0001553350-18-000565.txt : 20180515 0001553350-18-000565.hdr.sgml : 20180515 20180515164209 ACCESSION NUMBER: 0001553350-18-000565 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 71 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180515 DATE AS OF CHANGE: 20180515 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: 18837250 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: March 31, 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 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, 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

(Do not check if a smaller reporting company)

Emerging growth company  ¨


If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities 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 May 13, 2018.

 

 






TABLE OF CONTENTS

 


 

 

Page No.

                  

PART I. FINANCIAL INFORMATION

                  

 

 

 

ITEM 1.

FINANCIAL STATEMENTS.

1

 

 

 

 

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

1

 

 Condensed Statements of Operations –Three months ended March 31, 2018 and 2017 (unaudited)

2

 

Condensed Statements of Cash Flows – Three months ended March 31, 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.

15

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

18

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

19

 

 

 

 

PART II.   OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS.

20

 

 

 

ITEM 1A.

RISK FACTORS.

20

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

20

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

20

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURE.

20

 

 

 

ITEM 5.

OTHER INFORMATION.

20

 

 

 

ITEM 6.

EXHIBITS.

20

 







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.


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 $8,163,349 at May 15, 2018 due our Chairman and CEO 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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

ASSETS

     

 

                       

    

 

                       

  

Current assets:

 

 

 

 

 

 

 

Cash

 

$

 

$

54,438

 

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

 

 

420,978

 

 

270,896

 

Inventories, net

 

 

454,106

 

 

400,764

 

Prepaid expenses and other current assets

 

 

62,481

 

 

69,355

 

Total current assets

 

 

937,565

 

 

795,453

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

40,300

 

 

45,327

 

Other noncurrent assets

 

 

548,148

 

 

532,540

 

Total assets

 

$

1,526,013

 

$

1,373,320

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Cash overdraft

 

$

38,449

 

$

 

Accounts payable

 

 

274,359

 

 

186,696

 

Accrued liabilities

 

 

366,904

 

 

362,804

 

Sales incentives

 

 

 

 

99,128

 

     Capital lease obligation

 

 

2,505

 

 

3,443

 

Deferred compensation

 

 

1,574,952

 

 

1,626,003

 

Notes Payable - stockholders

 

 

25,000

 

 

7,988,349

 

Total current liabilities

 

 

2,282,169

 

 

10,266,423

 

 

 

 

 

 

 

 

 

Notes Payable - stockholders

 

 

8,163,349

 

 

 

Total long-term liabilities

 

 

8,163,349

 

 

 

Total Liabilities

 

 

10,445,518

 

 

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

 

 

53,609,501

 

 

53,599,160

 

Accumulated deficit

 

 

(62,598,022

)

 

(62,561,279

)

Total stockholders’ deficit

 

 

(8,919,505

)

 

(8,893,103

)

Total liabilities and stockholders’ deficit

 

$

1,526,013

 

$

1,373,320

 


See accompanying notes to unaudited condensed financial statements




1



 


PURADYN FILTER TECHNOLOGIES INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)


 

 

For the

Three Months Ended

March 31,

 

 

 

2018

 

2017

 

Net sales

 

$

885,740

 

$

688,990

 

Cost of products sold

 

 

504,442

 

 

442,712

 

Gross profit

 

 

381,298

 

 

246,278

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Salaries and wages

 

 

193,268

 

 

212,937

 

Selling and administrative

 

 

150,070

 

 

143,340

 

Total Operating Costs

 

 

343,338

 

 

356,277

 

 

 

 

 

 

 

 

 

Income / (Loss) from operations

 

 

37,960

 

 

(109,999

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

 

(74,703

)

 

(65,545

)

Total other expense, net

 

 

 

 

 

 

 

Net loss before income tax expense

 

 

(36,743

)

 

(175,544

)

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(36,743

)

$

(175,544

)

 

 

 

 

 

 

 

 

Loss per share – basic and diluted

 

$

(0.00

)

$

(0.00

)

 

 

 

 

 

 

 

 

Basic and diluted weighted average common shares outstanding

 

 

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)


 

 

For the

Three Months Ended

March 31,

 

 

 

2018

 

2017

 

Operating activities

 

 

 

 

 

 

 

Net loss

 

$

(36,743

)

$

(175,544

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,762

 

 

8,072

 

Compensation expense on stock-based arrangements with employees and consultants

 

 

10,341

 

 

10,880

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(150,082

)

 

(31,589

)

Prepaid expenses and other current assets

 

 

6,874

 

 

(4,969

)

Inventories

 

 

(53,342

)

 

121,227

 

Security deposits

 

 

850

 

 

 

Accounts payable

 

 

87,663

 

 

(37,998

)

Sales incentives

 

 

(99,128

)

 

 

Deferred compensation

 

 

(51,051

)

 

(19,226

)

Accrued liabilities

 

 

4,099

 

 

(11,912

)

Net cash used in operating activities

 

 

(271,757

)

 

(141,059

)

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Capitalized patent costs

 

 

(20,192

)

 

(2,575

)

Net cash used in investing activities

 

 

(20,192

)

 

(2,575

)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Cash overdraft

 

 

38,449

 

 

 

Proceeds from issuance of notes payable to stockholders

 

 

200,000

 

 

200,000

 

Repayments of stockholders loan

 

 

 

 

(50,000

)

Payment of capital lease obligations

 

 

(938

)

 

(939

)

Net cash provided by financing activities

 

 

237,511

 

 

149,061

 

 

 

 

 

 

 

 

 

Net (Decrease) / Increase in cash and cash equivalents

 

 

(54,438

)

 

5,427

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

54,438

 

 

12,806

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

 

$

18,233

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

 

$

61,164

 

$

59,074

 

     Cash paid for taxes

 

$

 

$

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

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 period ended March 31, 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 the first quarter of fiscal 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 the first quarter of 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 March 31, 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 March  31, 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 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 three months ended March 31, 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 three-months ended March 31, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of March 31, 2018 (unaudited)

 

$

20,000

 


Advertising Costs


Advertising costs are expensed as incurred. During the three months ended March 31, 2018 and March 31, 2017, advertising costs incurred by the Company totaled approximately $0, and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Engineering and Development


Engineering and development costs are expensed as incurred. During the three months ended March 31, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,429 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 months ended March 31, 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 March 31, 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


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 3,956,412 and 4,522,662 for the three months ended March 31, 2018 and 2017, respectively.


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 the first quarter of fiscal 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 in the first quarter of 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 $271,757 and $141,059 during the three-months ended March 31, 2018 and 2017, 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 a current stockholder 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 March 31, 2018 and December 31, 2017, respectively:


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

885,144

 

 

901,600

 

Work In Progress

 

 

71,867

 

 

125,932

 

Finished goods

 

 

140,711

 

 

16,848

 

Valuation allowance

 

 

(643,616

)

 

(643,616

)

Inventory, net

 

$

454,106

 

 

400,764

 


4.

Prepaid Expenses and Other Current Assets


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

24,412

 

 

26,648

 

Deposits

 

 

38,069

 

 

42,707

 

 

 

$

62,481

 

 

69,355

 




8



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



5.

Property and Equipment


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


 

 

March 31,

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

 

 

 (1,455,888

)

 

(1,450,861

)

 

 

$

40,300

 

$

45,327

 


Depreciation and amortization expense of property and equipment for the three months ended March 31, 2018 and 2017 are $5,027 and $4,677, respectively.


6.

Patents


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

 

 

 

 

Patent costs

 

$

579,065

 

$

558,873

 

Less accumulated amortization

 

 

(65,888

)

 

(62,153

)

 

 

$

513,177

 

$

496,720

 


Amortization expense for the three months ended March 31, 2018 and 2017 amounted to $3,735 and $3,395, 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 March 31, 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 remaining minimum lease payments over the term of the current lease amount to $221,430.  Rent expense for the three months ended March 31, 2018 and 2017 amounted to $65,679 and $69,135, respectively.


In January 2015 the Company entered into a capital lease for office equipment in the amount of $15,020. As of March 31, 2018 and December 31, 2017 the balance under capital lease obligations was $2,505 and $3,443, respectively.  




9



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



8.

Accrued Liabilities


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

66,916

 

$

69,025

 

Accrued expenses relating to vendors and others

 

 

132,094

 

 

136,681

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

128,549

 

 

115,039

 

Deferred rent

 

 

19,345

 

 

22,059

 

 

 

$


366,904

 

$

362,804

 


9.

Deferred Compensation


Deferred compensation represents amounts owed to four 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 March 31, 2018 and December 31, 2017, the Company recorded deferred compensation of $1,574,952 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. An incentive program was used to compensate the distributor for the difference between the price of product currently being charged by PFTI offered to the distributor for the oil and gas industry and the applicable distributor price currently available. The incentive, in the form of credits toward future product, is redeemable only 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. Targeted quarterly goals, if achieved, represent an aggregate of approximately $4 million in sales revenue between August 1, 2017 and June 30, 2018. Sales under the agreement amount to $936,193 for the period from August 1, 2017 to March 31, 2018.  


As of March 31, 2018 management determined it would not be possible for distributor to achieve its sales goals by June 30, 2018. Since the distributor would not be able to earn these credits the Company is no longer accruing any amounts under this agreement. As of March 31, 2018 the Company recognized $99,128 of amounts previously offset into revenue in the current period.  As of December 31, 2017 and March 31, 2018, the Company recorded a credit toward future product of $99,128 and $0, respectively.


11.

Notes Payable to Stockholders – Related Party


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 (3.678% and 3.616% per annum at March 31, 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 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.




10



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



During the three months ended March 31, 2018 we borrowed an additional $200,000 from him and repaid $0. As of March 31, 2018 and December 31, 2017 we owed him $8,163,349 and $7,963,349 which represented approximately 77% 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 Chairman and Chief Executive Officer 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 this same 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 the Company’s Chairman and CEO, as advances for working capital needs.  The Loan is unsecured and payable on demand.


During the three months ended March 31, 2018 and 2017, the Company incurred interest expense of $74,365 and $65,083, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $308 and $442 for the three months ended March 31, 2018 and 2017 related to the loan from one if its former Board members. These amounts, in addition to interest expense of $30 and $20 for the three months ended March 31, 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 March 31, 2018 and December 31, 2017:


 

 

March 31,

2018

 

December 31, 2017

 

Notes payable to stockholders

 

$

8,188,349

 

$

7,988,349

 

Capital lease obligation

 

 

2,505

 

 

3,443

 

 

 

 

8,190,854

 

 

7,991,792

 

Less: current maturities

 

 

(27,505

)

 

(7,991,792

)

Long-term maturities

 

$

8,163,349

 

$

 


Maturities of Long-Term Obligations for Five Years and Beyond


The minimum annual principal payments of notes payable and capital lease obligations at March 31, 2018 were:


 

 

 

 

 

2018

 

$

27,505

 

2019

  

 

8,163,349

 

 Total

 

$

8,190,854

 





11



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



12.

