the three and six months ended June 30, 2018 and 2017 is $5,026 and $10,053, and $4,420 and $9,097, respectively.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Patents
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Patents

6.

Patents


Included in other assets at June 30, 2018 and December 31, 2017 are capitalized patent costs as follows:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Patent costs

 

$

614,151

 

$

558,873

 

Less accumulated amortization

 

 

(72,709

)

 

(62,153

)

 

 

$

541,442

 

$

496,720

 


Amortization expense for the three and six months ended June 30, 2018 and 2017 amounted to $6,823, $10,558, and $3,395 and $6,790, respectively.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Leases
6 Months Ended
Jun. 30, 2018
Leases [Abstract]  
Leases

7.

Leases


The Company leases its office and warehouse facilities in Boynton Beach, Florida under a long-term non-cancellable lease agreement, which contains renewal options and rent escalation clauses. As of June 30, 2018, a security deposit of $34,970 is included in noncurrent assets in the accompanying balance sheet. On September 27, 2012 the Company entered into a non-cancellable six-year lease agreement for the same facilities commencing August 1, 2013 and expiring July 31, 2019. The total minimum lease payments over the term of the current lease amount to $180,826.


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 has agreed to reimburse the Company $58,000 towards the replacement of air conditioning units, upon written request. As of June 30, 2018 the Company has not requested or received any of the reimbursement.


In January 2015 the Company entered into a capital lease for office equipment in the amount of $15,020. As of June 30, 2018 and December 31, 2017 the balance under capital lease obligations was $1,567 and $3,443, respectively.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Liabilities
6 Months Ended
Jun. 30, 2018
Accrued Liabilities [Abstract]  
Accrued Liabilities

8.

Accrued Liabilities


At June 30, 2018 and December 31, 2017, accrued liabilities consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

68,107

 

$

69,025

 

Accrued expenses relating to vendors and others

 

 

156,309

 

 

136,681

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

160,591

 

 

115,039

 

Deferred rent

 

 

15,727

 

 

22,059

 

 

 

$

420,734

 

$

362,804

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Deferred Compensation
6 Months Ended
Jun. 30, 2018
Compensation Related Costs [Abstract]  
Deferred Compensation

9.

Deferred Compensation


Deferred compensation represents amounts owed to three employees for salary. As there is no written agreement with these employees which memorializes the terms of the salary deferral, only a voluntary election to do so. It is possible that the employees could demand payment in full at any time. As of June 30, 2018 and December 31, 2017 the Company recorded deferred compensation of $1,577,271 and $1,626,003, respectively.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Sales Incentives
6 Months Ended
Jun. 30, 2018
Other Liabilities Disclosure [Abstract]  
Sales Incentives

10.

Sales Incentives


The Company entered into an exclusive distribution agreement for the worldwide rights to sell its product in the oil and gas industry effective September 7, 2017. The agreement included an incentive program that rewarded credits toward future product redeemable only if targeted quarterly goals are achieved.  The incentive-earning period ended on June 30, 2018, and no incentives were earned. The exclusivity agreement continues at a minimum through the end of 2018.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable to Stockholders - Related Party
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Notes Payable to Stockholders - Related Party

11.

Notes Payable to Stockholders – Related Party


On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1 million. Under the terms of the 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 (3.79% and 3.61% per annum at June 30, 2018 and 2017 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, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007, to December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019.


During the six months ended June 30, 2018 we borrowed an additional $26,272 from our Executive Chairman, together with an $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of June 30, 2018 and December 31, 2017 we owed him an aggregate of $8,314,622 and $7,988,349, respectively, which represented approximately 75% and 78% of our total liabilities, respectively. On May 9, 2018 he extended the maturity date to December 31, 2019. While he has continued to fund our working capital needs at reduced levels and extend the due date of the obligation for an additional year, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.


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 and is due December 31, 2018.


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.


During the three and six months ended June 30, 2018 and 2017, the Company incurred interest expense of $80,354 and $65,083, and $154,719 and $131,841, respectively, on its loan from the Executive Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $310 and $620 for the three and six months ended June 30, 2018 related to the loan from one if its former Board members. These amounts, in addition to interest expense of $4 and $481, and $32 and $575 for the three and six months ended June 30, 2018 and 2017, respectively, related to capital lease obligations, financing and loans from a stockholder.


Notes payable and capital leases consisted of the following at June 30, 2018 and December 31, 2017:


 

 

June 30,

2018

 

December 31, 2017

 

Notes payable to stockholders

 

$

8,589,622

 

$

7,988,349

 

Capital lease obligation

 

 

1,567

 

 

3,443

 

 

 

 

8,591,189

 

 

7,991,792

 

Less: current maturities

 

 

(601,567

)

 

(7,991,792

)

Long-term maturities

 

$

7,989,622

 

$

 


Maturities of Long Term Obligations for Five Years and Beyond


The minimum annual principal payments of notes payable and capital lease obligations at June 30, 2018 were:


2018

 

$

601,567

 

2019

  

 

7,989,622

  

 

 

$

8,591,189

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

12.

