================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ____________________
                         
                                   FORM 10-QSB

[x]              QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934.

                  For the quarterly period ended June 30, 1997

                                       OR

[ ]             TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                            OF THE EXCHANGE ACT

            For the transition period from ___________ to ___________

                         Commission File Number 0-29192

                               T/F PURIFINER, INC.
        (Exact name of small business issuer as specified in its charter)

              DELAWARE                             14-1708544
     (State or other jurisdiction       (I.R.S.  Employer  Identification No.)
  of incorporation or organization)

    3020 High Ridge Road, Suite 100,
        Boynton Beach, Florida                        33426
(Address of principal executive offices)            (Zip Code)

                               (561) 547-9499
                        (Issuer's telephone number)

                                    N/A
              (Former name, former address and former fiscal year,
                          if changed since last report)
                              ____________________

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                  Yes        [X]                 No        [ ]

         APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                         DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the  distribution of
securities under a plan confirmed by the court.

                  Yes        [ ]                 No        [ ]

APPLICABLE   ONLY  TO  CORPORATE   ISSUERS:   State  the  number  of  shares
outstanding  of each of the  issuer's  classes of common  equity,  as of the
latest practicable date: August 5, 1997:  5,200,379.
================================================================================

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
             
                               T/F Purifiner, Inc.
                             Condensed Balance Sheet
                                  June 30, 1997
                                   (Unaudited)
                                     Assets
CURRENT ASSETS:
  Cash and cash equivalents                                         $ 2,048,413
  Trade accounts receivable, net                                        176,189
  Inventories                                                           602,210
  Prepaid expenses and other current assets, net                         94,153
                                                                    -----------
Total current assets                                                  2,920,965

Property and equipment, net                                             334,936
Patents and trademarks, net                                             189,138
Costs in excess of net assets acquired, net                             128,078
Other assets                                                             44,246
                                                                    -----------
                                                                    $ 3,617,363
                                                                    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable - trade                                          $   178,936
  Accrued expenses                                                      263,057
  Customer deposits and other                                           150,637
  Current portion of notes payable and capital lease obligations         39,583
  Note payable to shareholder, net of discount of $112,667            1,887,333
  Note payable to former shareholder                                     99,144
                                                                    -----------
Total current liabilities                                             2,618,690

Note payable to former shareholder                                      303,297
Note payable and capital lease obligations                               55,516
Deferred rent                                                             8,890
Liability to equity investee                                              3,000
                                                                    -----------
Total liabilities                                                     2,989,393

Contingencies

Stockholders' Equity:
  Common Stock, $.001 par value                                           5,146
  Preferred Stock, $.001 par value                                         --
  Additional paid-in-capital                                          6,664,392
  Unearned compensation                                                (115,845)
  Loans receivable                                                      (75,131)
  Accumulated deficit                                                (5,850,592)
                                                                    -----------
                                                                        627,970
                                                                    -----------
                                                                    $ 3,617,363
                                                                    ===========
See accompanying notes to condensed financial statements.
                                       2

<PAGE>


                                              T/F Purifiner, Inc.
                                       Condensed Statements of Operations
                                                  (Unaudited)
<TABLE>
<CAPTION>

                                  Three Months Ended June 30,        Six Months Ended June 30
                                  ---------------------------        ------------------------
                                       1996             1997            1996             1997
                                       ----             ----            ----             ----

<S>                              <C>              <C>              <C>              <C>        
Net sales                        $   412,670      $   432,288      $   841,297      $   848,189
Cost of sales                        225,531          236,222          493,869          508,551
                                 -----------      -----------      -----------      -----------
Gross profit                         187,139          196,066          347,428          339,638