Commitments and Contingencies


Agreements


On September 7, 2017 the Company entered into an exclusive distribution agreement for the worldwide rights to sell its product in the oil and gas industry. The distributor will receive sales incentive credits toward future product, based upon the difference in current pricing and new pricing detailed in the agreement. The credits toward future product are only redeemable if targeted quarterly goals are achieved.  If the goals are not achieved the credits will be carried forward and are redeemable when the quarterly goals are achieved. Refer to Note 10.


On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. The renewed lease commences August 1, 2013 and requires an initial rent of $12,026 per month beginning in the second month of 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 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 months ended March 31, 2018 and March 31, 2017, respectively, the Company recorded non-cash stock-based compensation expense of $10,341  and $10,880, 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 March 31, 2018 and 2017 for the options is $4,027 and $10,808, respectively, and will be recognized through March 30, 2019.


A summary of the Company’s stock option plans as of March 31, 2018, and changes during the three month period then ended is presented below:  


 

 

Three Months Ended

March 31, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2017

 

 

3,180,000

 

 

$

0.20

 

Options granted

 

 

 

 

 

 

Options exercised

 

 

 

 

 

 

Options cancelled

 

 

 

 

 

 

Options expired

 

 

(45,000

)

 

 

 0.26

 

Options at end of period

 

 

3,135,000

 

 

$

0.20

 

Options exercisable at March 31, 2018

 

 

2,864,160

 

 

$

0.20

 




12



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



Changes in the Company’s non-vested options for the three months ended March 31, 2018 are summarized as follows:


 

 

Three Months Ended

March 31, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Non-vested options at December 31, 2017

 

 

270,840

 

 

$

0.15

 

Granted

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

Non-vested options at March 31, 2018

 

 

270,840

 

 

$

0.15

 


 

 

 

Options Outstanding

 

 

Options Exercisable

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average Exercise Price

 

 

Number Exercisable

 

 

Weighted Average Exercise Price

 

0.04-.40

 

 

 

3,135,000

 

 

 

3.04

 

 

$

0.20

 

 

 

2,864,160

 

 

$

0.20

 

Totals

 

 

 

3,135,000

 

 

 

3.04

 

 

$

0.20

 

 

 

2,864,160

 

 

$

0.20

 


A summary of the Company’s warrant activity as of March 31, 2018 and changes during the three month period then ended is presented below:


 

 

Three months ended

March 31, 2018

 

  

 

Weighted Average Exercise

 

  

 

Warrants

 

 

Price

 

Warrants outstanding at December 31, 2017

 

 

990,162

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

Expired

 

 

(168,750

)

 

$

(0.35

Warrants outstanding at March 31, 2018

 

 

821,412

 

 

$

0.17

 


 

 

 

Warrants Outstanding

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average

Exercise Price

 

$0.05 - $0.50

 

 

 

821,412

 

 

 

2.04

 

 

$

0.17

 

Totals

 

 

 

821,412

 

 

 

2.04

 

 

$

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 Chairman of the Board and an Executive officer, 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 (3.616% per annum at March 31, 2018), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or the consummation of any other financing over $7.0 million. Beginning in March 2006 and through February 2012, the maturity date for the agreement was extended annually from December 31, 2007 to the agreements current maturity date of December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.




13



PURADYN FILTER TECHNOLOGIES INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)



During the three months ended March 31, 2018 we borrowed an additional $200,000 from him and repaid $0. As of March 31, 2018 and December 31, 2017 we owed him $8,163,349 and $7,963,349 which represented approximately 77% and 78% of our total liabilities, respectively.


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.


During the three months ended March 31, 2018 and 2017, the Company incurred interest expense of $74,365 and $65,083, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $308 and $442, respectively for the three months ended March 31, 2018 and 2017 related to the loan from one if its other Board members. These amounts, in addition to interest expense of $30 and $20 for the three months ended March 31, 2018  and 2017, respectively, related to capital lease obligations, financing and loans from a stockholder.


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 months ended March 31, 2018  and 2017 we paid Boxwood Associates, Inc. $6,000 under this agreement. A former member of our board of directors and a significant stockholder 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 March 31, 2018 whose balances each represented approximately 60% and 10%, for a total of 70% of the total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed There were two customers at December 31, 2017 whose balances each represented approximately 53%, and 30%, for a total of 83% of total accounts receivables. During the months ended March 31, 2018 sales from two customers represented 43% and 17% for a total of 60% of sales. During the months ended March 31, 2017 sales from four customers represented 17%, 12%, 12% and 10% for a total of 51% of 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


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to the Company’s Chairman and CEO, as advances for working capital needs.  The Loan is unsecured and payable on demand.


On May 9, 2018 the Company’s Chairman and CEO extended the maturity date on his loans to December 31, 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. Effective April 30, 2018 our Chairman and 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 of Puradyn Filter Technologies Incorporated at an exercise price of $0.0208 per share.


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 designate a different vesting schedule.




14





ITEM 2.

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


You should read the following discussion together with our audited financial statements and the related notes appearing elsewhere in this report. In addition to historical financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ from these expectations as a result of factors including those described under “Cautionary Statement Regarding Forward-Looking Information” and Item 1A, “Risk Factors,” and elsewhere in this Annual Report on Form 10-K.

Overview


Sales of the Company’s products, the Puradyn® bypass oil filtration system and replaceable filter elements depend principally upon end user demand for such products.  Developing market acceptance for the Company’s existing and proposed products requires substantial marketing and sales efforts and the expenditure of a significant amount of funds to inform customers of the perceived benefits and cost advantages of its products. We continue to market our product and its benefits through direct contact efforts with our distributors, direct customers, and original equipment manufacturers.

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 earlier 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.

While we believe that the initial rollout of the product through the DNOW distribution channel has been extremely encouraging and these opportunities have led to new orders and evaluations in 2017, there are no assurances we will be able to increase sales in 2018 or that sales to DNOW will meet the targeted revenue goals described elsewhere in this report.

Our marketing efforts target industries and potential customers open to innovative methods to protect their high-value engine assets, to reduce oil maintenance costs, to reduce engine overhaul costs, and to reduce engine downtime.  We believe that these businesses are searching for new and progressive ways to better maintain their equipment, 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 relationships we have with Nabors Industries, Inc., DNOW, and other end-users and distributors.

Net sales increased as a number of customers are now resuming production after having been negatively impacted since 2015 by the volatility in oil prices. We have found the price of oil not only affects our customers in the oil and gas industry but all ancillary industries these customers serve.  The renewed activity in targeted market segments we began to see in 2016 continued throughout 2017.  The price of NYMEX (WTI) crude oil has steadily increased from the mid-30s range in 2016 to the mid-$60s range per barrel through the first fiscal quarter of 2018.  We believe that a continued and steady rise in oil prices will reflect positively on our product sales. Based on industry intelligence from oil field services firm Baker Hughes as published online weekly on its website, U.S. rig count increased 31% from March 2017 through March 2018.  If this trend continues, it is expected to better support product replacement filter sales in 2018 as rigs continue to return to service.  Additionally, some international customers may be impacted by currency volatility relative to the US dollar, political climate, and general economic, business, and competitive conditions.




15





Our net sales do not generate sufficient gross margins to pay our operating expenses. Historically, we have been materially reliant on working capital advances from our Chairman and Chief Executive Officer to address our liquidity and working capital issues through the utilization of the borrowing agreement with him.  During 2017 we borrowed an additional net amount of $875,000 from him, and at December 31, 2017 we owed him approximately $8 million, net of a debt conversion in the fourth quarter of 2016. He has also advanced us an additional $200,000 during the three months ended March 31, 2018. The loan, which is unsecured, matures on December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019. We do not have the funds 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 $1,574,952 and $1,626,003, respectively in deferred cash compensation at March 31, 2018 and December 31, 2017, which represents 15% and 16%, respectively of our current liabilities on that date. Since 2005, Messrs. Sandler and Kroger, two of our executive officers, and one other employee 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, declining revenues and as a result of 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 20,333,333 shares of our common stock at a conversion price of $0.30 per share. We were initially hopeful that his conversion of approximately 46% owed him into shares of our common stock at a price which was effectively 10 times the recent market price of our common stock would have provided new paths in our efforts to raise working capital upon terms acceptable to our company. To date, such has not been the case although we have continued to discuss financing options with a number of sources. If we are unable to significantly increase our sales, or if we are not able to borrow or raise additional investment capital, we may have to further 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 2018. There can be no assurance we will be able to raise additional capital or that sales will increase to the level required to break even or generate profitable operations to provide positive cash flow from operations. In the event we are unable to secure needed capital, we would be unable to continue our operations and it is likely that stockholders could lose their entire investment in our company.


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 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.



16





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 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 Financial Statements appearing elsewhere in this report.

Results of Operations

Net Sales. Net sales increased 29% during the three months ended March 31, 2018 compared to March 31, 2017. Domestic sales represented 80% and 83% of net revenues  during the three months ended March 31, 2018 and 2017, respectively, and during  the three months ended March 31, 2018 and 2017 international sales represented 20 % and 17%, respectively, of the Company’s net sales. The increase in sales is mainly attributable to orders for filters from a large customer and the reversal of a previous sales credit of $99,128 recorded for a distributor. While the agreement has accelerated multiple discussions with prospective customers and incremental sales are expected to continue, as of March 31, 2018 management determined it would not be possible for the distributor to achieve it sales goals by June 30, 2018. Since the distributor would not be able to earn these credits the Company is no longer accruing any amounts under this agreement. As of March 31, 2018 the Company recognized $99,128 of amounts previously offset, into  revenue in the current period.

Cost of Products Sold. Gross profit, as a percentage of sales, increased from 35% for three months ended March 31, 2017 to 57% for three months ended March 31, 2018. The increase in gross profit was attributable to the reversal of a sales credits of $91,044 of previous sales credits recorded to DNOW.


We continue to review cost of materials increases, some of which were passed through to our customers as product price increases in 2018. With the exception of our exclusivity with DNOW which defines a set level of pricing through December 2018, price increases can be passed on to our distributors and customers with timely notice.

Total Operating Costs. Total operating costs decreased during the three months ended March 31, 2018 compare to three months ended March 31, 2017. During the three months ended March 31, 2018 compared to the three months ended March 31, 2017 salaries and wages, as a percentage of sales, were 28% and 31%, respectively as a result of staffing reductions.  Management does not anticipate any material changes in salaries and wages at the current level of sales and anticipates only nominal hiring would be required to support increased sales to OEM and niche industry targets.

Selling and Administrative Expenses. Selling and administrative expenses decreased by approximately 5% during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 which are attributable to reduction in expenses associated with stock compensation to employees, reduced professional fees, and reduced rent, which were partial offset by increased travel.   We anticipate that our selling and administration expenses will remain at the same level in 2018 as 2017. Other Expenses represents various expenses including communication costs, office supplies and other components of administrative expenses.