Commitments and Contingencies  


Agreements


On May 18, 2018 we entered into a letter agreement with Mr. Edward S. Vittoria pursuant to 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 to prior to the expiration of such initial term.  Under the terms of the letter agreement we agreed to pay him: (i) an annual base salary of $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 minimum amount of $50,000; and (iii) granted him options to purchase 6,500,000 shares of our common stock, vesting one-third in arrears, at an exercise price equal to fair market value on the date of grant pursuant to the terms and conditions of our 2018 Equity Compensation Plan.  He is also entitled to: (i) participate in 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 length of service to us; and (iii) reimbursement for all reasonable, out of-pocket expenses incurred by him 


On September 7, 2017 the Company entered into an exclusive distribution agreement with NOW, Inc. (“DNOW”) for the worldwide rights to sell its product in the oil and gas industry. As part of this agreement, the distributor could 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. Refer to Note 10. The incentive-earning period ended on June 30, 2018, and no incentives were earned. The exclusivity agreement continues at a minimum through the end of 2018.


On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. On June 29, 2018, the lease was extended an additional 5 years. The renewed lease commences August 1, 2019 and expiring on July 31, 2024 and requires an initial rent of $14,899 per month beginning in the second month of the first year, increasing in varying amounts 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 has agreed to reimburse the Company $58,000 towards the replacement of air conditioning units, upon written request. As of June 30, 2018 the Company has not requested or received any of the reimbursement.


On October 20, 2009, the Company entered into a consulting agreement for management and strategic development services with Boxwood Associates, Inc., pursuant to which the Company pays a $2,000 monthly service fee. The contract remains in effect until terminated by either party providing 30 days written notice. A former member of our board of directors and a significant stockholder is President of Boxwood Associates, Inc. Refer to Note 14.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options and Warrants

13.

Stock Options and Warrants


For the three and six months ended June 30, 2018 and June 30, 2017, respectively, the Company recorded non-cash stock-based compensation expense of $14,392 and $24,733, and $10,517 and $21,397, respectively, 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 June 30, 2018 and 2017 for the options is $180,427 and $34,596, respectively, and will be recognized through June 30, 2019.


On April 12, 2018 the Board of Directors approved the adoption of a 2018 Equity Compensation Plan.  The Company has reserved 10,000,000 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, no more than five years after the date of the grant. Generally, under both plans, options to employees vest over three years at 33.33% per annum unless the Board of Directors designates a different vesting schedule. 


On April 12, 2018, the Company granted employees and directors options to purchase 4,475,000 shares of the Company’s common stock, at exercise prices ranging from $0.0189 to $0.208 per share.  The options vest over a three-year period and expire April 12, 2028.   The fair value of the options totaled $69,989 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.64%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 217%. On April 30, 2018 our Chairman and Former CEO voluntarily cancelled the grant on April 12, 2018 of options awarded him to purchase an aggregate of 1,400,000 shares of the common stock.


On May 18, 2018, the Company, upon recommendation and approval by the compensation committee of the board of directors, granted its new Chief Executive Officer, options to purchase 6,500,000 shares of the Company’s common stock, at an exercise price of $0.017 per share. The options vest over a three-year period and expire May 18, 2028. The fair value of the options totaled $101,437 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.64%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 217%.


A summary of the Company’s stock option plans as of June 30, 2018, and changes during the six month period then ended is presented below:


 

 

Six Months Ended

June 30, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2017

 

 

3,180,000

 

 

$

0.20

 

Options granted

 

 

10,975,000

 

 

$

0.02

 

Options exercised

 

 

 

 

 

 

Options forfeited

 

 

(1,408,334

)

 

$

0.02

 

Options expired

 

 

(291,666

)

 

$

0.25

 

Options at end of period

 

 

12,455,000

 

 

$

0.06

 

Options exercisable at June 30, 2018

 

 

2,860,000

 

 

$

0.19

 


Changes in the Company’s non-vested options for the six months ended June 30, 2018 are summarized as follows:


 

 

Six Months Ended

June 30, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Nonvested options at December 31, 2017

 

 

270,840

 

 

$

0.15

 

Granted

 

 

10,975,000

 

 

$

0.02

 

Vested

 

 

(242,506

)

 

$

0.16

 

Forfeited

 

 

(1,408,334

)

 

$

0.22

 

Nonvested options at June 30, 2018

 

 

9,595,000

 

 

$

0.18

 


 

 

 

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

 

$0.017- $0.30

 

 

 

12,445,000

 

 

 

8.36

 

 

$

0.06

 

 

 

2,860,000

 

 

$

0.19

 

Totals

 

 

 

12,445,000

 

 

 

8.36

 

 

$

0.06

 

 

 

2,860,000

 

 

$

0.19

 


A summary of the Company’s warrant activity as of June 30, 2018 and changes during the six-month period then ended is presented below:


 

 

Six months ended

June 30, 2018

 

  

 

Warrants

 

 

Weighted
Average
Exercise Price

 

Warrants outstanding at December 31, 2017

 

 

990,162

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Expired

 

 

(168,750

)

 

$

0.35

 

Warrants outstanding at June 30, 2018

 

 

821,412

 

 

$

0.17

 


 

 

 

Warrants Outstanding

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average

Exercise Price

 

 

 

 

 

821,412

 

 

 

1.80

 

 

$

0.17

 

Totals

 

 

 

821,412

 

 

 

1.80

 

 

$

0.17

 
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions
6 Months Ended
Jun. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

14.

