Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - PURADYN FILTER TECHNOLOGIES INC | Financial_Report.xls |
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION - PURADYN FILTER TECHNOLOGIES INC | pfti_ex31z2.htm |
EX-32.1 - SECTION 1350 CERTIFICATION - PURADYN FILTER TECHNOLOGIES INC | pfti_ex32z1.htm |
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION - PURADYN FILTER TECHNOLOGIES INC | pfti_ex31z1.htm |
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, 2014 | |
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
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ |
|
| Accelerated filer | ¨ |
|
Non-accelerated filer | ¨ |
|
| Smaller reporting company | þ |
|
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. 48,866,870 shares of common stock are issued and outstanding as of August 11, 2014.
TABLE OF CONTENTS
|
| Page No. |
| PART I. FINANCIAL INFORMATION |
|
|
|
|
1 | ||
|
|
|
| Condensed Balance Sheets As of June 30, 2014 (unaudited) and December 31, 2013 | 1 |
| 2 | |
| Condensed Statements of Cash Flows six months ended June 30, 2014 and 2013 (unaudited) | 3 |
| 4 | |
| 5 | |
|
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 11 | |
|
|
|
16 | ||
|
|
|
16 | ||
|
|
|
| PART II. OTHER INFORMATION |
|
|
|
|
17 | ||
|
|
|
17 | ||
|
|
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 17 | |
|
|
|
17 | ||
|
|
|
17 | ||
|
|
|
17 | ||
|
|
|
17 |
i
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, and our subsidiaries.
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 $10.4 million at June 30, 2014 and any future loans due our Chairman and CEO,
·
our reliance on sales to a limited number of customers,
·
our dependence on a limited number of distributors,
·
our ability to compete,
·
our ability to protect our intellectual property, and
·
the application of penny stock rules to the trading in our 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, 2013 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.
PURADYN FILTER TECHNOLOGIES INCORPORATED
CONDENSED BALANCE SHEETS
|
| June 30, 2014 |
| December 31, 2013 |
| ||
|
| (Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
| $ | 99,007 |
| $ | 161,503 |
|
Accounts receivable, net of allowance for uncollectible accounts of $17,262 and $16,236, respectively |
|
| 400,367 |
|
| 182,143 |
|
Inventories, net |
|
| 568,037 |
|
| 593,783 |
|
Prepaid expenses and other current assets |
|
| 125,717 |
|
| 84,279 |
|
Total current assets |
|
| 1,193,128 |
|
| 1,021,708 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 57,682 |
|
| 57,046 |
|
Other noncurrent assets |
|
| 333,571 |
|
| 317,508 |
|
Total assets |
| $ | 1,584,381 |
| $ | 1,396,262 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
| $ | 103,049 |
| $ | 103,252 |
|
Accrued liabilities |
|
| 278,185 |
|
| 279,470 |
|
Current portion of capital lease obligation |
|
| 6,659 |
|
| 8,097 |
|
Deferred compensation |
|
| 1,444,384 |
|
| 1,400,796 |
|
Total current liabilities |
|
| 1,832,277 |
|
| 1,791,615 |
|
|
|
|
|
|
|
|
|
Capital lease obligation, less current portion |
|
| 759 |
|
| 3,280 |
|
Notes Payable - stockholders |
|
| 10,379,342 |
|
| 9,829,242 |
|
Total Long Term Liabilities |
|
| 10,380,101 |
|
| 9,832,522 |
|
Total Liabilities |
|
| 12,212,378 |
|
| 11,624,137 |
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 48,764,336 and 48,632,482, respectively |
|
| 48,764 |
|
| 48,632 |
|
Additional paid-in capital |
|
| 47,079,860 |
|
| 47,010,511 |
|
Accumulated deficit |
|
| (57,756,621 | ) |
| (57,287,018 | ) |
Total stockholders deficit |
|
| (10,627,997 | ) |
| (10,227,875 | ) |
Total liabilities and stockholders deficit |
| $ | 1,584,381 |
| $ | 1,396,262 |
|
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, |
| ||||||||||
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 772,880 |
|
| $ | 600,390 |
|
| $ | 1,667,182 |
|
| $ | 1,174,878 |
|
Cost of products sold |
|
| 491,046 |
|
|
| 506,030 |
|
|
| 1,028,816 |
|
|
| 909,563 |
|
Gross Profit |
|
| 281,834 |
|
|
| 94,360 |
|
|
| 638,366 |
|
|
| 265,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages |
|
| 258,781 |