Interest Expense Interest expense increased 17% in during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 as a result of increased borrowings in 2018. The Company pays interest monthly on the notes payable to our principal stockholder at prime rate less 0.5%, with rates reset as often as the Federal Reserve changes interest rates, which was a weighted average of 3.678% for the first quarter of 2018 as compared to an 3.616% for the first quarter of 2017.



17





Liquidity and Capital Resources

At March 31, 2018, we had negative working capital of $1,344,604 and our current ratio (current assets to current liabilities) was .41 to 1. As of December 31, 2017, we had cash of $54,438. and a negative working capital of $9,470,970 and our current ratio (current assets to current liabilities) was .08 to 1. The decrease in negative working capital is primarily attributable to our chairman extending the maturity date of his loans to December 31, 2019, increases in inventory and accounts receivable and 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.

Operating activities

Net cash used in operating activities was $271,757 for the three months ended March 31, 2018 compare to $141,059 for the three months ended March 31, 2017. In both periods, we principally used cash to fund our net losses.  Other period to period changes included increases in inventory and accounts receivable and decrease in deferred compensation which was offset by increases in accounts payable.

Investing activities

Net cash used in investing activities during three months ended March 31, 2018 compared to three months ended March 31, 2017 was $20,192 compared to $2,575, respectively the majority of the investing activity related to capitalized patent costs.

Financing activities

Net cash provided by financing activities was $237,511 for three months ended March 31, 2018 which was composed of $200,000 in loans from our stockholders as well as an increase in cash overdrafts of $38,499 which was partially offset by payment of $938  as compared to net cash provided by financing activities was $149,061 for the three months ended March 31, 2017, which was composed of $200,000 in loans from our stockholders as described above, repayment of loan  from a member of  the Board of Directors, totaling $50,000  and $939  in payments of capital lease obligations.  


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.




18





ITEM 4.

CONTROLS AND PROCEDURES.


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 March 31, 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 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.


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.




19





PART II.   OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS.


None.


ITEM 1A.

RISK FACTORS.


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, 2017. 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.


None, except as previously reported.


ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4.

MINE SAFETY DISCLOSURE.


Not Applicable.


ITEM 5.

OTHER INFORMATION.


None.


ITEM 6.

EXHIBITS.


10.1

 

Puradyn Filter Technologies Incorporated 2018 Equity Compensation Plan(1)

10.2

 

Standby Commitment Agreement Amendment No. 20 dated May 9, 2018*

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.

(1)

Incorporated by reference to exhibit to the Current Report on Form 8-K filed April 12, 2018.






20





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:  May 15, 2018

By:

/s/ Joseph V. Vittoria

 

 

Joseph V. Vittoria, Chairman and Chief Executive Officer, principal executive officer

  

 

 

Date:  May 15, 2018

By:

/s/ Alan J. Sandler

 

 

Alan J. Sandler, Secretary to the Board,
Vice President and principal financial officer and principal accounting officer








21


EX-10.2 2 pfti_ex10z2.htm STANDBY COMMITMENT AGREEMENT Joseph V

EXHIBIT 10.2


Joseph V. Vittoria

1616 South Ocean Boulevard

Palm Beach, FL 33480

(T) 561 659 0860 (F) 561 659 1045




Puradyn Filter Technologies, Inc.

2017 High Ridge Road

Boynton Beach, FL 33426

Attention: Alan J. Sandler, VP/CAO, Principal Financial Officer


May 9, 2018


RE:

Standby Commitment Agreement Amendment #20


Dear Mr. Sandler:


Pursuant to the Standby Commitment Agreement letters dated March 28, 2002, and March 14, 2003 and all Amendments thereto, I, Joseph Vittoria (the “Lending Party”), agree to extend the payback dates from December 31, 2018 to December 31, 2019.


All other terms defined in the original Standby Commitment Agreement letters and the Amendments thereto, not otherwise in conflict with this Amendment, shall remain in full force and effect.


IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and delivered by the respective officers hereunto duly authorized on the date first written above.




/s/ Joseph V. Vittoria

Joseph V. Vittoria





Accepted and Agreed:

Puradyn Filter Technologies, Inc.




By:

/s/ Alan J. Sandler

Alan J. Sandler, Vice President,

Chief Administration Officer, Principal Financial Officer








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, Joseph V. Vittoria, certify that:


1.

I have reviewed this report on Form 10-Q for the period ended March 31, 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:  May 15, 2018

 

/s/ Joseph V. Vittoria,

Joseph V. 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, Alan J. Sandler, certify that:


1.

I have reviewed this report on Form 10-Q for the period March 31, 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: May 15, 2018

 

/s/ Alan J. Sandler

Alan J. Sandler, Vice President, 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 March 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Joseph V. Vittoria, Chief Executive Officer of the Company, 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: May 15, 2018

 

/s/ Joseph V. Vittoria

Joseph V. Vittoria, Chief Executive Officer, principal executive 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.
















EX-32.2 6 pfti_ex32z2.htm SECTION 1350 CERTIFICATION Certification

EXHIBIT 32.2


Section 1350 Certification


In connection with the Quarterly Report of Puradyn Filter Technologies Incorporated (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Alan J. Sandler, Vice President and principal financial and accounting officer of the Company, 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: May 15, 2018

 