Related Party Transactions


On March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the former Chief Executive Officer, now Executive Chairman of the Board, to fund up to $6.1 million. Under the terms of the agreements, the Company can draw amounts as needed to fund operations. Amounts drawn bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points (3.78% per annum at June 30, 2018), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or consummation of any other financing over $7.0 million. Beginning in March 2006, annually, through February 2012, the maturity date for the agreement was extended annually from December 31, 2007, to December 31, 2018. On May 9, 2018, he extended the maturity date to December 31, 2019. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.


During the six months ended June 30, 2018 we borrowed an additional $26,272 from our Executive Chairman, together with an $325,000 under a demand note not covered by this line of credit. This demand note bears interest at 4% per annum. As of June 30, 2018 and December 31, 2017 we owed him an aggregate of $8,314,622 and $7,988,349, respectively, which represented approximately 75% and 78% of our total liabilities, respectively. On May 9, 2018 he extended the maturity date to December 31, 2019. While he has continued to fund our working capital needs at reduced levels and extend the due date of the obligation for an additional year, he is under no contractual obligation to do so. During 2017 he advised us he does not expect to continue to provide working capital advances to us at historic amounts. If we are unable to meet our obligation to our Executive Chairman prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its Chief Executive Officer, as advances for working capital needs. The amounts are non-interest bearing and are payable upon demand. On July 15, 2018, $250,000 was repaid.


On April 12, 2018, the Company granted our Chairman and Former CEO options to purchase 1,400,000 shares of the Company’s common stock, at exercise price of $0.208 per share. The options vest over a three-year period and expire April 12, 2028. On April 30, 2018 our Chairman and Former CEO voluntarily cancelled the grant on April 12, 2018 of options awarded him to purchase an aggregate of 1,400,000 shares of the common stock. 


On May 18, 2018, the Company, upon recommendation and approval by the compensation committee of the board of directors, granted its new Chief Executive Officer, options to purchase 6,500,000 shares of the Company’s common stock, at an exercise price of $0.017 per share. The options vest over a three-year period and expire May 18, 2028.


On May 18, 2018 Mr. Edward S. Vittoria was appointed Chief Executive Officer of Puradyn Filter Technologies Incorporated and as a member of its Board of Directors. Immediately prior to such appointment, Mr. Joseph V. Vittoria resigned from his position as Chief Executive Officer, and has been appointed Executive Chairman of the Board of Directors.


Since December 2017 Mr. Edward Vittoria has been providing advisory services to our company. He is the son of Mr. Joseph V. Vittoria.


In November 2017, the Company received an additional loan in the amount of $25,000 from a former member of the Board of Directors and a significant stockholder. The loan bears interest at a rate of 5% per annum and is due December 31, 2018.


On October 20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract remains in effect until terminated by either party providing 30 days written notice. During each of three and six months ended June 30, 2018 and 2017, we paid Boxwood Associates, Inc. $12,000 and $6,000, respectively under this agreement. A former member of our board of directors is President of Boxwood Associates, Inc.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Major Customers
6 Months Ended
Jun. 30, 2018
Risks and Uncertainties [Abstract]  
Major Customers

15.

Major Customers


There are concentrations of credit risk with respect to accounts receivables due to the amounts owed by two customers at June 30, 2018 whose balances each represented approximately 65%, and 22%, for a total of 87% of total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed by two customers at December 31, 2017 whose balances each represented approximately 53%, and 30%, for a total of 83% of total accounts receivables. Sales to two customers for the six months ended June 30, 2018 and 2017 were 66% and 32% of total 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.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
Subsequent Events

16.

Subsequent Events


Only July 15, 2018 the Company repaid a loan in the amount of $250,000 from a related party to both the Company’s Executive Chairman and its CEO.

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Organization

Organization


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

Basis of Presentation

Basis of Presentation


The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2018 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2018.


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, 2017.

Revenue Recognition

Revenue Recognition


The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services or installation by the Company are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying financial statements.


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


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 in during the six months ended June 30, 2018.

Use of Estimates

Use of Estimates


The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents


Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At June 30, 2018 and December 31, 2017, the Company did not have any cash equivalents.

Fair Value of Financial Instruments

Fair Value of Financial Instruments


The carrying amounts of cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities and notes payable to stockholder approximate their fair values as of June 30, 2018 and December 31, 2017, respectively, because of their short-term natures.

Accounts Receivable

Accounts Receivable


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


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

Inventories

Inventories


Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.

Property and Equipment

Property and Equipment


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

Patents

Patents


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

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets


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

Product Warranty Costs

Product Warranty Costs


As required by FASB ASC 460, Guarantor’s Guarantees, the Company is including the following disclosure applicable to its product warranties.