Operating expenses:
  Selling                            204,832          629,579          352,210        1,204,196
  General and administrative         195,473          356,301          325,394          614,682
  Deferred profit                      7,490           (2,975)          19,440           (6,463)
                                 -----------      -----------      -----------      -----------
                                     407,795          982,905          697,044        1,812,415
                                 -----------      -----------      -----------      -----------
Operating loss                      (220,656)        (786,839)        (349,616)      (1,472,777)
Other income (expense):
  Interest expense                    (8,528)         (13,337)         (17,399)         (15,975)
  Interest income                       --             12,814             --             29,060
                                 -----------      -----------      -----------      -----------


Net loss                         $  (229,184)     $  (787,362)     $  (367,015)     $(1,459,692)
                                 ===========      ===========      ===========      ===========

Loss per common share            $      (.08)     $      (.15)     $      (.13)     $      (.28)
                                 ===========      ===========      ===========      ===========

Weighted average common
    shares outstanding             3,033,775        5,145,879        2,913,388        5,139,442
                                 ===========      ===========      ===========      ===========

</TABLE>



See accompanying notes to condensed financial statements.














                                           3


<PAGE>

                                                  T/F Purifiner, Inc.

                                            Condensed Statements of Changes
                                                in Stockholders' Equity
                                                      (Unaudited)
<TABLE>
<CAPTION>

                                                             
                                    Common       Stock      Additional                                               Total    
                                    ------------------       Paid-In-     Unearned     Loans       Accumulated    Stockholders'
                                    Shares      Amount       Capital    Compensation  Receivable     Deficit        Equity
                                 -------------------------------------------------------------------------------------------
<S>                               <C>          <C>        <C>            <C>          <C>         <C>            <C>        
Balance at January 1, 1997        5,097,080    $ 5,097    $ 6,323,505    $(123,114)   $   --      $(4,390,900)   $ 1,814,588

Cancellation of common stock         (8,676)        (9)       (22,491)        --          --             --          (22,500)

Exercise of stock options, net       57,475         58        119,529         --       (75,131)          --           44,456

Issuance of compensatory
  stock options and warrants           --         --          123,849     (123,849)       --             --             --

Amortization of unearned
  compensation                         --         --             --        131,118        --             --          131,118

Issuance of Stock Purchase
   Warrant                             --         --          120,000         --          --             --          120,000

Net loss                               --         --             --           --          --       (1,459,692)    (1,459,692)
                                 -------------------------------------------------------------------------------------------

Balance at June 30, 1997          5,145,879    $ 5,146    $ 6,664,392    $(115,845)   $(75,131)   $(5,850,592)   $   627,970
                                 ==========    =======    ===========    =========    ========    ===========    ===========

</TABLE>


See accompanying notes to condensed financial statements.

















































                                                                          4

<PAGE>

                               T/F Purifiner, Inc.
                       Condensed Statements of Cash Flows
                     Six Months ended June 30, 1996 and 1997
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                1996           1997
                                                              ---------    -----------
<S>                                                           <C>          <C>         
Operating activities                                          $(367,015)   $(1,459,692)
Net loss
Adjustments to reconcile net loss to net cash
  used in operating activities:
    Amortization                                                  6,117         20,283
    Issuances of  compensatory options and warrants                --          131,118
    Cancellation of common stock                                   --          (10,000)
    Depreciation and amortization of property and equipment      15,120         35,037
    Changes in operating assets and liabilities:
      Trade accounts receivable, net                            (37,160)       (49,383)
      Inventories                                               (47,094)      (161,971)
      Prepaid expenses and other current assets                 (24,916)       (40,141)
      Other assets                                              (19,153)        (1,588)
      Accounts payable - trade                                  (30,621)      (135,298)
      Accrued expenses                                          192,244        185,980
      Customer deposits and other                                85,475       (104,988)
      Accrued interest and other payables - related parties     (41,570)          --
      Deferred rent                                                (990)        (4,500)
                                                              ---------    -----------
Net cash used in operating activities                          (269,563)    (1,595,143)