/s/ Alan J. Sandler

Alan J. Sandler, Vice President, 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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pfti:item 558873 579065 62153 65888 496720 513177 3735 3395 5027 4677 270840 270840 0.15 0.15 false --12-31 2018-03-31 Smaller Reporting Company PURADYN FILTER TECHNOLOGIES INC 0001019787 2018 Q1 10-Q P30D 1450861 1455888 1496188 1496188 1045217 1045217 56558 56558 152322 152322 88842 88842 153249 153249 4027 10808 0.83 0.53 0.30 0.70 0.60 0.10 0.43 0.17 0.17 0.12 0.12 0.60 0.51 0.10 2 2 2 4 P3Y P5Y 0 0 1429 1575 12026 13941 821412 990162 0.17 0.24 -0.35 221430 2019-07-31 2000 0.05 0.50 821412 821412 0.17 0.17 250000 250000 6000 6000 P17Y P20Y 3180000 3135000 45000 0.20 0.20 0.26 3135000 3135000 0.20 0.20 2864160 2864160 0.20 0.20 6100000 25000 250000 0.014 0.05 0.03616 2019-12-31 2019-12-31 2019-12-31 2019-12-31 7000000 74365 65083 308 442 30 20 200000 3956412 4522662 P3Y0M15D P3Y0M15D P2Y0M15D P2Y0M15D 7988349 25000 7963349 8163349 7963349 26373 20000 20000 65679 69135 27505 8163349 0.78 0.77 0.78 34970 2864160 0.20 0.04 0.40 <p style="margin: 0px; text-align: justify; font: 10pt 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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; font: 10pt Times New Roman, Times, Serif"><i>Use of Estimates</i></p> <p style="font: 10pt/10pt Times New Roman, Times, Serif; margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify; font: 10pt Times New Roman, Times, Serif">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="margin: 0px; font: 10pt Times New Roman, Times, Serif"></p> <p style="margin: 0px; text-align: justify; font: 10pt Times New Roman, Times, Serif"><i>Accounts Receivable</i></p> <p style="margin: 0px; text-align: justify; font: 10pt Times New Roman, Times, Serif"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify; font: 10pt Times New Roman, Times, Serif">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; font: 10pt Times New Roman, Times, Serif"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify; font: 10pt Times New Roman, Times, Serif">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. 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vertical-align: bottom; width: 23.93px; font: 10pt Times New Roman, Times, Serif"><p style="margin: 0px; padding: 0px; font: 10pt Times New Roman, Times, Serif">&#160;</p></td><td style="margin-top: 0px; border-bottom: #000000 3px double; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 16.06px"><p style="margin: 0px; font: 10pt Times New Roman, Times, Serif">$</p> </td><td style="margin-top: 0px; border-bottom: #000000 3px double; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 56.06px"><p style="margin: 0px; text-align: right; font: 10pt Times New Roman, Times, Serif">20,000</p> </td><td style="margin-top: 0px; border-bottom: #FFFFFF 3px double; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 7.86px"><p style="margin: 0px; padding: 0px; font: 10pt Times New Roman, Times, Serif">&#160;</p></td></tr></table> <p style="margin: 0px; text-align: justify; font: 10pt Times New Roman, Times, Serif"><i>Income Taxes</i></p> <p style="margin: 0px; text-align: justify; font: 10pt Times New Roman, Times, Serif"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify; font: 10pt Times New Roman, Times, Serif">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; font: 10pt Times New Roman, Times, Serif"><i>Reclassifications</i></p> <p style="margin: 0px; font: 10pt Times New Roman, Times, Serif"><br /></p> <p style="margin: 0px; text-indent: 48px; font: 10pt Times New Roman, Times, Serif">Certain prior year amounts have been reclassified to conform to the current year presentation. </p> 17000 17000 0.001 0.001 500000 500000 0 0 0 0 0.001 0.001 100000000 100000000 69016468 69016468 69016468 69016468 61164 59074 4000000 936193 15020 69016468 1373320 1526013 532540 548148 45327 40300 795453 937565 69355 62481 400764 454106 270896 420978 10266423 10445518 8163349 8163349 10266423 2282169 1626003 1574952 3443 2505 99128 362804 366904 186696 274359 38449 1373320 1526013 -8893103 -8919505 -62561279 -62598022 53599160 53609501 69016 69016 69016468 69016468 -0.00 -0.00 -36743 -175544 74703 65545 37960 -109999 343338 356277 150070 143340 193268 212937 381298 246278 504442 442712 -20192 -2575 20192 2575 54438 12806 18233 -54438 5427 237511 149061 938 939 200000 200000 38449 <div style="margin-top: 0; font: 10pt Times New Roman; color: #000000"><p style="margin: 0px"></p> <p style="margin-top: 0px; width: 32px; float: left"><b>1.</b></p> <p style="margin: 0px"><b>Basis of Presentation, Going Concern and Summary of Significant Accounting Policies</b></p> <p style="margin: 0px; clear: left"><br /></p> <p style="margin: 0px"><i>Organization</i></p> <p style="margin: 0px"><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 &#160;oil filtration systems under the trademark Puradyn<sup>&#194;&#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 period ended March 31, 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; text-align: justify">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="margin: 0px; text-align: justify"><br /></p> <p style="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: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="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="margin: 0px; text-align: justify"><br /></p> <p style="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 the first quarter of fiscal 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 the first quarter of 2018. </p> <p style="margin: 0px; text-align: justify"><br /></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"><br /></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 March 31, 2018 and December&#160;31, 2017, the Company did not have any cash equivalents.</p> <p style="line-height: 10pt; margin: 0px; text-align: justify"></p> <p style="margin: 0px"><br /></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 March &#160;31, 2018 and December&#160;31, 2017, respectively, because of their short-term natures.</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px"><i>Accounts Receivable</i></p> <p style="margin: 0px"><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 are exhausted, the determination for charging off uncollectible receivables is made. </p> <p style="margin: 0px; text-align: justify"><br /></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"><br /></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&#194;&#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"><br /></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"><br /></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&#194;&#146; net carrying amounts. 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vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">38,069</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 6.6px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; 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; 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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>March 31, </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; background-color: #ccffcc; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; 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background-color: #ccffcc; vertical-align: bottom; width: 79.4px"><p style="margin: 0px; text-align: right">152,322</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; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">152,322</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; vertical-align: bottom"><p style="margin: 0px">Software and website development</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79.4px"><p style="margin: 0px; text-align: right">88,842</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 6.66px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">88,842</p> </td><td style="margin-top: 0px; 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">Computer hardware and software</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-bottom: #000000 1px solid; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; 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vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79.4px"><p style="margin: 0px; text-align: right">1,496,188</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 6.66px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">1,496,188</p> </td><td style="margin-top: 0px; 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">Less accumulated depreciation and amortization</p> </td><td style="margin-top: 0px; background-color: #ccffcc; 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margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 7.26px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid"><p style="margin: 0px">$</p> </td><td style="vertical-align: bottom; width: 80.6px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid"><p style="text-align: right; margin: 0px">0.20</p> </td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 9.93px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 77.93px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid"><p style="text-align: right; margin: 0px">2,864,160</p> </td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc; border-bottom: #ffffff 1px solid"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid"><p style="margin: 0px">$</p> </td><td style="vertical-align: bottom; width: 79.13px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid"><p style="text-align: right; margin: 0px">0.20</p> </td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; background-color: #ccffcc; border-bottom: #ffffff 1px solid"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="vertical-align: bottom; width: 88px; margin-top: 0px"><p style="margin: 0px">Totals</p> </td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px; border-bottom: #000000 3px double"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 79.2px; margin-top: 0px; border-bottom: #000000 3px double"><p style="text-align: right; margin: 0px">3,135,000</p> </td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px; border-bottom: #ffffff 3px double"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px; border-bottom: #000000 3px double"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 79.2px; margin-top: 0px; border-bottom: #000000 3px double"><p style="text-align: right; margin: 0px">3.04</p> </td><td style="vertical-align: bottom; width: 8.8px; margin-top: 0px; border-bottom: #ffffff 3px double"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 7.26px; margin-top: 0px; border-bottom: #000000 3px double"><p style="margin: 0px">$</p> </td><td style="vertical-align: bottom; width: 80.6px; margin-top: 0px; border-bottom: #000000 3px double"><p style="text-align: right; margin: 0px">0.20</p> </td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; border-bottom: #ffffff 3px double"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 9.93px; margin-top: 0px; border-bottom: #000000 3px double"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 77.93px; margin-top: 0px; border-bottom: #000000 3px double"><p style="text-align: right; margin: 0px">2,864,160</p> </td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; border-bottom: #ffffff 3px double"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; border-top: #ffffff 1px solid"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; border-bottom: #000000 3px double"><p style="margin: 0px">$</p> </td><td style="vertical-align: bottom; width: 79.13px; margin-top: 0px; border-bottom: #000000 3px double"><p style="text-align: right; margin: 0px">0.20</p> </td><td style="vertical-align: bottom; width: 8.73px; margin-top: 0px; border-bottom: #ffffff 3px double"><p style="margin: 0px">&#160;</p> </td></tr> </table> <p style="margin: 0px"><br /></p> <p style="margin: 0px; text-indent: 48px">A summary of the Company&#146;s warrant activity as of March 31, 2018 and changes during the three month period then ended is presented below:</p> <p style="line-height: 8pt; margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" style="width: 100%; margin-top: 0px; font-size: 10pt"><tr style="height: 0px; font-size: 0"><td></td><td style="width: 20.13px"></td><td style="width: 3.4px"></td><td style="width: 81.33px"></td><td style="width: 17.4px"></td><td style="width: 6.06px"></td><td style="width: 23.86px"></td><td style="width: 57.06px"></td><td style="width: 7.8px"></td></tr> <tr><td style="vertical-align: bottom; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 20.13px; margin-top: 0px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td colspan="6" style="vertical-align: bottom; width: 189.13px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="text-align: center; margin: 0px; font-size: 8pt"><b>Three months ended</b></p> <p style="text-align: center; margin: 0px; font-size: 8pt"><b>March 31, 2018</b></p> </td><td style="vertical-align: bottom; width: 7.8px; margin-top: 0px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td></tr> <tr><td style="vertical-align: bottom; margin-top: 0px"><p style="margin: 0px; font-size: 8pt">&#160;&#160;</p> </td><td style="vertical-align: bottom; width: 20.13px; margin-top: 0px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td colspan="6" style="vertical-align: bottom; width: 189.13px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="text-align: center; margin: 0px; font-size: 8pt"><b>Weighted Average Exercise</b></p> </td><td style="vertical-align: bottom; width: 7.8px; margin-top: 0px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td></tr> <tr><td style="vertical-align: bottom; margin-top: 0px"><p style="margin: 0px; font-size: 8pt">&#160;&#160;</p> </td><td style="vertical-align: bottom; 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margin: 0px">&#151;</p> </td><td style="vertical-align: bottom; width: 7.8px; margin-top: 0px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="vertical-align: bottom; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding-left: 24px">Exercised</p> </td><td style="vertical-align: bottom; width: 20.13px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 3.4px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 81.33px; margin-top: 0px; background-color: #ccffcc"><p style="text-align: right; margin: 0px">&#151;</p> </td><td style="vertical-align: bottom; width: 17.4px; margin-top: 0px; background-color: #ccffcc; border-bottom: #ffffff 1px solid"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 6.06px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 23.86px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 57.06px; margin-top: 0px; background-color: #ccffcc"><p style="text-align: right; margin: 0px">&#151;</p> </td><td style="vertical-align: bottom; width: 7.8px; margin-top: 0px; background-color: #ccffcc; border-bottom: #ffffff 1px solid"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="vertical-align: bottom; margin-top: 0px"><p style="margin: 0px; padding-left: 24px">Expired</p> </td><td style="vertical-align: bottom; width: 20.13px; margin-top: 0px"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 3.4px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 81.33px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="text-align: right; margin: 0px">(168,750</p> </td><td style="vertical-align: bottom; width: 17.4px; margin-top: 0px"><p style="margin: 0px">)</p> </td><td style="vertical-align: bottom; width: 6.06px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 23.86px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="margin: 0px">$</p> </td><td style="vertical-align: bottom; width: 57.06px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="text-align: right; margin: 0px">(0.35</p> </td><td style="vertical-align: bottom; width: 7.8px; margin-top: 0px"><p style="margin: 0px">)&#160;</p> </td></tr> <tr><td style="vertical-align: bottom; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px">Warrants outstanding at March 31, 2018</p> </td><td style="vertical-align: bottom; width: 20.13px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; width: 3.4px; margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 3px double"><p style="margin: 0px">&#160;</p> </td><td style="vertical-align: bottom; 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margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" align="center" style="margin-top: 0px; font-size: 10pt"><tr style="height: 0px; font-size: 0"><td style="width: 132.8px"></td><td style="width: 13.26px"></td><td style="width: 13.26px"></td><td style="width: 13.26px"></td><td style="width: 119.53px"></td><td style="width: 13.26px"></td><td style="width: 13.26px"></td><td style="width: 13.26px"></td><td style="width: 119.53px"></td><td style="width: 13.26px"></td><td style="width: 13.26px"></td><td style="width: 13.26px"></td><td style="width: 119.53px"></td><td style="width: 13.2px"></td></tr> <tr><td style="vertical-align: bottom; width: 132.8px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td colspan="10" style="vertical-align: bottom; 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padding: 0px; font-size: 8pt">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td colspan="2" style="vertical-align: bottom; width: 132.8px; margin-top: 0px"><p style="text-align: center; margin: 0px; font-size: 8pt"><b>Remaining Average Contractual Life (In Years)</b></p> </td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td colspan="2" style="vertical-align: bottom; width: 132.8px; margin-top: 0px; border-bottom: #000000 1px solid"><p style="text-align: center; margin: 0px; font-size: 8pt"><b>Weighted Average </b></p> <p style="text-align: center; margin: 0px; font-size: 8pt"><b>Exercise Price</b></p> </td><td style="vertical-align: bottom; width: 13.2px; margin-top: 0px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td></tr> <tr><td style="vertical-align: bottom; width: 132.8px; margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid"><p style="text-align: center; margin: 0px">$0.05 - $0.50</p> </td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 119.53px; margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid"><p style="text-align: right; margin: 0px">821,412</p> </td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 119.53px; margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid"><p style="text-align: right; margin: 0px">2.04</p> </td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="vertical-align: bottom; width: 13.26px; margin-top: 0px; background-color: #ccffcc"><p style="margin: 0px">$</p> </td><td style="vertical-align: bottom; width: 119.53px; 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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&#160;percentage points (3.616% per annum at March 31, 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 the consummation of any other financing over $7.0&#160;million. Beginning in March&#160;2006 and through February&#160;2012, the maturity date for the agreement was extended annually from December&#160;31, 2007 to the agreements current maturity date of December&#160;31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px"><br /></p> <p style="text-align: justify; margin: 0px; text-indent: 48px">During the three months ended March 31, 2018 we borrowed an additional $200,000 from him and repaid $0. As of March 31, 2018 and December 31, 2017 we owed him $8,163,349 and $7,963,349 which represented approximately 77% and 78% of our total liabilities, respectively.