The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience.  The Company's warranty reserve is included in accrued liabilities in the accompanying condensed financial statements and is calculated as the gross sales multiplied by the historical warranty expense return rate. For the six months ended June 30, 2018, 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 six -months ended June 30, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of June 30, 2018 (unaudited)

 

$

20,000

Advertising Costs

Advertising Costs


Advertising costs are expensed as incurred. During the three and six months ended June, 2018 and 2017, advertising costs incurred by the Company totaled approximately $2,904 and $3,333, $0 and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.

Engineering and Development

Engineering and Development


Research and development costs are expensed as incurred. During the three and six months ended June 30, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,384 and $2,813, and $1,575 and $1,575, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.

Income Taxes

Income Taxes


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

Stock Option Plans

Stock Option Plans


We adopted FASB ASC 718, Compensation-Stock Compensation, effective January 1, 2006 using the modified prospective application method of adoption which requires us to record compensation cost related to unvested stock awards as of December 31, 2005 by recognizing the amortized grant date fair value in accordance with provisions of FASB ASC 718 on straight line basis over the service periods of each award. We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the year ended December 31, 2017 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 six months ended June 30, 2018.  


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


Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 505, Equity, and FASB ASC 718, Compensation-Stock Compensation, including related amendments and interpretations. The related expense is recognized over the period the services are provided.

Credit Risk

Credit Risk


The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the FDIC insured limit of $250,000 are at risk. At June 30, 2018 and December 31, 2017, respectively, the Company did not have cash balances above the FDIC insured limit. The Company performs ongoing evaluations of its significant trade accounts receivable customers and generally does not require collateral. An allowance for doubtful accounts is maintained against trade accounts receivable at levels which management believes is sufficient to cover probable credit losses. The Company also has some customer concentrations, and the loss of business from one or a combination of these significant customers, or an unexpected deterioration in their financial condition, could adversely affect the Company’s operations.  Please refer to Note 15 for further details.

Basic and Diluted Loss Per Share

Basic and Diluted Loss Per Share


The Company uses ASC 260-10, "Earnings Per Share" for calculating the basic and diluted income (loss) per share. 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 June 30, 2018 and 2017, there were 13,276,412 and 4,497,662 shares issuable upon the exercise of options and warrants, respectively. Common stock equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive. The Company had net income for the three month period ended June 30, 2018. A separate computation of diluted earnings per share is presented using the treasury stock method and the common stock equivalents did not have any effect on net income per share.

Reclassifications

Reclassifications


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

Recent Accounting Pronouncements

Recent Accounting Pronouncements


In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which supersedes the revenue recognition requirements in Accounting Standards Codification 605, "Revenue Recognition." This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the new revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are effective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method. 


The Company adopted these standards 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 adoption of these standards did not have a material impact on the Company's Condensed Statements of Operations during the six months ended June 30, 2018.


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

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Schedule of Product Warrant Liability

The following table shows the changes in the aggregate product warranty liability for the six -months ended June 30, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of June 30, 2018 (unaudited)

 

$

20,000

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Tables)
6 Months Ended
Jun. 30, 2018
Inventory Disclosure [Abstract]  
Schedule of Inventories

Inventories consisted of the following at June 30, 2018 and December 31, 2017, respectively:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

1,036,774

 

$

901,600

 

Work In Progress

 

 

 

 

125,932

 

Finished goods

 

 

133,375

 

 

16,848

 

Valuation allowance

 

 

(657,226

)

 

(643,616

)

Inventory, net

 

$

512,923

 

$

400,764

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Prepaid Expenses and Other Current Assets (Tables)
6 Months Ended
Jun. 30, 2018
Prepaid Expense and Other Assets, Current [Abstract]  
Schedule of Prepaid Expenses and Other Current Assets

At June 30, 2018 and December 31, 2017, prepaid expenses and other current assets consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

86,740

 

$

26,648

 

Deposits

 

 

60,835

 

 

42,707

 

 

 

$

147,575

 

$

69,355

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Tables)
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

At June 30, 2018 and December 31, 2017, property and equipment consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Machinery and equipment

 

$

1,045,217

 

$

1,045,217

 

Furniture and fixtures

 

 

56,558

 

 

56,558

 

Leasehold improvements

 

 

152,322

 

 

152,322

 

Software and website development

 

 

88,842

 

 

88,842

 

Computer hardware and software

 

 

153,249

 

 

153,249

 

 

 

 

1,496,188

 

 

1,496,188

 

Less accumulated depreciation and amortization

 

 

(1,460,914

)

 

(1,450,861

)

 

 

$

35,274

 

$

45,327

 


Depreciation and amortization expense of property and equipment for the three and six months ended June 30, 2018 and 2017 is $5,026 and $10,053, and $4,420 and $9,097, respectively.

XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Patents (Tables)
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of capitalized patent costs included in other assets

Included in other assets at June 30, 2018 and December 31, 2017 are capitalized patent costs as follows:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Patent costs

 

$

614,151

 

$

558,873

 

Less accumulated amortization

 

 

(72,709

)

 

(62,153

)

 

 

$

541,442

 

$

496,720

XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Liabilities (Tables)
6 Months Ended
Jun. 30, 2018
Accrued Liabilities [Abstract]  
Schedule of Accrued Liabilities

At June 30, 2018 and December 31, 2017, accrued liabilities consisted of the following:


 

 

June 30,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

68,107

 

$

69,025

 

Accrued expenses relating to vendors and others

 

 

156,309

 

 

136,681

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

160,591

 

 

115,039

 

Deferred rent

 

 

15,727

 

 

22,059

 

 

 

$

420,734

 

$

362,804

XML 40 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable to Stockholders - Related Party (Tables)
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Schedule of Notes Payable and Capital Leases

Notes payable and capital leases consisted of the following at June 30, 2018 and December 31, 2017:


 

 

June 30,

2018

 

December 31, 2017

 

Notes payable to stockholders

 

$

8,589,622

 

$

7,988,349

 

Capital lease obligation

 

 

1,567

 

 

3,443

 

 

 

 

8,591,189

 

 

7,991,792

 

Less: current maturities

 

 

(601,567

)

 

(7,991,792

)

Long-term maturities

 

$

7,989,622

 

$

Schedule of Maturities of Long-Term Obligations

The minimum annual principal payments of notes payable and capital lease obligations at June 30, 2018 were:


2018

 

$

601,567

 

2019

  

 

7,989,622

  

 

 

$

8,591,189

XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Tables)
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Stock Options Activity

A summary of the Company’s stock option plans as of June 30, 2018, and changes during the six month period then ended is presented below:


 

 

Six Months Ended

June 30, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2017

 

 

3,180,000

 

 

$

0.20

 

Options granted

 

 

10,975,000

 

 

$

0.02

 

Options exercised

 

 

 

 

 

 

Options forfeited

 

 

(1,408,334

)

 

$

0.02

 

Options expired

 

 

(291,666

)

 

$

0.25

 

Options at end of period

 

 

12,455,000

 

 

$

0.06

 

Options exercisable at June 30, 2018

 

 

2,860,000

 

 

$

0.19

Schedule of Nonvested Options Activity

Changes in the Company’s non-vested options for the six months ended June 30, 2018 are summarized as follows:


 

 

Six Months Ended

June 30, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Nonvested options at December 31, 2017

 

 

270,840

 

 

$

0.15

 

Granted

 

 

10,975,000

 

 

$

0.02

 

Vested

 

 

(242,506

)

 

$

0.16

 

Forfeited

 

 

(1,408,334

)

 

$

0.22

 

Nonvested options at June 30, 2018

 

 

9,595,000

 

 

$

0.18

Summary of Options Outstanding by Price Range


 

 

 

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

 

$0.017- $0.30

 

 

 

12,445,000

 

 

 

8.36

 

 

$

0.06

 

 

 

2,860,000

 

 

$

0.19

 

Totals

 

 

 

12,445,000

 

 

 

8.36

 

 

$

0.06

 

 

 

2,860,000

 

 

$

0.19

Summary of Warrants Activity

A summary of the Company’s warrant activity as of June 30, 2018 and changes during the six-month period then ended is presented below:


 

 

Six months ended

June 30, 2018

 

  

 

Warrants

 

 

Weighted
Average
Exercise Price

 

Warrants outstanding at December 31, 2017

 

 

990,162

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Expired

 

 

(168,750

)

 

$

0.35

 

Warrants outstanding at June 30, 2018

 

 

821,412

 

 

$

0.17

Summary of Warrants Outstanding by Price Range

 

 

 

Warrants Outstanding

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average

Exercise Price

 

 

 

 

 

821,412

 

 

 

1.80

 

 

$

0.17

 

Totals

 

 

 

821,412

 

 

 

1.80

 

 