|
|
| 274,313 |
|
|
| 536,750 |
|
|
| 554,138 |
|
Selling and administrative |
|
| 212,269 |
|
|
| 250,484 |
|
|
| 450,201 |
|
|
| 508,184 |
|
Total operating costs |
|
| 471,050 |
|
|
| 524,797 |
|
|
| 986,951 |
|
|
| 1,062,322 |
|
Loss from operations |
|
| (189,216 | ) |
|
| (430,437 | ) |
|
| (348,585 | ) |
|
| (797,007 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
| |
|
|
| 10,000 |
|
|
| |
|
|
| 10,000 |
|
Interest expense |
|
| (62,301 | ) |
|
| (53,778 | ) |
|
| (121,018 | ) |
|
| (103,892 | ) |
Total other expense, net |
|
| (62,301 | ) |
|
| (43,778 | ) |
|
| (121,018 | ) |
|
| (93,892 | ) |
Loss before income taxes |
|
| (251,517 | ) |
|
| (474,215 | ) |
|
| (469,603 | ) |
|
| (890,899 | ) |
Income tax expense |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (251,517 | ) |
| $ | (474,215 | ) |
| $ | (469,603 | ) |
| $ | (890,899 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (.01 | ) |
| $ | (.01 | ) |
| $ | (.01 | ) |
| $ | (.01 | ) |
Weighted average common shares outstanding (basic and diluted) |
|
| 48,743,498 |
|
|
| 48,441,050 |
|
|
| 48,771,763 |
|
|
| 48,170,048 |
|
See accompanying notes to unaudited condensed financial statements
2
PURADYN FILTER TECHNOLOGIES INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Six Months Ended June 30 |
| |||||
|
| 2014 |
|
| 2013 |
| ||
Operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | (469,603 | ) |
| $ | (890,899 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 20,010 |
|
|
| 18,210 |
|
Provision for slow moving inventory |
|
| 1,053 |
|
|
| 42,702 |
|
Amortization of deferred financing costs included in interest expense |
|
| |
|
|
| 125 |
|
Deferred compensation |
|
| |
|
|
| 40,533 |
|
Compensation expense on stock-based arrangements with employees and consultants |
|
| 69,477 |
|
|
| 95,629 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (218,133 | ) |
|
| (27,902 | ) |
Inventories |
|
| 24,693 |
|
|
| 93,872 |
|
Prepaid expenses and other current assets |
|
| (41,732 | ) |
|
| (69,799 | ) |
Accounts payable |
|
| (201 | ) |
|
| (18,284 | ) |
Accrued liabilities |
|
| 42,303 |
|
|
| 31,572 |
|
Net cash used in operating activities |
|
| (572,133 | ) |
|
| (684,241 | ) |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Capitalized patent costs |
|
| (21,505 | ) |
|
| (25,421 | ) |
Purchases of property and equipment |
|
| (14,999 | ) |
|
| (17,411 | ) |
Net cash used in investing activities |
|
| (36,504 | ) |
|
| (42,832 | ) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from issuance of notes payable to stockholders |
|
| 550,100 |
|
|
| 665,155 |
|
Payment of capital lease obligations |
|
| (3,959 | ) |
|
| (3,636 | ) |
Net cash provided by financing activities |
|
| 546,141 |
|
|
| 661,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash |
|
| (62,496 | ) |
|
| (65,554 | ) |
Cash at beginning of period |
|
| 161,503 |
|
|
| 114,512 |
|
Cash at end of period |
| $ | 99,007 |
|
| $ | 48,958 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 114,789 |
|
| $ | 115,598 |
|
Cash paid for taxes |
| $ | |
|
| $ | |
|
See accompanying notes to unaudited condensed financial statements
3
PURADYN FILTER TECHNOLOGIES INCORPORATED
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2014
(UNAUDITED)
|
|
|
|
|
| Additional Paid-in Capital |
|
| Accumulated Deficit |
|
| Total Stockholders' Deficit |
| |||||
|
|
| ||||||||||||||||
Common Stock | ||||||||||||||||||
Shares |
| Amount | ||||||||||||||||
Balance at December 31, 2013 |
|
| 48,632,482 |
| $ | 48,632 |
| $ | 47,010,511 |
|
| $ | (57,287,018 | ) |
| $ | (10,227,875 | ) |
Common Stock to consultant |
|
| 131,854 |
|
| 132 |
|
| 23,868 |
|
|
| |
|
|
| 24,000 |
|
Compensation expense associated with option awards |
|
| |
|
| |
|
| 45,481 |
|
|
| |
|
|
| 45,481 |
|
Net loss |
|
| |
|
| |
|
| |
|
|
| (469,603 | ) |
|
| (469,603 | ) |
Balance at June 30, 2014 |
|
| 48,764,336 |
| $ | 48,764 |
| $ | 47,079,860 |
|
| $ | (57,756,621 | ) |
| $ | (10,627,997 | ) |
See accompanying notes to unaudited condensed financial statements
4
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1.