</p> <p style="text-align: justify; margin: 0px"><br /></p> <p style="text-align: justify; margin: 0px; text-indent: 32px">&#160;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="text-align: justify; margin: 0px"><br /></p> <p style="text-align: justify; margin: 0px; text-indent: 48px">During the three months ended March 31, 2018 &#160;and 2017, the Company incurred interest expense of $74,365 and $65,083, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $308 and $442, respectively for the three months ended March 31, 2018 and 2017 related to the loan from one if its other Board members. These amounts, in addition to interest expense of $30 and $20 for the three months ended March 31, 2018 &#160;and 2017, respectively, related to capital lease obligations, financing and loans from a stockholder.</p> <p style="text-align: justify; line-height: 8pt; margin: 0px"><br /></p> <p style="text-align: justify; line-height: 11pt; margin: 0px; text-indent: 48px">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 months ended March 31, 2018 &#160;and 2017 we paid Boxwood Associates, Inc. $6,000 under this agreement. 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Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed There were two customers at December 31, 2017 whose balances each represented approximately 53%, and 30%<b>,</b> for a total of 83% of total accounts receivables. During the months ended March 31, 2018 sales from two customers represented 43% and 17% for a total of 60% of sales. During the months ended March 31, 2017 sales from four customers represented 17%, 12%, 12% and 10% for a total of 51% of sales. 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In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. 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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: 10pt; margin: 0px; text-align: justify"><br /></p> <p style="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="margin: 0px; text-align: justify"><br /></p> <p style="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 the first quarter of fiscal 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 the first quarter of 2018. </p></div> <div style="margin-top: 0; font: 10pt Times New Roman; color: #000000"><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. 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During the three months ended March 31, 2018 and March 31, 2017, advertising costs incurred by the Company totaled approximately $0, and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations. </p></div> <div style="margin-top: 0; font: 10pt Times New Roman; color: #000000"><p style="margin: 0px; text-align: justify"></p> <p style="margin: 0px; text-align: justify"><i>Engineering and Development</i></p> <p style="margin: 0px; text-align: justify"><br /></p> <p style="margin: 0px; text-indent: 48px; text-align: justify">Engineering and development costs are expensed as incurred. 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We have estimated forfeiture rates based on our historical experience. Stock option compensation expense for the year ended December&#160;31, 2017 has been recognized as a component of cost of goods sold and general and administrative expenses in the accompanying financial statements for the three months ended March 31, 2018.</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px"><br /></p> <p style="text-align: justify; margin: 0px; text-indent: 48px">The Company leases its employees from a payroll leasing company. 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background-color: #ccffcc; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">$</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">62,481</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: 6.6px"><p style="margin: 0px; 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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>March 31, </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; background-color: #ccffcc; vertical-align: bottom; 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vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 79.4px"><p style="margin: 0px; text-align: right">152,322</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; padding: 0px">&#160;</p></td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">152,322</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; vertical-align: bottom"><p style="margin: 0px">Software and website development</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; 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vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16.93px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79.4px"><p style="margin: 0px; text-align: right">1,496,188</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 6.66px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">1,496,188</p> </td><td style="margin-top: 0px; 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">Less accumulated depreciation and amortization</p> </td><td style="margin-top: 0px; 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vertical-align: bottom; width: 85.6px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 16px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 85.73px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 4.46px"><p style="margin: 0px; text-align: justify">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom"><p style="margin: 0px; text-align: justify">Patent costs</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 16px"><p style="margin: 0px; text-align: justify">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 6.73px"><p style="margin: 0px; text-align: justify">$</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; 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text-align: justify">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 78.86px"><p style="margin: 0px; text-align: right">(65,888</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 16px"><p style="margin: 0px">)</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.73px"><p style="margin: 0px; text-align: justify">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">(62,153</p> </td><td style="margin-top: 0px; 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; text-align: justify">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 16px"><p style="margin: 0px; text-align: justify">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-top: #000000 1px solid; 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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: 85.73px"><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: 3.4px"><p style="margin: 0px; font-size: 8pt">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</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: 85px"><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: 85.73px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 3.4px"><p style="margin: 0px; padding: 0px; font-size: 8pt">&#160;</p></td></tr> <tr><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom"><p style="margin: 0px">Accrued vacation and benefits</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: 17px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 68px"><p style="margin: 0px; text-align: right">66,916</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: 6.73px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">69,025</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 3.4px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">Accrued expenses relating to vendors and others</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><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 style="margin-top: 0px; vertical-align: bottom; width: 68px"><p style="margin: 0px; text-align: right">132,094</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">136,681</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 3.4px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom"><p style="margin: 0px">Accrued warranty costs</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: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 68px"><p style="margin: 0px; text-align: right">20,000</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: 6.73px"><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">20,000</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 3.4px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">Accrued interest payable relating to stockholder notes</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><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 style="margin-top: 0px; vertical-align: bottom; width: 68px"><p style="margin: 0px; text-align: right">128,549</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">115,039</p> </td><td style="margin-top: 0px; border-bottom: #ffffff 1px solid; vertical-align: bottom; width: 3.4px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom"><p style="margin: 0px">Deferred rent</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 1px solid; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid; vertical-align: bottom; width: 68px"><p style="margin: 0px; text-align: right">19,345</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-bottom: #ffffff 1px solid; vertical-align: bottom; width: 17px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid; vertical-align: bottom; width: 6.73px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-bottom: #000000 1px solid; vertical-align: bottom; width: 79px"><p style="margin: 0px; text-align: right">22,059</p> </td><td style="margin-top: 0px; background-color: #ccffcc; border-bottom: #ffffff 1px solid; vertical-align: bottom; width: 3.4px"><p style="margin: 0px">&#160;</p> </td></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 style="margin-top: 0px; border-bottom: #000000 3px double; vertical-align: bottom; 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margin-bottom: 3.73px"><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><td style="width: 17px"></td><td style="width: 6.66px"></td><td style="width: 76px"></td><td style="width: 6px"></td></tr> <tr><td style="margin-top: 0px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; width: 17px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; width: 6.66px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; width: 76px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; width: 6px"><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">2018</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">$</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 76px"><p style="margin: 0px; text-align: right">27,505</p> </td><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom; width: 6px"><p style="margin: 0px; padding: 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">8,163,349</p> </td><td style="margin-top: 0px; border-bottom: #ffffff 1px solid; vertical-align: bottom; width: 6px"><p style="margin: 0px; padding: 0px">&#160;</p></td></tr> <tr><td style="margin-top: 0px; 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font-size: 8pt; text-align: center"><b>Exercise Price</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7.46px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td></tr> <tr><td style="margin-top: 0px; background-color: #ccffcc; vertical-align: bottom"><p style="margin: 0px">Options outstanding at December 31, 2017</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">3,180,000</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: 20px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; 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width: 8px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 20px"><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: 76.53px"><p style="margin: 0px; text-align: right">&#151;</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; 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; 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vertical-align: bottom; width: 8.73px"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; border-bottom: #000000 3px double; vertical-align: bottom; width: 8.73px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; border-bottom: #000000 3px double; vertical-align: bottom; width: 79.13px"><p style="margin: 0px; text-align: right">0.20</p></td></tr></table></div> <div style="margin-top: 0; font: 10pt Times New Roman; color: #000000"><p style="margin: 0px; text-indent: 48px">A summary of the Company&#8217;s warrant activity as of March 31, 2018 and changes during the three month period then ended is presented below:</p> <p style="line-height: 8pt; 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><td style="width: 20.13px"></td><td style="width: 3.4px"></td><td style="width: 81.33px"></td><td style="width: 17.4px"></td><td style="width: 6.06px"></td><td style="width: 23.86px"></td><td style="width: 57.06px"></td><td style="width: 7.8px"></td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding: 0px">&#160;</p></td><td style="margin-top: 0px; vertical-align: bottom; width: 20.13px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td colspan="6" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 189.13px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>Three months ended</b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>March 31, 2018</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7.8px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; font-size: 8pt">&#160;&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 20.13px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td colspan="6" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 189.13px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>Weighted Average Exercise</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7.8px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; font-size: 8pt">&#160;&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 20.13px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 84.73px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>Warrants</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 17.4px"><p style="margin: 0px; font-size: 8pt"><b>&#160;</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6.06px"><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: 80.93px"><p style="margin: 0px; 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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] Percentage of plan. Chairman and Chief Executive Officer [Member] Prepaid Expense and Other Assets, Current Assets, Current Assets Accrued Liabilities, Current Liabilities, Current Notes Payable, Related Parties, Noncurrent Liabilities, 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 Prepaid Expense and Other Assets Increase (Decrease) in Inventories Increase (Decrease) in Accounts Payable Number of warrants that can be purchased in each lot during the month [Default Label] Increase (Decrease) in Deferred Compensation Increase (Decrease) in Accrued Liabilities Net Cash Provided by (Used in) Operating Activities Payments to Acquire Intangible Assets Net Cash Provided by (Used in) Investing Activities Proceeds from (Repayments of) Bank Overdrafts 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, 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 Arrangements by Share-based Payment Award, Options, Forfeitures 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, 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, Options, Vested, Weighted Average Grant Date Fair Value 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 Debt Instrument, Interest Rate, Stated Percentage EX-101.PRE 12 pfti-20180331_pre.xml XBRL PRESENTATION FILE XML 13 R1.htm IDEA: XBRL DOCUMENT v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 13, 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 Mar. 31, 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 Q1  
Document Fiscal Year Focus 2018  
XML 14 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED BALANCE SHEETS - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash $ 54,438
Accounts receivable, net of allowance for uncollectible accounts of $17,000 and $17,000, respectively 420,978 270,896
Inventories, net 454,106 400,764
Prepaid expenses and other current assets 62,481 69,355
Total current assets 937,565 795,453
Property and equipment, net 40,300 45,327
Other noncurrent assets 548,148 532,540
Total assets 1,526,013 1,373,320
Current liabilities:    
Cash overdraft 38,449
Accounts payable 274,359 186,696
Accrued liabilities 366,904 362,804
Sales incentives 99,128
Capital lease obligation 2,505 3,443
Deferred compensation 1,574,952 1,626,003
Notes Payable - stockholders 25,000 7,988,349
Total current liabilities 2,282,169 10,266,423
Notes Payable - stockholders 8,163,349
Total long-term liabilities 8,163,349
Total Liabilities 10,445,518 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 53,609,501 53,599,160
Accumulated deficit (62,598,022) (62,561,279)
Total stockholders' deficit (8,919,505) (8,893,103)
Total liabilities and stockholders' deficit $ 1,526,013 $ 1,373,320
XML 15 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)
Mar. 31, 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 16 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Net sales $ 885,740 $ 688,990
Cost of products sold 504,442 442,712
Gross profit 381,298 246,278
Costs and expenses:    
Salaries and wages 193,268 212,937
Selling and administrative 150,070 143,340
Total Operating Costs 343,338 356,277
Income / (Loss) from operations 37,960 (109,999)
Other income (expense):    
Interest expense (74,703) (65,545)
Total other expense, net (74,703) (65,545)
Net loss before income tax expense (36,743) (175,544)
Provision for income taxes
Net loss $ (36,743) $ (175,544)
Loss per share - basic and diluted $ (0.00) $ (0.00)
Basic and diluted weighted average common shares outstanding 69,016,468 69,016,468
XML 17 R5.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operating activities    
Net loss $ (36,743) $ (175,544)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 8,762 8,072
Compensation expense on stock-based arrangements with employees and consultants 10,341 10,880
Changes in operating assets and liabilities:    
Accounts receivable (150,082) (31,589)
Prepaid expenses and other current assets 6,874 (4,969)
Inventories (53,342) 121,227
Security deposits 850
Accounts payable 87,663 (37,998)
Sales incentives (99,128)
Deferred compensation (51,051) (19,226)
Accrued liabilities 4,099 (11,912)
Net cash used in operating activities (271,757) (141,059)
Investing activities    
Capitalized patent costs (20,192) (2,575)
Net cash used in investing activities (20,192) (2,575)
Financing activities    
Cash overdraft 38,449
Proceeds from issuance of notes payable to stockholders 200,000 200,000
Repayments of stockholders loan (50,000)
Payment of capital lease obligations (938) (939)
Net cash provided by financing activities 237,511 149,061
Net (Decrease) / Increase in cash and cash equivalents (54,438) 5,427
Cash and cash equivalents at beginning of period 54,438 12,806
Cash and cash equivalents at end of period 18,233
Supplemental cash flow information:    
Cash paid for interest 61,164 59,074
Cash paid for taxes
Supplemental disclosure of non-cash transactions:    
Forgiveness of stockholder loan and accrued interest $ 26,373
XML 18 R6.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 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 period ended March 31, 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 the first quarter of fiscal 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 the first quarter of 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 March 31, 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 March  31, 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 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 assetÂ’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 assetsÂ’ 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 three months ended March 31, 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 three-months ended March 31, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of March 31, 2018 (unaudited)