Investing activities
Patents and trademarks                                         (118,807)       (42,368)
Purchases of property and equipment                             (32,880)      (148,656)
Acquisition of DB Filters                                        (1,275)          --
Decrease in other assets                                           --           11,100
Decrease in note receivable from shareholder/officer               --          200,000
Increase in note receivable from shareholder/officer               --         (200,000)
                                                              ---------    -----------
Net cash used in investing activities                          (152,962)      (179,924)

Financing activities
Increase in deferred issuance and financing costs               (63,952)       (65,857)
Proceeds from issuances of Common Stock and
  exercise of stock options, net                                574,689      1,073,550
Collection of subscription receivables                            7,000           --
Proceeds from notes payable                                      25,000         20,200
Payment on notes payable and capital lease obligations          (32,878)       (13,437)
Proceeds from shareholder loans                                   9,000      2,000,000
Payment on shareholder loans                                    (44,213)          --
Payment on former shareholder loans                                --          (99,585)
Borrowing from investee                                            --             --
Repayment to investee                                           (33,105)       (20,351)
                                                              ---------    -----------
Net cash provided by financing activities                       441,541      2,894,520
                                                              ---------    -----------
Increase in cash and cash equivalents                            19,016      1,119,453
Cash and cash equivalents at beginning of period                 31,732        928,960
                                                              ---------    -----------
Cash and cash equivalents at end of period                    $  50,748    $ 2,048,413
                                                              =========    ===========
</TABLE>


During 1997, the Company entered into capital lease obligations in the amount of
approximately $49,000.


See accompanying notes to condensed financial statements.

                                       5

<PAGE>



                               T/F Purifiner, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

1.   BASIS OF PRESENTATION AND COMPANY

The  unaudited  condensed  financial  statements as of June 30, 1997 and for the
three and six month periods  ended June 30, 1996 and 1997 are unaudited  and, in
the opinion of management,  include all adjustments  (consisting  only of normal
and  recurring  adjustments)  necessary  for a fair  presentation  of  financial
position  and results of  operations  for these  interim  periods.  Such interim
financial  statements  have been prepared on the basis of  presentation  as more
fully described in the Company's annual financial  statements and should be read
in  conjunction  with the  Company's  audited  financial  statements  which  are
included in the Company's  Form 10-KSB.  The results of  operations  for the six
month period ended June 30, 1997 are not  necessarily  indicative of the results
to be expected for the entire year.

The Company has incurred recurring losses from operations since inception, which
has resulted in continuing  cash flow  difficulties  and the continuing need for
additional financing.  These factors raise substantial doubt about the Company's
ability to continue as a going concern. In order to continue as a going concern,
the Company must obtain  additional  financing,  which it is  endeavoring  to do
through the issuance of additional securities.

However,  there is no  assurance  that the Company  can  complete  its  proposed
issuances or that it can obtain adequate additional financing from other sources
or  that  profitable  operations  can be  sustained.  The  inability  to  obtain
additional  financing when needed,  would have a material  adverse effect on the
Company, including requiring the Company to curtail or cease its operations. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  of recorded asset amounts that might be necessary as a result of
the above uncertainty.

At June 30, 1997, deferred issuance costs of approximately $28,000,  included in
other assets,  represent  costs  incurred by the Company in connection  with the
Company's planned  issuances of securities.  Such costs will be charged directly
against the net proceeds of the related offering if it is successfully completed
or will be expensed if the offering is abandoned. At June 30, 1997 other current
assets includes  approximately  $36,000 of deferred  financing costs, net, which
represent  costs  associated  with obtaining QIP debt financing  (Note 5)and are
being amortized to interest expense over six months.

2.   INVENTORIES

At June 30, 1997, inventories consist of the following:


            Raw materials                                         $443,101
            Finished goods                                         146,214
            Supplies                                                12,895
                                                                  --------
                                                                  $602,210
                                                                  ========

                                       6

<PAGE>

                               T/F Purifiner, Inc.
                    Notes to Financial Statements (continued)
                                   (Unaudited)

3.   CONTINGENCIES

During  1995,  the  Company  commenced  a patent  infringement  case  against  a
competitor  which is expected to go to trial in November  1997.  The  competitor
subsequently  asserted certain  counterclaims against the Company and certain of
its employees.  The ultimate outcome of these counterclaims  cannot currently be
determined at this time but the Company believes it has meritorious defenses and
will eventually prevail in these actions.