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies
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 and six-month periods ended June 30, 2014 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2014.
For further information, refer to Puradyn Filter Technologies Incorporateds (the Company) financial statements and footnotes thereto included in the Form 10-K for the year ended December 31, 2013.
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.
Basic and Diluted Loss Per Share
FASB ASC 260, Earnings Per Share, requires a dual presentation of basic and diluted earnings per share. However, because of the Company's net losses, the effect of outstanding stock options and warrants would be anti-dilutive and, accordingly, is excluded from the computation of diluted loss per share. The number of such shares excluded from the computation of loss per share were 5,421,818 and 6,695,260 for the three and six months ended June 30, 2014 and 2013, respectively.
Stock Compensation
The Company 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, 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 periods ended June 30, 2014 and June 30, 2013 have been recognized as a component of cost of goods sold and general and administrative expenses in the accompanying Condensed Financial Statements.
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 718 and FASB ASC 505 Equity, including related amendments and interpretations. The related expense is recognized over the period the services are provided.
Inventories
Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending inventories at a rate based on estimated production capacity and any excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
5
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Inventories consisted of the following at June 30, 2014 and December 31, 2013, respectively:
|
| June 30, 2014 |
| December 31, 2013 |
| ||
|
| (unaudited) |
|
|
| ||
Raw materials |
| $ | 951,691 |
| $ | 953,575 |
|
Work In Progress |
|
| 157 |
|
| 5,988 |
|
Finished goods |
|
| 81,779 |
|
| 98,757 |
|
Valuation allowance |
|
| (465,590 | ) |
| (464,537 | ) |
Inventory, net |
| $ | 568,037 |
| $ | 593,783 |
|
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 in accordance with FASB ASC 605, Revenue Recognition, as amended and interpreted. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying condensed financial statements.
Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products sold.
Product Warranty Costs
As required by FASB ASC 460, Guarantors 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. As of June 30, 2014, 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, 2014:
Balance as of December 31, 2013 |
| $ | 20,000 |
|
Less: Payments made |
|
| |
|
Add: Provision for current period warranties |
|
| |
|
Balance as of June 30, 2014 (unaudited) |
| $ | 20,000 |
|
6
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
New Accounting Pronouncements
In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35, Revenue Recognition Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In June 2014, FASB issued ASU No. 2014-12, Compensation Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities.
Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
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 $572,133 and $684,241 during the six-months ended June 30, 2014 and 2013, respectively. As a result, the Company has had to rely principally on the conversion of debt into stock as well as stockholder loans to fund its activities to date.
These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from two stockholders led the Companys independent registered public accounting firm, Liggett, Vogt & Webb, P.A., to include a statement in its audit report relating to the Companys audited financial statements for the year ended December 31, 2013 expressing substantial doubt as to the Companys ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.
7
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
3.
Common Stock
As partial compensation per an agreement dated May 19, 2011, and subsequently renewed on June 8, 2012 and July 24, 2013, for consultant work, the Company issued to Monarch Communications, Inc. the following:
·
On April 1, 2014, 18,182 shares of its common stock valued at $0.22 per share.
·
On May 2, 2014, 20,000 shares of its common stock valued at $0. 20 per share.
·
On June 4, 2014, 19,048 shares of its common stock valued at $0.21 per share.
4.
Stock Options and Warrants
For the three months and six months ended June 30, 2014 and June 30, 2013, respectively, the Company recorded stock-based compensation expense of $18,176, $45,481, $32,151, and $44,518, respectively, relating to employee stock options.
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, 2014 and 2013 for the options is $115,744 and $175,857, respectively, and will be recognized through June 30, 2018.
On June 24, 2014, the Company filed a registration statement on Form S-8 with the Securities and Exchange Commission amending the shares of Common Stock included within its 2010 Stock Option from 2,000,000 shares to 4,000,000 shares.
On June 20, 2014 the Companys board of directors resolved to extend an expiration date of June 22, 2014 by an additional 30 days for 66,666 options previously awarded to an employee. The new expiration date was extended to July 21, 2014. The Company determined the value of $388 incurred by the change in the expiration date was not material.