 

$

20,000

 


Advertising Costs


Advertising costs are expensed as incurred. During the three months ended March 31, 2018 and March 31, 2017, advertising costs incurred by the Company totaled approximately $0, and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.


Engineering and Development


Engineering and development costs are expensed as incurred. During the three months ended March 31, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,429 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 months ended March 31, 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 March 31, 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


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 3,956,412 and 4,522,662 for the three months ended March 31, 2018 and 2017, respectively.


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 the first quarter of fiscal 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 in the first quarter of 2018.


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

XML 19 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
Going Concern
3 Months Ended
Mar. 31, 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 $271,757 and $141,059 during the three-months ended March 31, 2018 and 2017, 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 a current stockholder 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 20 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
Inventories
3 Months Ended
Mar. 31, 2018
Inventory Disclosure [Abstract]  
Inventories

3.

Inventories


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

885,144

 

 

901,600

 

Work In Progress

 

 

71,867

 

 

125,932

 

Finished goods

 

 

140,711

 

 

16,848

 

Valuation allowance

 

 

(643,616

)

 

(643,616

)

Inventory, net

 

$

454,106

 

 

400,764

XML 21 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Prepaid Expenses and Other Current Assets
3 Months Ended
Mar. 31, 2018
Prepaid Expense and Other Assets, Current [Abstract]  
Prepaid Expenses and Other Current Assets

4.

Prepaid Expenses and Other Current Assets


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

24,412

 

 

26,648

 

Deposits

 

 

38,069

 

 

42,707

 

 

 

$

62,481

 

 

69,355

XML 22 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment

5.

Property and Equipment


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


 

 

March 31,

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

 

 

 (1,455,888

)

 

(1,450,861

)

 

 

$

40,300

 

$

45,327

 


Depreciation and amortization expense of property and equipment for the three months ended March 31, 2018 and 2017 are $5,027 and $4,677, respectively.

XML 23 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Patents
3 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Patents

6.

Patents


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

 

 

 

 

Patent costs

 

$

579,065

 

$

558,873

 

Less accumulated amortization

 

 

(65,888

)

 

(62,153

)

 

 

$

513,177

 

$

496,720

 


Amortization expense for the three months ended March 31, 2018 and 2017 amounted to $3,735 and $3,395, respectively.

XML 24 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Leases
3 Months Ended
Mar. 31, 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 March 31, 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 remaining minimum lease payments over the term of the current lease amount to $221,430.  Rent expense for the three months ended March 31, 2018 and 2017 amounted to $65,679 and $69,135, respectively.


In January 2015 the Company entered into a capital lease for office equipment in the amount of $15,020. As of March 31, 2018 and December 31, 2017 the balance under capital lease obligations was $2,505 and $3,443, respectively.

XML 25 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accrued Liabilities
3 Months Ended
Mar. 31, 2018
Accrued Liabilities [Abstract]  
Accrued Liabilities

8.

Accrued Liabilities


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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

66,916

 

$

69,025

 

Accrued expenses relating to vendors and others

 

 

132,094

 

 

136,681

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

128,549

 

 

115,039

 

Deferred rent

 

 

19,345

 

 

22,059

 

 

 

$


366,904

 

$

362,804

XML 26 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Deferred Compensation
3 Months Ended
Mar. 31, 2018
Compensation Related Costs [Abstract]  
Deferred Compensation

9.

Deferred Compensation


Deferred compensation represents amounts owed to four 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 March 31, 2018 and December 31, 2017, the Company recorded deferred compensation of $1,574,952 and $1,626,003, respectively.

XML 27 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Sales Incentives
3 Months Ended
Mar. 31, 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. An incentive program was used to compensate the distributor for the difference between the price of product currently being charged by PFTI offered to the distributor for the oil and gas industry and the applicable distributor price currently available. The incentive, in the form of credits toward future product, is redeemable only 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. Targeted quarterly goals, if achieved, represent an aggregate of approximately $4 million in sales revenue between August 1, 2017 and June 30, 2018. Sales under the agreement amount to $936,193 for the period from August 1, 2017 to March 31, 2018.  


As of March 31, 2018 management determined it would not be possible for distributor to achieve its sales goals by June 30, 2018. Since the distributor would not be able to earn these credits the Company is no longer accruing any amounts under this agreement. As of March 31, 2018 the Company recognized $99,128 of amounts previously offset into revenue in the current period.  As of December 31, 2017 and March 31, 2018, the Company recorded a credit toward future product of $99,128 and $0, respectively.

XML 28 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Notes Payable to Stockholders - Related Party
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Notes Payable to Stockholders - Related Party

11.

Notes Payable to Stockholders – Related Party


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 (3.678% and 3.616% per annum at March 31, 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 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 three months ended March 31, 2018 we borrowed an additional $200,000 from him and repaid $0. As of March 31, 2018 and December 31, 2017 we owed him $8,163,349 and $7,963,349 which represented approximately 77% 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 Chairman and Chief Executive Officer 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 this same 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 the Company’s Chairman and CEO, as advances for working capital needs.  The Loan is unsecured and payable on demand.


During the three months ended March 31, 2018 and 2017, the Company incurred interest expense of $74,365 and $65,083, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $308 and $442 for the three months ended March 31, 2018 and 2017 related to the loan from one if its former Board members. These amounts, in addition to interest expense of $30 and $20 for the three months ended March 31, 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 March 31, 2018 and December 31, 2017:


 

 

March 31,

2018

 

December 31, 2017

 

Notes payable to stockholders

 

$

8,188,349

 

$

7,988,349

 

Capital lease obligation

 

 

2,505

 

 

3,443

 

 

 

 

8,190,854

 

 

7,991,792

 

Less: current maturities

 

 

(27,505

)

 

(7,991,792

)

Long-term maturities

 

$

8,163,349

 

$

 


Maturities of Long-Term Obligations for Five Years and Beyond


The minimum annual principal payments of notes payable and capital lease obligations at March 31, 2018 were:


 

 

 

 

 

2018

 

$

27,505

 

2019

  

 

8,163,349

 

 Total

 

$

8,190,854

XML 29 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

12.

Commitments and Contingencies


Agreements


On September 7, 2017 the Company entered into an exclusive distribution agreement for the worldwide rights to sell its product in the oil and gas industry. The distributor will receive sales incentive credits toward future product, based upon the difference in current pricing and new pricing detailed in the agreement. The credits toward future product are only redeemable if targeted quarterly goals are achieved.  If the goals are not achieved the credits will be carried forward and are redeemable when the quarterly goals are achieved. Refer to Note 10.


On September 27, 2012, the Company entered into a 72 month lease for its corporate offices and warehouse facility in Boynton Beach, Florida. The renewed lease commences August 1, 2013 and requires an initial rent of $12,026 per month beginning in the second month of 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 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 30 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants
3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options and Warrants

13.

Stock Options and Warrants


For the three months ended March 31, 2018 and March 31, 2017, respectively, the Company recorded non-cash stock-based compensation expense of $10,341  and $10,880, 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 March 31, 2018 and 2017 for the options is $4,027 and $10,808, respectively, and will be recognized through March 30, 2019.


A summary of the Company’s stock option plans as of March 31, 2018, and changes during the three month period then ended is presented below:  


 

 

Three Months Ended

March 31, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2017

 

 

3,180,000

 

 

$

0.20

 

Options granted

 

 

 

 

 

 

Options exercised

 

 

 

 

 

 

Options cancelled

 

 

 

 

 

 

Options expired

 

 

(45,000

)

 

 

 0.26

 

Options at end of period

 

 

3,135,000

 

 

$

0.20

 

Options exercisable at March 31, 2018

 

 

2,864,160

 

 

$

0.20

 



Changes in the Company’s non-vested options for the three months ended March 31, 2018 are summarized as follows:


 

 

Three Months Ended

March 31, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Non-vested options at December 31, 2017

 

 

270,840

 

 

$

0.15

 

Granted

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

Non-vested options at March 31, 2018

 

 

270,840

 

 

$

0.15

 


 

 

 

Options Outstanding

 

 

Options Exercisable

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average Exercise Price

 

 

Number Exercisable

 

 

Weighted Average Exercise Price

 

0.04-.40

 

 

 

3,135,000

 

 

 

3.04

 

 

$

0.20

 

 

 

2,864,160

 

 

$

0.20

 

Totals

 

 

 

3,135,000

 

 

 

3.04

 

 

$

0.20

 

 

 

2,864,160

 

 

$

0.20

 


A summary of the Company’s warrant activity as of March 31, 2018 and changes during the three month period then ended is presented below:


 

 

Three months ended

March 31, 2018

 

  

 

Weighted Average Exercise

 

  

 

Warrants

 

 

Price

 

Warrants outstanding at December 31, 2017

 

 

990,162

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

Expired

 

 

(168,750

)

 

$

(0.35

Warrants outstanding at March 31, 2018

 

 

821,412

 

 

$

0.17

 


 

 

 

Warrants Outstanding

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Remaining Average Contractual Life (In Years)

 

 

Weighted Average

Exercise Price

 

$0.05 - $0.50

 

 

 

821,412

 

 

 

2.04

 

 

$

0.17

 

Totals

 

 

 

821,412

 

 

 

2.04

 

 

$

0.17

XML 31 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions
3 Months Ended
Mar. 31, 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 Chairman of the Board and an Executive officer, 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 (3.616% per annum at March 31, 2018), payable monthly and were to become due and payable on December 31, 2005 or upon a change in control of the Company or the consummation of any other financing over $7.0 million. Beginning in March 2006 and through February 2012, the maturity date for the agreement was extended annually from December 31, 2007 to the agreements current maturity date of December 31, 2018. On May 9, 2018 he extended the maturity rate to December 31, 2019. If we are unable to meet our obligation to our Chairman and Chief Executive Officer prior to maturity, he has advised us that he may forgive all, or substantially all, of this obligation.



During the three months ended March 31, 2018 we borrowed an additional $200,000 from him and repaid $0. As of March 31, 2018 and December 31, 2017 we owed him $8,163,349 and $7,963,349 which represented approximately 77% and 78% of our total liabilities, respectively.


 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.