In  April  1996,  the  Company  became a party  to an  action  filed by a former
independent  contractor  claiming certain  commissions and other damages due him
pursuant to an  agreement.  Pursuant to the  agreement,  as  adjudicated  by the
Court, the Company will resolve this case through  arbitration and, although the
ultimate  outcome of this matter cannot be determined at this time, the Company,
upon advice of counsel, believes it has meritorious defenses and will eventually
prevail in this matter.  

In January  1997, a patent  holder  filed an action  against the Company for non
payment of approximately  $21,000 of unpaid royalties claimed by him and seeking
a permanent  injunction  against the Company's  manufacturing and selling of the
covered Purifiner products.  The Company has filed an answer to this case and is
proceeding  to  discovery  and the case is  scheduled  to go to trial in October
1997.  Although the Company  believes it has  meritorious  defenses  against the
monetary  amounts alleged by the licensor patent owner, it has agreed to pay the
patent holder such alleged unpaid  royalties,  which amount relates primarily to
the timing of the royalty  payment and legal fees  regarding  defending  certain
patents pending of the licensor.  The Company,  upon advice of counsel, does not
believe the license holder will be in a position to obtain an injunction against
the Company's  manufacturing and selling of the Purifiner products.  The Company
believes  that the  licensor  patent  holder  initiated  litigation  in order to
extract a favorable settlement.

In late 1996 and subsequently,  TF Systems,  Inc.'s former law firm claimed that
it was due  approximately  $313,000 in legal fees related primarily to obtaining
the  manufacturing  and marketing  rights to the Purifiner for TF Systems,  Inc.
("TFS") and the Company.  TFS was  awaiting  the judgment of an appellate  court
which,  if adjudicated in TFS's favor,  would have provided TFS with  sufficient
funds to pay such legal  fees and other  possible  legal fee  claims  from other
attorneys  aggregating  approximately  $72,000 at June 30, 1997. On February 26,
1997,  the  appellate  court  ruled  against  TFS and,  accordingly,  the  funds
discussed above are not currently  available to TFS to satisfy such claims.  T/F
Purifiner,  Inc. did not assume these obligations as part of its purchase of TFS
and  management  believes  such  amounts  are  not  the  responsibility  of  T/F
Purifiner, Inc.  On  June 24, 1997,  TFS's  former  law  firm  filed a complaint

 

                                      7

<PAGE>


                               T/F Purifiner, Inc.
                    Notes to Financial Statements (continued)
                                   (Unaudited)

3.   CONTINGENCIES (CONTINUED)

against the Company, TFS, Richard C. Ford,  individually and an inactive company
controlled by Richard C. Ford  demanding  payment of  approximately  $313,000 of
legal fees and costs,  plus interest and attorney fees. The ultimate  outcome of
this  litigation  and other claims  against the Company  cannot be determined at
this time. No liability  has been recorded for these claims in the  accompanying
balance sheet.

4.   JOINT VENTURE

Effective  January 1, 1996, the Company  entered into a joint venture  agreement
whereby such venture,  TF Purifiner Ltd.  ("Ltd"),  will sell and distribute the
Company's product in Europe, the Middle East and certain African countries.  The
Company  has an  approximate  45%  interest  in  Ltd's  operations  (50%  voting
interest) and is accounting for Ltd using the equity method.  The Company is not
required to fund Ltd and will sell product to Ltd until such time as Ltd decides
to  exercise  its  rights  under the  agreement  to  manufacture  the  Company's
products.  Ltd was initially  capitalized with approximately $88,000 provided by
one of its  shareholders.  Through  June 30,  1997,  Ltd  advanced  the  Company
approximately  $115,000, to be used to fund certain patent and trademark filings
for the venture's exclusive  territory.  At June 30, 1997,  approximately $3,000
remained unexpended.  For the three and six months ended June 30, 1997 and 1996,
the   Company  had  sales  of   approximately   $21,000  and  $42,000  in  1997,
respectively,  and  $75,000,  and  $242,000  in  1996,  respectively,  to Ltd at
negotiated prices. At June 30, 1997 and 1996,  approximately $11,000 and $19,000
has been deferred as  unrealized  intercompany  profit  related to the inventory
sold to Ltd which is  included  in Ltd's  inventory  at June 30,  1997 and 1996,
respectively.