$

0.17

XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Narrative) (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Cash equivalents    
Advertising costs 2,904 $ 0 3,333 $ 0  
Engineering and development costs 1,384 $ 1,575 2,813 $ 1,575  
FDIC insured limit $ 250,000   $ 250,000   $ 250,000
Shares excluded from computation loss per share     13,276,412 4,497,662  
Minimum [Member]          
Property and equipment, estimated useful life     3 years    
Estimated useful lives of patents     17 years    
Maximum [Member]          
Property and equipment, estimated useful life     5 years    
Estimated useful lives of patents     20 years    
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Product Warrant Liability) (Details)
6 Months Ended
Jun. 30, 2018
USD ($)
Accounting Policies [Abstract]  
Balance as of December 31, 2017 $ 20,000
Less: Payments made
Add: Provision for current period warranties
Balance as of June 30, 2018 $ 20,000
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Going Concern (Details) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Going Concern [Abstract]    
Net cash used in operating activities $ 413,949 $ 355,708
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Inventory Disclosure [Abstract]    
Raw materials $ 1,036,774 $ 901,600
Work In Progress 125,932
Finished goods 133,375 16,848
Valuation allowance (657,226) (643,616)
Inventory, net $ 512,923 $ 400,764
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Prepaid Expenses and Other Current Assets (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Prepaid Expense and Other Assets, Current [Abstract]    
Prepaid expenses $ 86,740 $ 26,648
Deposits 60,835 42,707
Prepaid expenses and other current assets $ 147,575 $ 69,355
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Property, Plant and Equipment [Line Items]          
Property and equipment, gross $ 1,496,188   $ 1,496,188   $ 1,496,188
Less accumulated depreciation and amortization (1,460,914)   (1,460,914)   (1,450,861)
Property and equipment, net 35,274   35,274   45,327
Depreciation and amortization expense of property and equipment 5,026 $ 4,420 10,053 $ 9,097  
Machinery and Equipment [Member]          
Property, Plant and Equipment [Line Items]          
Property and equipment, gross 1,045,217   1,045,217   1,045,217
Furniture and Fixtures [Member]          
Property, Plant and Equipment [Line Items]          
Property and equipment, gross 56,558   56,558   56,558
Leasehold Improvements [Member]          
Property, Plant and Equipment [Line Items]          
Property and equipment, gross 152,322   152,322   152,322
Software and website development [Member]          
Property, Plant and Equipment [Line Items]          
Property and equipment, gross 88,842   88,842   88,842
Computer hardware and software [Member]          
Property, Plant and Equipment [Line Items]          
Property and equipment, gross $ 153,249   $ 153,249   $ 153,249
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Patents (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]          
Patent costs $ 614,151   $ 614,151   $ 558,873
Less accumulated amortization (72,709)   (72,709)   (62,153)
Patent costs, less accumulated amortization 541,442   541,442   $ 496,720
Amortization expense $ 6,823 $ 3,395 $ 10,558 $ 6,790  
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Leases (Narrative) (Details) - USD ($)
1 Months Ended 6 Months Ended
Jun. 29, 2018
Jun. 30, 2018
Dec. 31, 2017
Sep. 27, 2012
Operating Leased Assets [Line Items]        
Security deposit   $ 34,970    
Annual increase percentage 3.00%      
Lease expiration date Jul. 31, 2024      
Capital leased assets - office equipment, gross   15,020    
Rent expense in fifth year $ 16,769      
Lease reimburse amount that is agreed by landlord 58,000      
Rent expense $ 14,899      
Capital lease obligations   $ 1,567 $ 3,443  
Office and Warehouse Facilities, Boynton Beach, Florida [Member]        
Operating Leased Assets [Line Items]        
Aggregate total minimum lease payments       $ 180,826
Lease expiration date   Jul. 31, 2019    
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Liabilities (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Accrued Liabilities [Abstract]    
Accrued vacation and benefits $ 68,107 $ 69,025
Accrued expenses relating to vendors and others 156,309 136,681
Accrued warranty costs 20,000 20,000
Accrued interest payable relating to stockholder notes 160,591 115,039
Deferred rent 15,727 22,059
Accrued liabilities $ 420,734 $ 362,804
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Deferred Compensation (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Compensation Related Costs [Abstract]    
Deferred compensation $ 1,577,271 $ 1,626,003
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable to Stockholders - Related Party (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Jul. 15, 2018
May 09, 2018
Jan. 06, 2016
May 15, 2018
Nov. 30, 2017
Mar. 28, 2002
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Debt Instrument [Line Items]                      
Notes Payable - stockholders             $ 600,000   $ 600,000   $ 7,988,349
Proceeds from related party loan                 $ 601,273 $ 440,000  
Board of Directors [Member] | Unsecured Loan [Member]                      
Debt Instrument [Line Items]                      
Face amount of debt instrument         $ 25,000            
Interest rate on outstanding term loan             5.00%   5.00%    
Maturity date         Dec. 31, 2018            
Board of Directors [Member] | Unsecured Loan [Member]                      
Debt Instrument [Line Items]                      
Maturity date     Dec. 31, 2019                
Executive Chairman and CEO [Member]                      
Debt Instrument [Line Items]                      
Proceeds from related party loan       $ 250,000              
Executive Chairman and CEO [Member] | Subsequent Event [Member]                      
Debt Instrument [Line Items]                      
Repayments of related party loan $ 250,000                    
Note Payable to Chairman of Board [Member]                      
Debt Instrument [Line Items]                      
Interest expense, debt             $ 80,354 $ 154,719 $ 65,083 $ 131,841  
Note Payable to Chairman of Board [Member] | Executive Officer [Member]                      
Debt Instrument [Line Items]                      
Face amount of debt instrument           $ 6,100,000          
Percent in addition to BBA LIBOR           1.40%          
Interest rate on outstanding term loan             3.78% 3.61% 3.78% 3.61%  
Maturity date           Dec. 31, 2005          