A summary of the Companys stock option plans as of June 30, 2014, and changes during the six-month period then ended is presented below:
|
| Six Months Ended June 30, | ||||||||||
|
| Number of Options |
|
| Weighted Average Exercise Price |
| Weighted- average remaining contractual term (in years) |
| Aggregate intrinsic value (in thousands) | |||
Options outstanding at December 31, 2013 |
|
| 4,194,972 |
|
| $ | .25 |
|
|
|
|
|
Options granted |
|
| |
|
|
| |
|
|
|
|
|
Options exercised |
|
| |
|
|
| |
|
|
|
|
|
Options forfeited |
|
| (37,084 | ) |
|
| .15 |
|
|
|
|
|
Options expired |
|
| (171,250 | ) |
|
| .24 |
|
|
|
|
|
Options at end of period |
|
| 3,986,638 |
|
|
| .25 |
|
|
|
| |
Options exercisable at June 30, 2014 |
|
| 3,161,624 |
|
|
| .24 |
| 6.01 |
| $ | 820,014 |
8
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Changes in the Companys nonvested options for the six months ended June 30, 2014 are summarized as follows:
|
| Six Months Ended June 30, 2014 | |||||
|
| Number of Options |
|
| Weighted Average Exercise Price | ||
Nonvested options at December 31, 2013 |
|
| 1,311,674 |
|
| $ | .18 |
Options vested |
|
| (486,660 | ) |
|
| .19 |
Options forfeited |
|
| |
|
|
| |
Nonvested options at June 30, 2014 |
|
| 825,014 |
|
| $ | .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 |
| |||||
$.17 - 1.70 |
|
|
| 3,986,638 |
|
|
| 5.03 |
|
| $ | .25 |
|
|
| 3,161,624 |
|
| $ | .27 |
|
Totals |
|
|
| 3,986,638 |
|
|
| 5.03 |
|
| $ | .25 |
|
|
| 3,161,624 |
|
| $ | .27 |
|
A summary of the Companys warrant activity as of June 30, 2014 and changes during the six month period then ended is presented below:
|
| Six Months Ended June 30, | ||||||||||
|
| Warrants |
|
| Weighted Average Exercise Price |
| Weighted- average remaining contractual terms (in years) |
| Aggregate intrinsic value | |||
Warrants outstanding at December 31, 2013 |
|
| 2,271,483 |
|
| $ | .46 |
|
|
|
|
|
Granted |
|
| |
|
|
| |
|
|
|
|
|
Exercised |
|
| |
|
|
| |
|
|
|
|
|
Expired |
|
| (836,303 | ) |
|
| .50 |
|
|
|
|
|
Warrants outstanding at June 30, 2014 |
|
| 1,435,180 |
|
| $ | .43 |
| .80 |
| $ | |
|
|
| Warrants Outstanding |
| |||||||||
Range of Exercise Price |
|
| Number Outstanding |
|
| Remaining Average Contractual Life (In Years) |
|
| Weighted Average Exercise Price |
| |||
$0.35 0.75 |
|
|
| 1,435,180 |
|
|
| 1.58 |
|
| $ | .43 |
|
Totals |
|
|
| 1,435,180 |
|
|
| 1.58 |
|
| $ | .43 |
|
5.
Notes Payable to Stockholder
Beginning on March 28, 2002 the Company executed a binding agreement with one of its principal stockholders, who is also the Chairman of the Board and an executive officer, 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 (2.658% per annum at June 30, 2014), 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 March 2014, the maturity date for the agreement was extended annually from December 31, 2007 to December 31, 2015.
Between January 1, 2014 and June 30, 2014, the Company received loans in various amounts totaling $550,100, from the Companys Chairman and CEO, as advances for working capital needs. The loans bear interest at the BBA LIBOR Daily Floating Rate plus 1.4 percentage points.
9
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
At June 30, 2014 the Company had drawn the full funding amount under the agreement of $6.1 million plus an additional $4,029,342, plus direct loans of $250,000 for a total amount due of $10,379,342.
For the three and six months ended June 30, 2014 and 2013, the Company recorded $61,580, $119,983, $52,306 and $102,420,respectively, of interest expense related to the notes payable, as noted above, which is included in interest expense in the accompanying condensed statements of operations.
6.
Commitments and Contingencies
On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. The lease commenced August 1, 2013 and required an initial rent of $12,026 per month beginning in the second month for the first year, increasing in varying amounts to $13,941 per month in the sixth year. In addition, the Company is responsible for all operating expenses and utilities.