During the three months ended March 31, 2018  and 2017, the Company incurred interest expense of $74,365 and $65,083, respectively, on its loan from the Chairman of the Board, which is included in interest expense in the accompanying statements of operations as well as interest expense of $308 and $442, respectively for the three months ended March 31, 2018 and 2017 related to the loan from one if its other Board members. These amounts, in addition to interest expense of $30 and $20 for the three months ended March 31, 2018  and 2017, respectively, related to capital lease obligations, financing and loans from a stockholder.


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 months ended March 31, 2018  and 2017 we paid Boxwood Associates, Inc. $6,000 under this agreement. A former member of our board of directors and a significant stockholder is President of Boxwood Associates, Inc.

XML 32 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Major Customers
3 Months Ended
Mar. 31, 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 March 31, 2018 whose balances each represented approximately 60% and 10%, for a total of 70% of the total accounts receivables. Comparatively, there are concentrations of credit risk with respect to accounts receivables due to the amounts owed There were two customers at December 31, 2017 whose balances each represented approximately 53%, and 30%, for a total of 83% of total accounts receivables. During the months ended March 31, 2018 sales from two customers represented 43% and 17% for a total of 60% of sales. During the months ended March 31, 2017 sales from four customers represented 17%, 12%, 12% and 10% for a total of 51% of sales. The loss of business from one or a combination of the CompanyÂ’s significant customers, or an unexpected deterioration in their financial condition, could adversely affect the CompanyÂ’s operations.

XML 33 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent Events

16.

Subsequent Events


From April 1, 2018 through May 15, 2018, the Company received additional loans in the amount of $250,000 from a related party to the Company’s Chairman and CEO, as advances for working capital needs.  The Loan is unsecured and payable on demand.


On May 9, 2018 the Company’s Chairman and CEO extended the maturity date on his loans to December 31, 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. Effective April 30, 2018 our Chairman and 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 of Puradyn Filter Technologies Incorporated at an exercise price of $0.0208 per share.


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 designate a different vesting schedule.

XML 34 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 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 period ended March 31, 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 the first quarter of fiscal 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 the first quarter of 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 March 31, 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 March  31, 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 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 three months ended March 31, 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 nine -months ended March 31, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of March 31, 2018 (unaudited)

 

$

20,000

 

Advertising Costs

Advertising Costs


Advertising costs are expensed as incurred. During the three months ended March 31, 2018 and March 31, 2017, advertising costs incurred by the Company totaled approximately $0, and $0, respectively, and are included in selling and administrative expenses in the accompanying statements of operations.

Engineering and Development

Engineering and Development


Engineering and development costs are expensed as incurred. During the three months ended March 31, 2018 and 2017, engineering and development costs incurred by the Company totaled $1,429 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 months ended March 31, 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 March 31, 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


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 3,956,412 and 4,522,662 for the three months ended March 31, 2018 and 2017, respectively.

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 the first quarter of fiscal 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 in the first quarter of 2018.


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

XML 35 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Schedule of Product Warrant Liability

The following table shows the changes in the aggregate product warranty liability for the three-months ended March 31, 2018:


Balance as of December 31, 2017

     

$

20,000

 

Less: Payments made

 

 

 

Add: Provision for current period warranties

 

 

 

Balance as of March 31, 2018 (unaudited)

 

$

20,000

XML 36 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Inventories (Tables)
3 Months Ended
Mar. 31, 2018
Inventory Disclosure [Abstract]  
Schedule of Inventories

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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Raw materials

 

$

885,144

 

 

901,600

 

Work In Progress

 

 

71,867

 

 

125,932

 

Finished goods

 

 

140,711

 

 

16,848

 

Valuation allowance

 

 

(643,616

)

 

(643,616

)

Inventory, net

 

$

454,106

 

 

400,764

XML 37 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Prepaid Expenses and Other Current Assets (Tables)
3 Months Ended
Mar. 31, 2018
Prepaid Expense and Other Assets, Current [Abstract]  
Schedule of Prepaid Expenses and Other Current Assets

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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Prepaid expenses

 

$

24,412

 

 

26,648

 

Deposits

 

 

38,069

 

 

42,707

 

 

 

$

62,481

 

 

69,355

XML 38 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Tables)
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

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


 

 

March 31,

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

 

 

 (1,455,888

)

 

(1,450,861

)

 

 

$

40,300

 

$

45,327

XML 39 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Patents (Tables)
3 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of capitalized patent costs included in other assets

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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

 

 

 

 

Patent costs

 

$

579,065

 

$

558,873

 

Less accumulated amortization

 

 

(65,888

)

 

(62,153

)

 

 

$

513,177

 

$

496,720

XML 40 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accrued Liabilities (Tables)
3 Months Ended
Mar. 31, 2018
Accrued Liabilities [Abstract]  
Schedule of Accrued Liabilities

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


 

 

March 31,

2018

 

December 31,

2017

 

 

 

(Unaudited)

 

 

 

Accrued vacation and benefits

 

$

66,916

 

$

69,025

 

Accrued expenses relating to vendors and others

 

 

132,094

 

 

136,681

 

Accrued warranty costs

 

 

20,000

 

 

20,000

 

Accrued interest payable relating to stockholder notes

 

 

128,549

 

 

115,039

 

Deferred rent

 

 

19,345

 

 

22,059

 

 

 

$


366,904

 

$

362,804

XML 41 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Notes Payable to Stockholders - Related Party (Tables)
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of Notes Payable and Capital Leases

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


 

 

March 31,

2018

 

December 31, 2017

 

Notes payable to stockholders

 

$

8,188,349

 

$

7,988,349

 

Capital lease obligation

 

 

2,505

 

 

3,443

 

 

 

 

8,190,854

 

 

7,991,792

 

Less: current maturities

 

 

(27,505

)

 

(7,991,792

)

Long-term maturities

 

$

8,163,349

 

$

Schedule of Maturities of Long-Term Obligations

The minimum annual principal payments of notes payable and capital lease obligations at March 31, 2018 were:


 

 

 

 

 

2018

 

$

27,505

 

2019

  

 

8,163,349

 

 Total

 

$

8,190,854

XML 42 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Tables)
3 Months Ended
Mar. 31, 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 March 31, 2018, and changes during the three month period then ended is presented below:  


 

 

Three Months Ended

March 31, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Options outstanding at December 31, 2017

 

 

3,180,000

 

 

$

0.20

 

Options granted

 

 

 

 

 

 

Options exercised

 

 

 

 

 

 

Options cancelled

 

 

 

 

 

 

Options expired

 

 

(45,000

)

 

 

 0.26

 

Options at end of period

 

 

3,135,000

 

 

$

0.20

 

Options exercisable at March 31, 2018

 

 

2,864,160

 

 

$

0.20

Schedule of Nonvested Options Activity

Changes in the Company’s non-vested options for the three months ended March 31, 2018 are summarized as follows:


 

 

Three Months Ended

March 31, 2018

 

  

 

Number of

Options

 

 

Weighted

Average

Exercise Price

 

Non-vested options at December 31, 2017

 

 

270,840

 

 

$

0.15

 

Granted

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

Non-vested options at March 31, 2018

 

 

270,840

 

 

$

0.15

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

 

0.04-.40

 

 

 

3,135,000

 

 

 

3.04

 

 

$

0.20

 

 

 

2,864,160

 

 

$

0.20

 

Totals

 

 

 

3,135,000

 

 

 

3.04

 

 

$

0.20

 

 

 

2,864,160

 

 

$

0.20

Summary of Warrants Activity

A summary of the Company’s warrant activity as of March 31, 2018 and changes during the three month period then ended is presented below:


 

 

Three months ended

March 31, 2018

 

  

 

Weighted Average Exercise

 

  

 

Warrants

 

 

Price

 

Warrants outstanding at December 31, 2017

 

 

990,162

 

 

$

0.24

 

Granted

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

Expired

 

 

(168,750

)

 

$

(0.35

Warrants outstanding at March 31, 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

 

$0.05 - $0.50

 

 

 

821,412

 

 

 

2.04

 

 

$

0.17

 

Totals

 

 

 

821,412

 

 

 

2.04

 

 