At June 30, 1997 and 1996 summarized financial information of Ltd is as follows:

                                                 1996       1997
                                                 ----       ----
      Total assets                            $360,000    $514,000
      Total liabilities                        569,000   1,264,000 (1)
      Capital deficiency                      (209,000)   (750,000)
      Total revenues                           127,000     202,000
      Gross profit                              46,000      78,000
      Net loss                                (137,000)   (253,000)

(1)  Includes  approximately  $1,137,000  of loans  due to one of Ltd's  foreign
shareholders, collateralized by substantially all the tangible assets of Ltd.









                                       8

<PAGE>

                                T/F Purifiner, Inc.
                     Notes to Financial Statements (continued)
                                    (Unaudited)


5.   NOTE PAYABLE

On June 19, 1997,  the Company and members of the Ford Family and Taylor  Family
entered into a Securities  Purchase Agreement with Quantum  Industrial  Partners
LDC ("QIP") ("the Agreement"). Pursuant to the Agreement, the Company issued QIP
a  $2,000,000  non-interest  bearing  promissory  note due December 19, 1997 and
received  gross  proceeds  of  $2,000,000.  This note is  subject  to  mandatory
prepayment  prior to its due date upon the  Company's  consummation  of a public
offering  of  either  debt  or  equity  securities.  As  long  as  this  note is
outstanding,  the Company cannot, without the consent of QIP, declare or pay any
dividends,  purchase,  redeem or acquire  any of its Common  Stock or retire its
existing indebtedness other than required periodic payments.

Additionally,  the Company issued a Common Stock Purchase Warrant to QIP for the
purchase of 500,000 shares of the Company's  Common Stock,  exercisable at $2.75
per share and expiring on December 31, 2000. These warrants have been assigned a
value of $120,000 and, accordingly,  such amount has been credited to additional
paid in capital  and the  $2,000,000  note  payable has been  recorded  net of a
$120,000 discount which is being amortized to interest expense over six months.

The  Company  has also  agreed  to  register  securities  of QIP  under  certain
circumstances.

6.   COMMON STOCK

During the six months  ended June 30, 1997,  57,475  shares of Common Stock were
issued pursuant to the exercise of options at exercise prices ranging from $2.00
to $6.00 per share. As of June 30, 1997, the Company had received $44,456 in net
cash  proceeds and was owed  $75,131,  substantially  all from current or former
employees, related to the cashless exercise of these options.

7.   STOCK OPTIONS AND WARRANTS

During the six months ended June 30, 1997, the Company  granted  397,500 options
(30,000  of which were  subsequently  cancelled)  to  purchase  Common  Stock to
various  employees  at exercise  prices  ranging from $7.50 to $10.00 and 60,000
options (40,000 of which were subsequently cancelled) to consultants at exercise
prices ranging from $9.00 to $9.50 per share. Additionally,  during this period,
the Company granted 10,000 warrants to various consultants which are exercisable
at $9.50 per share and expire on January 27, 1999.











                                       9

<PAGE>


                                T/F Purifiner, Inc.
                     Notes to Financial Statements (continued)
                                    (Unaudited)

7.   STOCK OPTIONS AND WARRANTS (CONTINUED)

During the six months ended June 30, 1997,  the Company  expensed  approximately
$131,000  related  to  compensatory   stock  options  and  warrants  to  various
consultants  and the Board of Advisors  using the  Black-Scholes  Option Pricing
Model.