On July 24, 2013 with an effective date of May 1, 2013, we renewed a consulting agreement with Monarch Communications, Inc. for services rendered as public relations firm and media relations consultants for the Company. The term of the agreement is for twelve months. As compensation for their services, Monarch will receive a monthly fee of $7,000, payable as $3,000 in cash and $4,000 in shares of common stock. Either party may terminate the agreement with 30 days notice. The recipient is an accredited or otherwise sophisticated investor who had such knowledge and experience in business matters and was capable of evaluating the merits and risks of the prospective investment in our securities. The issuance of the shares is exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(a)(2) of that act.
On October 20, 2009, the Company entered into a consulting agreement with Boxwood Associates, Inc., whereby the Company pays $2,000 monthly for management and strategic development services performed. The contract will remain in effect until terminated by either party providing 30 days written notice. Mr. Telesco, a member of our board of directors, a note holder and a significant stockholder, is President of Boxwood Associates, Inc.
In January 2014, the Company renewed the lease at an annual expense of $8,500, on a condominium in Ocean Ridge, Florida until December 31, 2014.
7.
Subsequent Events
As partial compensation per an agreement dated May 19, 2011, and subsequently renewed on June 8, 2012 and July 24, 2013, for consultant work, the Company issued to Monarch Communications, Inc. the following:
·
On July 1, 2014, 21,053 shares of its common stock valued at $0.19 per share.
·
On August 1, 2014, 14,815 shares of its common stock valued at $0.27 per share.
In July 2014 a total of 66,666 employee stock options were exercised at an average price of $0.22 with the following dates and amounts:
·
options exercised on July 15, 2014 for 29,200 shares of common stock valued at $0.23 per share.
·
options exercised on July 16, 2014 for 18,632 shares of common stock valued at $0.21 per share.
·
options exercised on July 17, 2014 for 5,000 shares of common stock valued at $0.20 per share.
·
options exercised on July 18, 2014 for 13,834 shares of common stock valued at $0.21 per share.
On July 11, 2014, the Company board of directors resolved to extend the expiration date by an additional two years of 637,360 Class A warrants to purchase common stock at a price of $.35 per share, which were previously awarded to certain stockholder as part of private offerings.
10
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Puradyn, which has been in business for over 25 years, and designs, manufactures, and sells the Puradyn® System, a high-efficiency bypass oil filtration system and replacement filter elements. We generate revenues through the initial sale of the bypass oil filtration systems and through the sale of the replacement filter elements. We purchase component parts for unit housing and filter elements and the component parts are assembled, packed and shipped from our facility in Boynton Beach, Florida.
Sales of the Companys products depend principally upon acceptance and demand by end-user customers and OEMs. We focus our sales strategy on the development of OEM and individual end user relationships, along with building distributor sales efforts to continue expansion of a nationwide distribution network that will not only sell but also install and support our product. We currently have approximately 100 active distributors in the U.S. and internationally.
We also focus our sales and marketing efforts to target industries open to innovative methods to reduce oil maintenance operating costs and overhaul cycles. These industries are also searching for new and progressive technologies to optimize their equipment use, including bypass oil filtration. While this is a long-term and ongoing process, we believe we have achieved a degree of product acceptance based on the expansion of existing strategic relationships we have with Nabors Industries, Inc. and other end-users and distributors, including:
·
On April 9, 2014, management announced the receipt of an initial order from one of its distributors for Puradyn Systems for a military contract planned for 750 generator sets to be built by a major military contractor utilizing John Deere engines starting in October of 2014 and concluding in September of 2017. Following receipt of this initial order, we expect to receive future orders through our distributor to supply Puradyn systems for this military contract in accordance with military build requirement over this period. Puradyn is a second tier supplier to this military contractor and as such does not have a separate contract with the military for this order. If the military carries out its contract in full, it is estimated to generate around $300,000 in revenue over the three years. Sales for first six months of 2014 were approximately $9,600.
Our net sales for the second quarter of 2014 increased 29% from the comparable period in 2013. This increase is attributable to sustained increased activity from a number of our larger accounts at the beginning of the third quarter of 2013. We believe that industry acceptance will grow in fiscal 2014 based in part upon our progress this year. However, there can be no assurance that any of our sales efforts or strategic relationships will meet managements expectations or result in an increase in our revenues.
Going Concern
The Companys financial statements have been prepared on the basis that it will operate as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses each year since inception and has relied on the sale of its stock from time to time and loans from third parties and from related parties to fund its operations.
These recurring operating losses, liabilities exceeding assets and the reliance on cash inflows from a current stockholder have led the Companys management to conclude there is substantial doubt about the Companys ability to continue as a going concern.