$

0.17

XML 43 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Cash equivalents  
Advertising costs 0 $ 0  
Engineering and development costs 1,429 $ 1,575  
FDIC insured limit $ 250,000   $ 250,000
Shares excluded from computation loss per share 3,956,412 4,522,662  
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 44 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Product Warrant Liability) (Details)
3 Months Ended
Mar. 31, 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 March 31, 2018 $ 20,000
XML 45 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Going Concern (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Going Concern [Abstract]    
Net cash used in operating activities $ 271,757 $ 141,059
XML 46 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Inventories (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Inventory Disclosure [Abstract]    
Raw materials $ 885,144 $ 901,600
Work In Progress 71,867 125,932
Finished goods 140,711 16,848
Valuation allowance (643,616) (643,616)
Inventory, net $ 454,106 $ 400,764
XML 47 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Prepaid Expenses and Other Current Assets (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Prepaid Expense and Other Assets, Current [Abstract]    
Prepaid expenses $ 24,412 $ 26,648
Deposits 38,069 42,707
Prepaid expenses and other current assets $ 62,481 $ 69,355
XML 48 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Property and Equipment (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Property, Plant and Equipment [Line Items]      
Property and equipment, gross $ 1,496,188   $ 1,496,188
Less accumulated depreciation and amortization (1,455,888)   (1,450,861)
Property and equipment, net 40,300   45,327
Depreciation and amortization expense of property and equipment 5,027 $ 4,677  
Machinery and Equipment [Member]      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 1,045,217   1,045,217
Furniture and Fixtures [Member]      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 56,558   56,558
Leasehold Improvements [Member]      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 152,322   152,322
Software and website development [Member]      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 88,842   88,842
Computer hardware and software [Member]      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross $ 153,249   $ 153,249
XML 49 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Patents (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]      
Patent costs $ 579,065   $ 558,873
Less accumulated amortization (65,888)   (62,153)
Patent costs, less accumulated amortization 513,177   $ 496,720
Amortization expense $ 3,735 $ 3,395  
XML 50 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Leases (Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Sep. 27, 2012
Operating Leased Assets [Line Items]        
Security deposit $ 34,970      
Capital leased assets - office equipment, gross 15,020      
Rent expense 65,679 $ 69,135    
Capital lease obligations $ 2,505   $ 3,443  
Office and Warehouse Facilities, Boynton Beach, Florida [Member]        
Operating Leased Assets [Line Items]        
Aggregate total minimum lease payments       $ 221,430
Lease expiration date Jul. 31, 2019      
XML 51 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accrued Liabilities (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Accrued Liabilities [Abstract]    
Accrued vacation and benefits $ 66,916 $ 69,025
Accrued expenses relating to vendors and others 132,094 136,681
Accrued warranty costs 20,000 20,000
Accrued interest payable relating to stockholder notes 128,549 115,039
Deferred rent 19,345 22,059
Accrued liabilities $ 366,904 $ 362,804
XML 52 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
Deferred Compensation (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Compensation Related Costs [Abstract]    
Deferred compensation $ 1,574,952 $ 1,626,003
XML 53 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
Sales Incentives (Details) - USD ($)
8 Months Ended
Mar. 31, 2018
Dec. 31, 2017
Other Liabilities Disclosure [Abstract]    
Sales incentives $ 99,128
Targeted quarterly sales revenue for the period August 1, 2017 and June 30, 2018 4,000,000  
Actual sales revenue achieved under agreement 936,193  
Product liability accrual $ 99,128 $ 0
XML 54 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
Notes Payable to Stockholders - Related Party (Details) - USD ($)
1 Months Ended 3 Months Ended
May 09, 2018
Nov. 11, 2016
Mar. 28, 2002
Mar. 31, 2018
Mar. 31, 2017
May 15, 2018
Dec. 31, 2017
Nov. 30, 2017
Debt Instrument [Line Items]                
Maturity date       Dec. 31, 2019        
Notes Payable - stockholders       $ 25,000     $ 7,988,349  
Note Payable to Chairman of Board [Member]                
Debt Instrument [Line Items]                
Interest expense, debt       $ 74,365 $ 65,083      
Chief Executive Officer [Member] | Note Payable to Chairman of Board [Member]                
Debt Instrument [Line Items]                
Notes Payable - stockholders             $ 7,963,349  
Percentage of total liabilities             78.00%  
Executive Officer [Member] | Note Payable to Chairman of Board [Member]                
Debt Instrument [Line Items]                
Face amount of debt instrument     $ 6,100,000          
Percent in addition to BBA LIBOR     1.40%          
Interest rate       3.616%        
Maturity date   Dec. 31, 2019            
Maximum amount of additional financing the company may obtain that will affect the repayment provisions of the debt instrument     $ 7,000,000          
Notes Payable - stockholders       $ 8,163,349     $ 7,963,349  
Percentage of total liabilities       77.00%     78.00%  
Proceeds from stockholder loan       $ 200,000        
Board of Directors [Member] | Unsecured Loan [Member]                
Debt Instrument [Line Items]                
Face amount of debt instrument               $ 25,000
Interest rate       5.00%        
Former Board of Directors Member [Member] | Note Payable to Chairman of Board [Member]                
Debt Instrument [Line Items]                
Interest expense, debt       $ 308 442      
Interest expense related to capital lease obligations       $ 30 $ 20      
Subsequent Event [Member] | Chief Executive Officer [Member] | Working capital loan from CEO [Member] | Unsecured Loan [Member]                
Debt Instrument [Line Items]                
Face amount of debt instrument           $ 250,000    
Maturity date Dec. 31, 2019              
XML 55 R43.htm IDEA: XBRL DOCUMENT v3.8.0.1
Notes Payable to Stockholders - Related Party (Schedule of Notes Payable and Capital Leases) (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Debt Disclosure [Abstract]    
Notes payable to stockholders $ 8,188,349 $ 7,988,349
Capital lease obligation 2,505 3,443
Total obligations 8,190,854 7,991,792
Less: current maturities (27,505) (7,991,792)
Long-term maturities $ 8,163,349
XML 56 R44.htm IDEA: XBRL DOCUMENT v3.8.0.1
Notes Payable to Stockholders - Related Party (Schedule of Maturities of Long-Term Obligations) (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Debt Disclosure [Abstract]    
2018 $ 27,505  
2019 8,163,349  
Total obligations $ 8,190,854 $ 7,991,792
XML 57 R45.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details) - USD ($)
Oct. 20, 2009
Sep. 27, 2012
Purchase Commitment, Excluding Long-term Commitment [Line Items]    
Lease term   72 months
Initial monthly rent paid   $ 12,026
Increase in monthly rent   $ 13,941
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  
XML 58 R46.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Stock Options Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Compensation expense $ 10,341 $ 10,880
Unrecognized compensation cost $ 4,027 $ 10,808
XML 59 R47.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Summary of Stock Options Activity) (Details)
3 Months Ended
Mar. 31, 2018
$ / shares
shares
Options  
Options outstanding at December 31, 2017 | shares 3,180,000
Options granted | shares
Options exercised | shares
Options cancelled | shares
Options expired | shares (45,000)
Options at end of period | shares 3,135,000
Options exercisable at March 31, 2018 | shares 2,864,160
Weighted Average Exercise Price  
Options outstanding at December 31, 2017 | $ / shares $ 0.20
Options granted | $ / shares
Options exercised | $ / shares
Options cancelled | $ / shares
Options expired | $ / shares 0.26
Options at end of period | $ / shares 0.20
Options exercisable at March 31, 2018 | $ / shares $ 0.20
XML 60 R48.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Schedule of Nonvested Options Activity) (Details)
3 Months Ended
Mar. 31, 2018
$ / shares
shares
Non-Vested stock option activity, shares:  
Non-Vested options at December 31, 2017 | shares 270,840
Granted | shares
Vested | shares
Forfeited | shares
Non-Vested options at March 31, 2018 | shares 270,840
Non-Vested stock option activity, weighted average exercise price:  
Non-Vested options at December 31, 2017 | $ / shares $ 0.15
Granted | $ / shares
Vested | $ / shares
Forfeited | $ / shares
Non-Vested options at March 31, 2018 | $ / shares $ 0.15
XML 61 R49.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Summary of Options Outstanding by Price Range) (Details)
3 Months Ended
Mar. 31, 2018
$ / shares
shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]  
Number Outstanding | shares 3,135,000
Remaining Average Contractual Life 3 years 15 days
Weighted Average Exercise Price, Outstanding $ 0.20
Number Exercisable | shares 2,864,160
Weighted Average Exercise Price, Exercisable $ 0.20
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 0.04
Range of Exercise Price, upper limit $ 0.40
Number Outstanding | shares 3,135,000
Remaining Average Contractual Life 3 years 15 days
Weighted Average Exercise Price, Outstanding $ 0.20
Number Exercisable | shares 2,864,160
Weighted Average Exercise Price, Exercisable $ 0.20
XML 62 R50.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Summary of Warrants Activity) (Details) - Warrant [Member]
3 Months Ended
Mar. 31, 2018
$ / shares
shares
Warrant activity, number of shares:  
Warrants outstanding at December 31, 2017 | shares 990,162
Granted | shares
Exercised | shares
Expired | shares (168,750)
Warrants outstanding at March 31, 2018 | shares 821,412
Warrants outstanding at December 31, 2017 | $ / shares $ 0.24
Granted | $ / shares
Exercised | $ / shares
Expired | $ / shares (0.35)
Warrants outstanding at March 31, 2018 | $ / shares $ 0.17
XML 63 R51.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock Options and Warrants (Summary of Warrants Outstanding by Price Range) (Details)
3 Months Ended
Mar. 31, 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 2 years 15 days
Weighted average exercise price, outstanding $ 0.17
Range of Exercise Price from $0.05 - $0.50 [Member]  
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]  
Range of exercise price, lower limit 0.05
Range of exercise price, upper limit $ 0.50
Number outstanding | shares 821,412
Remaining Average Contractual Life 2 years 15 days
Weighted average exercise price, outstanding $ 0.17
XML 64 R52.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions - Related Party (Details) - USD ($)
1 Months Ended 3 Months Ended
Nov. 11, 2016
Jan. 06, 2016
Oct. 20, 2009
Mar. 28, 2002
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Nov. 30, 2017
Related Party Transaction [Line Items]                
Maturity date         Dec. 31, 2019      
Repayments of stockholders loan         $ 50,000    
Notes Payable - stockholders         25,000   $ 7,988,349  
Debt amount forgiven         26,373    
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         $ 6,000 6,000    
Board of Directors [Member] | Unsecured Loan [Member]                
Related Party Transaction [Line Items]                
Maturity date   Dec. 31, 2019            
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%      
Note Payable to Chairman of Board [Member]                
Related Party Transaction [Line Items]                
Interest expense, debt         $ 74,365 65,083    
Note Payable to Chairman of Board [Member] | Executive Officer [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         3.616%      
Maturity date Dec. 31, 2019              
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         $ 200,000      
Notes Payable - stockholders         $ 8,163,349   $ 7,963,349  
Percentage of total liabilities         77.00%   78.00%  
Note Payable to Chairman of Board [Member] | Chief Executive Officer [Member]                
Related Party Transaction [Line Items]                
Notes Payable - stockholders             $ 7,963,349  
Percentage of total liabilities             78.00%  
Note Payable to Chairman of Board [Member] | Former Board of Directors Member [Member]                
Related Party Transaction [Line Items]                
Interest expense, debt         $ 308 442    
Interest expense related to capital lease obligations         $ 30 $ 20    
XML 65 R53.htm IDEA: XBRL DOCUMENT v3.8.0.1
Major Customers (Details)
3 Months Ended 12 Months Ended
Mar. 31, 2018
USD ($)
item
Mar. 31, 2017
USD ($)
item
Dec. 31, 2016
item
Concentration Risk [Line Items]      
Net sales | $ $ 885,740 $ 688,990  
Accounts Receivable [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage 70.00%   83.00%
Number of customers representing concentration risk percentage 2   2
Accounts Receivable [Member] | Customer One [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage 60.00%   53.00%
Accounts Receivable [Member] | Customer Two [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage 10.00%   30.00%
Sales [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage 60.00% 51.00%  
Number of customers representing concentration risk percentage 2 4  
Sales [Member] | Customer One [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage 43.00% 17.00%  
Sales [Member] | Customer Two [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage 17.00% 12.00%  
Sales [Member] | Customer Three [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage   12.00%  
Sales [Member] | Customer Four [Member]      
Concentration Risk [Line Items]      
Concentration risk percentage   10.00%  
XML 66 R54.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events (Details) - USD ($)
3 Months Ended
May 09, 2018
Apr. 12, 2018
Mar. 31, 2018
May 15, 2018
Nov. 30, 2017
Subsequent Event [Line Items]          
Maturity date     Dec. 31, 2019    
Board of Directors [Member] | Unsecured Loan [Member]          
Subsequent Event [Line Items]          
Face amount of debt instrument         $ 25,000
Subsequent Event [Member] | Chief Executive Officer [Member] | 2018 Equity Compensation Plan [Member]          
Subsequent Event [Line Items]          
Number of shares for plan   1,400,000      
Exercise price   $ 0.0208      
Stock reserved for grant   10,000,000      
Subsequent Event [Member] | Chief Executive Officer [Member] | Working capital loan from CEO [Member] | Unsecured Loan [Member]          
Subsequent Event [Line Items]          
Face amount of debt instrument       $ 250,000  
Maturity date Dec. 31, 2019        
Subsequent Event [Member] | Board of Directors [Member]          
Subsequent Event [Line Items]          
Term period for plan   3 years      
Percentage of plan   33.33%      
Subsequent Event [Member] | Board of Directors [Member] | 2018 Equity Compensation Plan [Member]          
Subsequent Event [Line Items]          
Term period for plan   10 years      
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