Maximum amount of additional financing the company may obtain that will affect the repayment provisions of the debt instrument           $ 7,000,000          
Proceeds from stockholder loan                 $ 26,272    
Notes Payable - stockholders             $ 8,314,622   $ 8,314,622   $ 7,988,349
Percentage of total liabilities             75.00%   75.00%   78.00%
Note Payable to Chairman of Board [Member] | Executive Officer [Member] | Demand note [Member]                      
Debt Instrument [Line Items]                      
Interest rate on outstanding term loan             4.00%   4.00%    
Proceeds from stockholder loan                 $ 325,000    
Note Payable to Chairman of Board [Member] | Chief Executive Officer [Member]                      
Debt Instrument [Line Items]                      
Maturity date   Dec. 31, 2019                  
Note Payable to Chairman of Board [Member] | Former Board of Directors Member [Member]                      
Debt Instrument [Line Items]                      
Interest expense, debt             $ 310   620    
Interest expense related to capital lease obligations             $ 4 $ 32 $ 481 $ 575  
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable to Stockholders - Related Party (Schedule of Notes Payable and Capital Leases) (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Debt Disclosure [Abstract]    
Notes payable to stockholders $ 8,589,622 $ 7,988,349
Capital lease obligation 1,567 3,443
Total obligations 8,591,189 7,991,792
Less: current maturities (601,567) (7,991,792)
Long-term maturities $ 7,989,622
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable to Stockholders - Related Party (Schedule of Maturities of Long-Term Obligations) (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Debt Disclosure [Abstract]    
2018 $ 601,567  
2019 7,989,622  
Total obligations $ 8,591,189 $ 7,991,792
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details) - USD ($)
1 Months Ended 6 Months Ended
Oct. 20, 2009
Jun. 29, 2018
May 18, 2018
Jun. 30, 2018
Sep. 27, 2012
Purchase Commitment, Excluding Long-term Commitment [Line Items]          
Options granted       10,975,000  
Lease term         72 months
Lease expiration date   Jul. 31, 2024      
Annual increase percentage   3.00%      
Rent expense in fifth year   $ 16,769      
Lease reimburse amount that is agreed by landlord   58,000      
Rent expense   $ 14,899      
Consulting Agreement with Boxwood Associates, Inc. [Member]          
Purchase Commitment, Excluding Long-term Commitment [Line Items]          
Monthly fee under agreement $ 2,000        
Notice period to terminate the agreement 30 days        
Letter agreement with Mr. Edward S. Vittoria [Member] | Chief Executive Officer [Member]          
Purchase Commitment, Excluding Long-term Commitment [Line Items]          
Annual base salary     $ 200,000    
Options granted     6,500,000    
Cash portion of payment     $ 50,000    
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Stock Options Narrative) (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Apr. 12, 2018
May 18, 2018
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Compensation expense     $ 14,392 $ 10,517 $ 24,733 $ 21,397
Unrecognized compensation cost     $ 180,427 $ 34,596 $ 180,427 $ 34,596
Employees and directors [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Vesting period 3 years          
Warrants to purchase common stock 4,475,000          
Expiration date Apr. 12, 2028          
Fair value of the options $ 69,989          
Risk free interest rate 2.64%          
Expected life 5 years          
Dividend yield 0.00%          
Expected volatility 217.00%          
Options cancelled 1,400,000          
Employees and directors [Member] | Minimum [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Exercise price $ 0.0189          
Employees and directors [Member] | Maximum [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Exercise price $ 0.208          
New Chief Executive Officer [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Vesting period   3 years        
Warrants to purchase common stock   6,500,000        
Exercise price   $ 0.017        
Expiration date   May 18, 2028        
Fair value of the options   $ 101,437        
Risk free interest rate   2.64%        
Expected life   5 years        
Dividend yield   0.00%        
Expected volatility   217.00%        
2018 Equity Compensation Plan [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Common stock reserved for future issuance 10,000,000          
Exercisable period 10 years          
Percentage of common stock own by employee 10.00%          
Grants period 5 years          
Vesting period 3 years          
Vesting percentage 33.33%          
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Summary of Stock Options Activity) (Details)
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Options  
Options outstanding at December 31, 2017 | shares 3,180,000
Options granted | shares 10,975,000
Options exercised | shares
Options forfeited | shares (1,408,334)
Options expired | shares (291,666)
Options at end of period | shares 12,455,000
Options exercisable at June 30, 2018 | shares 2,860,000
Weighted Average Exercise Price  
Options outstanding at December 31, 2017 | $ / shares $ 0.20
Options granted | $ / shares 0.02
Options exercised | $ / shares
Options forfeited | $ / shares 0.02
Options expired | $ / shares 0.25
Options at end of period | $ / shares 0.06
Options exercisable at June 30, 2018 | $ / shares $ 0.19
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Schedule of Nonvested Options Activity) (Details)
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Non-Vested stock option activity, shares:  
Nonvested options at December 31, 2017 | shares 270,840
Granted | shares 10,975,000
Vested | shares (242,506)
Forfeited | shares (1,408,334)
Nonvested options at June 30, 2018 | shares 9,595,000
Non-Vested stock option activity, weighted average exercise price:  
Nonvested options at December 31, 2017 | $ / shares $ 0.15
Granted | $ / shares 0.02
Vested | $ / shares 0.16
Forfeited | $ / shares 0.22
Nonvested options at June 30, 2018 | $ / shares $ 0.18
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Summary of Options Outstanding by Price Range) (Details)
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]  
Number Outstanding | shares 12,445,000
Remaining Average Contractual Life 8 years 4 months 9 days
Weighted Average Exercise Price, Outstanding $ 0.06
Number Exercisable | shares 2,860,000
Weighted Average Exercise Price, Exercisable $ 0.19
Range of Exercise Price [Member]  
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]  