11
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We believe the critical accounting policies in Note 1 to the financial statements appearing elsewhere in this report affect our more significant judgments and estimates used in the preparation of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Results of Operations for the Three-months Ended June 30, 2014 Compared to the Three-months Ended June 30, 2013
Net Sales
Net sales increased 29% in the second quarter of 2014 as compared to the second quarter of 2013. The increase in sales was primarily due to two customers who increased purchases accounted for 69% of the increase in sales. In addition a couple of our new distributors are beginning to generate sales in their areas, and helped to contribute to the increase in the second quarter.
We are dependent upon sales to a limited number of customers. Sales to three customers accounted for approximately 16%, 12%, and 10%, respectively, for a total of 38% of the net sales for the three-months ended June 30, 2014, or 65% of the increase over net sales in the same period in 2013. While we remain dependent upon sales to a limited number of customers, our sales dependence is now on a larger group of customers. Sales to three customers accounted for approximately 20%, 19%, and 15%, respectively (for a total of 54%), of the net sales for the three-months ended June 30, 2013.
Cost of Products Sold
Gross profit, as a percentage of sales, increased from 16% in the second quarter of 2013 to 36% in the second quarter of 2014. The increase in gross profit was also attributable to sales of higher margin products, sales to customers in higher margin price categories and reduced charges for slow moving inventory. The last area that contributed to the increase in gross profit resulted from better pricing in the cost of a few of our key components, purchased during the period. We have obtained alternative sources for some of these components and this has contributed to improved margins.
Salaries and Wages
Salaries and wages were decreased by 6% for the quarter ended June 30, 2014 compared to June 30, 2013 as a result of reduced expenses for employee benefits, primarily stock option expense.
12
Selling and Administrative Expenses
Selling and administrative expenses decreased by 15% for the three months ended June 30, 2014 from the comparable period in 2013. This decrease was due to a decrease in travel, marketing expense and professional fees to outside consultants. As we extend our reach to international customers and develop more specialized products for niche industries, we anticipate that travel and marketing costs will increase, but all other expenses will remain stable for the balance of the year. The following table lists the major categories of expenses included in Selling and Administrative expenses:
|
| Three Months Ended June 30, |
| |||||||||
|
| 2014 |
|
| 2013 |
|
| Change |
| |||
Employee Benefits |
| $ | 43,655 |
|
| $ | 54,390 |
|
| $ | (10,735 | ) |
Travel & Marketing |
|
| 50,515 |
|
|
| 56,305 |
|
|
| (5,790 | ) |
Depreciation & Amortization |
|
| 5,892 |
|
|
| 5,805 |
|
|
| 87 |
|
Engineering |
|
| 191 |
|
|
| 13,431 |
|
|
| (13,240 | ) |
Professional Fees |
|
| 38,510 |
|
|
| 50,861 |
|
|
| (12,351 | ) |
Investor Relations |
|
| 302 |
|
|
| 1,841 |
|
|
| (1,539 | ) |
Occupancy Expense |
|
| 24,757 |
|
|
| 27,920 |
|
|
| (3,162 | ) |
Patent Expense |
|
| 22,772 |
|
|
| 21,206 |
|
|
| 1,566 |
|
Stock Compensation |
|
| 1,139 |
|
|
| 1,260 |
|
|
| (120 | ) |
Bad Debts |
|
| (32 | ) |
|
| 174 |
|
|
| (206 | ) |
Other Expenses |
|
| 24,568 |
|
|
| 17,291 |
|
|
| 7,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 212,269 |
|
| $ | 250,484 |
|
| $ | (38,215 | ) |
Interest Expense
Interest expense increased 16% for the three months ending June 30, 2014 as compared to the three months ending June 30, 2013 and was incurred primarily on the outstanding balance of the stockholder notes payable. The increase was due to higher borrowings. The Company pays interest monthly on the notes payable to the stockholder at the LIBOR Daily Floating Rate plus 1.4%, which was a weighted average of 2.66% as of June 30, 2014 as compared to 2.24% as of June 30, 2013.
Results of Operations for the Six-months Ended June 30, 2014 Compared to the Six-months Ended June 30, 2013
Net Sales
Net sales increased 42 % in the six months ending June 30, 2014 compared to the six months ending June 30, 2013. The majority of our sales increase in the 2014 period resulted from orders from two customers in the amount of approximately $197,000, or 17%.
Sales to two customers individually accounted for 18% and 14% (for a total of 32%) for the six months ending June 30, 2014. Sales to two customers individually accounted for 16%, and 12% (for a total of 28%) for the six months ending June 30, 2013.
Cost of Products Sold
Gross profit, as a percentage of sales, increased from 23% in the six months ending June 30, 2013 to 38% in the six months ending June 30, 2014. The decrease in cost of goods sold, which generates a higher gross profit, is primarily attributable to the reserve for slow moving inventory of $42,702 recorded during the six months ended June 30, 2013 and decreased allocation of manufacturing overhead due to lower than expected sales.