8.   RELATED PARTY TRANSACTION

In January  1997,  as amended,  the  Company  loaned  Richard C. Ford,  its then
President and principal shareholder,  $200,000 bearing interest at 10% per annum
and due in June 1997,  secured by 40,000  shares of the  Company's  Common Stock
owned by Mr. Ford.  On June 19, 1997,  Mr. Ford repaid the entire  principal and
accrued interest on this loan in the amount of $209,078.

9.  SUBSEQUENT EVENTS

On July 17, 1997, the Board of Directors authorized an increase in the number of
shares of the  Company's  Common  Stock  which may be  granted  pursuant  to the
Company's 1996 Stock Option Plan from 1,625,000 shares to 2.2 million shares.

Subsequent to June 30, 1997,  54,500 stock options were exercised by consultants
at an exercise price of $2 per share for which the Company received $106,000 and
a $3,000 note receivable.


























                                       10

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following  should be read in conjunction  with  Management's  Discussion and
Analysis  of  Financial  Condition  and  Results of  Operations  included in the
Company's Form 10-KSB.

Other than historical and factual statements, the matters and items discussed in
this Quarterly Report on Form 10-QSB are forward-looking statements that involve
risks and  uncertainties.  Actual  results of the Company may differ  materially
from the results discussed in the  forward-looking  statements.  Certain factors
that could contribute to such differences are discussed with the forward-looking
statements throughout this report.

GENERAL

The Company was formed in 1987, and commenced limited operations in 1991 when it
obtained  worldwide  manufacturing  and  marketing  rights  to the  Purifiner(R)
products.  The  growth  in the  Company  is  primarily  due  to  the  increasing
acceptance of the Company's products by the marketplace.  This acceptance is the
result of various factors, including the increased credibility of the product as
a result of its commercial relationship with well-known entities and the growing
desire of users to reduce maintenance costs, extend engine life and preserve the
environment.

RESULTS OF OPERATIONS

The  following  table sets forth for the periods  indicated  the  percentage  of
revenues  represented by certain items reflected in the Company's  statements of
operations.

                                                   Percentage of Revenues
                                                   ----------------------
                                                        Six Months
                                                      Ended June 30,
                                                     1996         1997
                                                     ----         ----
Net sales                                             100%         100%
Operating costs and expenses:
  Cost of sales                                      (59)         (60)
  Selling expenses                                   (42)        (142)
  General and administrative expenses                (39)         (72)
  Other                                               (2)           -
                                                   ------       ------
Total operating costs and expenses                  (142)        (274)
                                                   ------       ------

Operating loss                                     (  42)%       (174)%
                                                  =======       ======



                                       11

<PAGE>



SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996

      Net Sales.  Net sales increased by 1% from $841,297 in 1996 to $848,189 in
1997.  This minimal  increase was  primarily  attributable  to the effect of the
Company's price reductions implemented in the last quarter of 1996. During 1996,
the Company had  approximately  $242,000 of sales to Ltd,  the  Company's  joint
venture formed in 1996 compared to approximately $42,000 in 1997. Approximately,
$11,000 of intercompany  profit on these sales to Ltd have been deferred at June
30, 1997.

      Effective October 15, 1996, the Company  implemented a new product pricing
strategy to reduce the Company's  selling prices to enable end users to obtain a
significantly  improved  return on  investment.  The Company  believed  this new
strategy  would  promote  the  sale of the  Company's  products  and  result  in
increased  long-term  revenues from unit and  replacement  filter sales and also
provide the Company  with the  ability to reduce its  product  costs,  primarily
through  1)  volume   purchase   discounts,   2)  utilization  of  excess  fixed
manufacturing capacity and 3) improved production processes. If the Company does
not realize these cost savings, its gross margin will be adversely effected.