Range of Exercise Price, lower limit 0.017
Range of Exercise Price, upper limit $ 0.30
Number Outstanding | shares 12,445,000
Remaining Average Contractual Life 8 years 4 months 9 days
Weighted Average Exercise Price, Outstanding $ 0.06
Number Exercisable | shares 2,860,000
Weighted Average Exercise Price, Exercisable $ 0.19
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Summary of Warrants Activity) (Details) - Warrant [Member]
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Warrant activity, number of shares:  
Warrants outstanding at December 31, 2017 | shares 990,162
Granted | shares
Expired | shares (168,750)
Warrants outstanding at June 30, 2018 | shares 821,412
Warrants outstanding at December 31, 2017 | $ / shares $ 0.24
Granted | $ / shares
Expired | $ / shares 0.35
Warrants outstanding at June 30, 2018 | $ / shares $ 0.17
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Summary of Warrants Outstanding by Price Range) (Details)
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]  
Number outstanding | shares 821,412
Remaining Average Contractual Life 1 year 9 months 18 days
Weighted average exercise price, outstanding | $ / shares $ 0.17
Range of Exercise Price [Member]  
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]  
Number outstanding | shares 821,412
Remaining Average Contractual Life 1 year 9 months 18 days
Weighted average exercise price, outstanding | $ / shares $ 0.17
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions - Related Party (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Jul. 15, 2018
May 09, 2018
Apr. 12, 2018
Jan. 06, 2016
Oct. 20, 2009
May 18, 2018
May 15, 2018
Apr. 30, 2018
Nov. 30, 2017
Mar. 28, 2002
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Related Party Transaction [Line Items]                              
Notes Payable - stockholders                     $ 600,000   $ 600,000   $ 7,988,349
Proceeds from related party loan                         601,273 $ 440,000  
Consulting Agreement with Boxwood Associates, Inc. [Member]                              
Related Party Transaction [Line Items]                              
Monthly fee under agreement         $ 2,000                    
Notice period to terminate the agreement         30 days                    
Payments to consultants                     $ 12,000 $ 12,000 $ 6,000 $ 6,000  
New Chief Executive Officer [Member]                              
Related Party Transaction [Line Items]                              
Warrants to purchase common stock           6,500,000                  
Exercise price           $ 0.017                  
Vesting period           3 years                  
Expiration date           May 18, 2028                  
Chairman and Former CEO [Member]                              
Related Party Transaction [Line Items]                              
Warrants to purchase common stock     1,400,000                        
Exercise price     $ 0.208                        
Vesting period     3 years                        
Expiration date     Apr. 12, 2028                        
Options cancelled               1,400,000              
Executive Officer [Member] | Note Payable to Chairman of Board [Member]                              
Related Party Transaction [Line Items]                              
Face amount of debt instrument                   $ 6,100,000          
Percent in addition to BBA LIBOR                   1.40%          
Interest rate on outstanding term loan                     3.78% 3.61% 3.78% 3.61%  
Maturity date                   Dec. 31, 2005          
Maximum amount of additional financing the company may obtain that will affect the repayment provisions of the debt instrument                   $ 7,000,000          
Proceeds from stockholder loan                         $ 26,272    
Notes Payable - stockholders                     $ 8,314,622   $ 8,314,622   $ 7,988,349
Percentage of total liabilities                     75.00%   75.00%   78.00%
Executive Officer [Member] | Note Payable to Chairman of Board [Member] | Demand note [Member]                              
Related Party Transaction [Line Items]                              
Interest rate on outstanding term loan                     4.00%   4.00%    
Proceeds from stockholder loan                         $ 325,000    
Board of Directors [Member] | Unsecured Loan [Member]                              
Related Party Transaction [Line Items]                              
Face amount of debt instrument                 $ 25,000            
Interest rate on outstanding term loan                     5.00%   5.00%    
Maturity date                 Dec. 31, 2018            
Board of Directors [Member] | Unsecured Loan [Member]                              
Related Party Transaction [Line Items]                              
Maturity date       Dec. 31, 2019                      
Chief Executive Officer [Member] | Note Payable to Chairman of Board [Member]                              
Related Party Transaction [Line Items]                              
Maturity date   Dec. 31, 2019                          
Executive Chairman and CEO [Member]                              
Related Party Transaction [Line Items]                              
Proceeds from related party loan             $ 250,000                
Executive Chairman and CEO [Member] | Subsequent Event [Member]                              
Related Party Transaction [Line Items]                              
Repayments of related party loan $ 250,000                            
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.10.0.1
Major Customers (Details)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2018
USD ($)
Jun. 30, 2017
USD ($)
Jun. 30, 2018
USD ($)
item
Jun. 30, 2017
USD ($)
Dec. 31, 2017
item
Concentration Risk [Line Items]          
Net sales | $ $ 1,152,462 $ 575,170 $ 2,038,202 $ 1,264,160  
Accounts Receivable [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     87.00%   83.00%
Number of customers representing concentration risk percentage | item     2   2
Accounts Receivable [Member] | Customer One [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     65.00%   53.00%
Accounts Receivable [Member] | Customer Two [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     22.00%   30.00%
Sales [Member] | Two Customers [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     66.00% 32.00%  
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details)
Jul. 15, 2018
USD ($)
Subsequent Event [Member] | Executive Chairman and CEO [Member]  
Subsequent Event [Line Items]  
Repayment of related party loan $ 250,000
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