13
Salaries and Wages
Salaries and wages decreased by 3% for the six months ending June 30, 2014 compared to the six months ending June 30, 2013. This decrease was primarily due to decreased expenses associated with employee benefits. Salaries and wages, as a percentage of sales are 47% for the six months ending June 30, 2013 and 32% for the six months ending June 30, 2014.
Selling and Administrative Expenses
Selling and administrative expenses decreased 11% for the six months ending June 30, 2014 compared to the six months ending June 30, 2013. The following table represents the major components of Selling and Administrative expenses for the six months ended June 30, 2014 and 2013, and the change of those components over their respective periods:
|
| Six Months Ended June 30, |
| |||||||||
|
| 2014 |
|
| 2013 |
|
| Change |
| |||
Employee Benefits |
| $ | 98,426 |
|
| $ | 112,739 |
|
| $ | (14,313 | ) |
Travel & Marketing |
|
| 111,912 |
|
|
| 120,332 |
|
|
| (8,420 | ) |
Depreciation & Amortization |
|
| 11,143 |
|
|
| 11,267 |
|
|
| (124 | ) |
Engineering |
|
| (1,673 | ) |
|
| 17,496 |
|
|
| (19,169 | ) |
Professional Fees |
|
| 87,004 |
|
|
| 106,821 |
|
|
| (19,817 | ) |
Investor Relations |
|
| 908 |
|
|
| 2,594 |
|
|
| (1,686 | ) |
Occupancy Expense |
|
| 49,220 |
|
|
| 54,378 |
|
|
| (5,158 | ) |
Patent Expense |
|
| 46,810 |
|
|
| 43,593 |
|
|
| 3,217 |
|
Stock Compensation |
|
| 2,132 |
|
|
| 2,424 |
|
|
| (292 | ) |
Bad Debts |
|
| 1,026 |
|
|
| 391 |
|
|
| 635 |
|
Other Expenses |
|
| 43,293 |
|
|
| 36,149 |
|
|
| 7,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 450,201 |
|
| $ | 508,184 |
|
| $ | (57,983 | ) |
The changes in most components of selling and administrative expenses for the six months ended June 30, 2014 from the comparable period in 2013 are the result of the same factors which impacted period to period changes described earlier in this section.
Our investor relations expense increased as a result of the cancellation of our contract with Emerging Markets. We anticipate that our expenses for investor relations will remain at or below 2013 levels for the remainder of the current year.
In May 2011 we entered into an agreement with Monarch Communications, Inc., to pay a portion of our public relations firm fees in stock. This agreement was renewed in May of 2012 and 2013. This amount has been reported as a marketing expense. Amounts reported as stock compensation for 2014 and 2013 represent the value of options issued to Directors pursuant to our 2000 Non-Employee Directors Stock Option Plan.
We anticipate expenses for the remainder of 2014 should be similar to those incurred in the six months ending June 30, 2013.
Interest Expense
Interest expense increased for the six months ending June 30, 2014 as compared to the six months ending June 30, 2013 and was incurred primarily on the outstanding balance of the stockholder notes payable. The increase was due to higher borrowings.
14
Liquidity and Capital Resources
As of June 30, 2014, the Company had cash of $99,077, as compared to $161,503 at December 31, 2013. At June 30, 2014, we had negative working capital of ($639,149) and our current ratio (current assets to current liabilities) was 0.65 to 1. At December 31, 2013 we had negative working capital of ($769,907) and our current ratio was 0.57 to 1. The decrease in working capital deficit and increase in current ratio is primarily attributable to decrease in cash and inventories, offset by an increase in accounts receivable and prepaid expenses.
We have incurred net losses each year since inception and at June 30, 2014 we had an accumulated deficit of $57,756,621. Our net sales are not sufficient to fund our operating expenses. Historically, we have relied on the sale of our stock from time to time and loans from related parties to fund our operations. During the six months ended June 30, 2014 we raised an additional $550,100 from stockholder loans. During the six months ended June 30, 2013, we raised $665,155 from stockholder loans. As of June 30, 2014, we owe our principal stockholder who is also an executive officer and director of the Company $10.4 million for funds he has advanced to us from time to time for working capital, which includes an additional $550,100 advanced during the six months ended June 30, 2014. Interest expense on our loans was $119,982 for the six months ended June 30, 2014.
We do not currently have any commitments for capital expenditures. Our current cash position is insufficient to cover our current operating needs for the next twelve months, and we do not have any external sources of working capital. While we anticipate an increase in cash flows from 2014 sales activity, we expect additional cash will still be needed to support operations, meet our working capital needs, and satisfy our obligations as they become due this year. Although we are actively seeking additional equity investments, we have no firm commitments from any third parties and there are no assurances we will be successful in attracting additional capital. In addition, as set forth above, we owe our stockholder $10.4 million which is due on December 31, 2015 or (i) at such time as we have raised an additional $7 million over the $3.5 million raised in prior offerings, or (ii) at such time as we are operating within sufficient cash flow parameters to sustain operations, or (iii) until a disposition of our company, such as an acquisition or merger, occurs. We do not have sufficient funds to pay this loan when it becomes due and there are no assurances our stockholder will extend the due date.
We continue to address liquidity concerns because of inadequate revenue growth. As a result, cash flow from operations is insufficient to cover our liquidity needs for the next twelve months of operations. We have implemented measures to preserve our ability to operate, including organizational changes, a reduction and/or deferral of salaries, reduction in personnel and renegotiating creditor and collection arrangements. If budgeted sales levels are not achieved and/or significant unanticipated expenditures occur, or if we are not able to raise additional investment capital, we may have to modify our business plan, reduce or discontinue some of our operations or seek a buyer for part of our assets to continue as a going concern through 2014. There can be no assurance that we will be able to raise additional capital or that sales will increase to the level required to generate profitable operations to provide positive cash flow from operations. In that event, it is possible that stockholders could lose their entire investment in our company.
Cash Flows
Operating activities
For the six-month period ended June 30, 2014 net cash used in operating activities was $572,133, which primarily resulted from the net loss of $469,603. In addition to the cash used in funding the operating loss, the utilization of cash in operations is also attributable to the increase in accounts receivable of $218,133 as a result of our increased sales. For the six-month period ended June 30, 2013 net cash used in operating activities was $684,241, which primarily resulted from the net loss of $890,899.
Investing activities
For the six months ending June 30, 2014, $36,504 was used in investing activities for the purchase of software and capitalized patent costs. For the six months ending June 30, 2013, $42,832 was used in investing activities for the purchase of equipment.
15
Financing activities
Net cash provided by financing activities was $546,141 for the six months ended June 30, 2014, which was composed of $550,100 in loans from our stockholders as described above, offset by $3,959 in payments of capital lease obligations. Net cash provided by financing activities was $661,519 for the six months ended June 30, 2013, which was composed of $665,155 in loans from our stockholders as described above, offset by $3,636 in payments of capital lease obligations.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.
ITEM 4.
Evaluation of Disclosure Controls and Procedures
Our management, which includes our CEO and our Vice President who serves as our principal financial 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, 2014 (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 systems objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on their evaluation as of the end of the period covered by this report, our CEO and our Vice President who also serves as our principal financial 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 Vice President who serves as our principal financial officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal controls over financial reporting.
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.
16
PART II. OTHER INFORMATION
ITEM 1.
None.
ITEM 1A.
Risk factors describing the major risks to our business can be found under Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2013. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On June 4, 2014 we issued an additional 19,048 shares of our common stock valued at $4,000 to Monarch Communications, Inc. as partial compensation for services to us under the terms of a consulting agreement. On each of July 1, 2014 and August 1, 2014 we issued Monarch Communications, Inc. an additional 21,053 shares of our common stock valued at $4,000 and 14,815 shares of our common stock valued at $4,000 as compensation under the terms of the consulting agreement. The recipient is an accredited or otherwise sophisticated investor who had such knowledge and experience in business matters and was capable of evaluating the merits and risks of the prospective investment in our securities. The issuances of the shares were exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(a)(2) of that act.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
Not Applicable.
ITEM 5.
None.
ITEM 6.
31.1 |
| Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer * |
31.2 |
| Rule 13a-14(a)/15d-14(a) certificate of principal financial officer * |
32.1 |
| Section 1350 certification of Chief Executive Officer * |
32.2 |
| Section 1350 certification of principal financial officer * |
101.INS |
| XBRL Instance Document ** |
101.SCH |
| XBRL Taxonomy Extension Schema Document ** |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document ** |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document ** |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document ** |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document ** |
*
filed herewith.
**
In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this report shall be deemed furnished and not filed.
17
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 12, 2014 | By: | /s/ Joseph V. Vittoria |
|
| Joseph V. Vittoria, Chairman and |
|
|
|
Date: August 12, 2014 | By: | /s/ Alan J. Sandler |
|
| Alan J. Sandler, Secretary to the Board, |
18