      Cost of Sales.  Cost of sales  increased by 3.2% from  $493,869 in 1996 to
$508,551 in 1997.  The  Company's  gross margin  decreased  from 41.3% to 40.0%,
substantially  all due to the significant  price reductions  implemented in 1996
and cost increases to the product incurred primarily for improvements  offset by
the reduction of sales made to Ltd. at substantially lower sales prices than the
Company's exclusive international  distributor pricing. To the extent additional
sales are made by the Company to Ltd., the Company's aggregate gross margin will
be adversely affected.

      Selling Expenses. Selling expenses increased by 242% from $352,210 in 1996
to $1,204,196 in 1997. The primary  reasons for this increase were the increases
in other selling expenses such as salaries for new personnel, compensatory stock
options and warrants,  commissions,  office and related expenses,  brochures and
catalogs,  advertising,  product  evaluation  expenses,  travel  and trade  show
expenses in 1997 versus 1996.  As a percentage  of  revenues,  selling  expenses
increased from 42% in 1996 to 142% in 1997.

      Commencing  in late  1996,  but  primarily  in  1997,  the  Company  began
implementing a product evaluation  program,  whereby it would supply Purifiners,
replacement  filters and installation  services at no cost to certain  potential
customers or to assist its  distributors  potential  customers,  to evaluate the
effectiveness of the Purifiner. The costs related to this evaluation program has
been charged to selling  expenses and no revenues have been  recognized.  To the
extent  these  evaluations  are not  successful  or the  Company  is  unable  to
consummate  these  potential  sales,  the  Company's  future  revenues  will  be
adversely effected.

      General and Administrative  Expenses.  General and administrative expenses
increased by 89% from  $325,394 in 1996 to $614,682 in 1997 and, as a percent of
revenues,  increased from 39% to 72%. This dollar  increase was generally due to

                                       12

<PAGE>


the increased level of business activity,  specifically  including  increases in
personnel,  consultants,  compensatory  stock options and warrants,  travel, and
professional fees.

      Operating Loss. As a result of the foregoing, the Company's operating loss
increased from $349,616 in 1996 to $1,472,777 in 1997.

      Interest  Expense  and Income.  Interest  expense  decreased  by 8.2% from
$17,399 for 1996 to $15,975 for 1997.  This change  resulted  from a decrease in
average short and long term borrowings outstanding in 1997 versus the comparable
period for 1996. The Company  anticipates its interest  expense to increase over
the next six  months  as a result of its  recent  financing  from QIP.  Interest
income  increased to 29,060 in 1997 as a result of investing  idle cash balances
and interest earned on notes  receivable from its former  president,  which note
was repaid in June 1997.

      Net Loss. As a result of the  foregoing,  the Company's net loss increased
from $367,015 for 1996 to $1,459,692 for 1997.

LIQUIDITY AND CAPITAL RESOURCES

      To  date,  the  Company's  capital  requirements  in  connection  with its
business  activities have been and will continue to be significant.  To fund its
activities,  the Company has been  dependent  upon available cash generated from
operations,   the  proceeds  of  sales  of  its   securities  to  investors  and
stockholders,  and other loans,  including its most recent short term  borrowing
from QIP. The Company's 1996 auditors report  included an explanatory  paragraph
which stated that because the Company has sustained  recurring  operating losses
and  negative  cash  flows  from  operating  activities,   these  factors  raise
substantial doubt about the Company's ability to continue as a going concern.

      At June 30,  1997,  the Company had  working  capital of $302,275  and its
current ratio (current assets to current  liabilities) was 1.1 to 1, as compared
with working  capital of $1,727,933  and a current ratio of 3.1 to 1 at December
31,  1996.  At June  30,  1997,  the  Company  had  $2,048,413  of cash and cash
equivalents.  Outstanding  short-term  debt from  lenders and  shareholders  was
$2,026,060  at June 30, 1997 and included a former  shareholder  loan of $99,144
due to the Estate of Willard Taylor, on January 31, 1998 and $1,887,333 net of a
discount of $112,667,  due QIP on December 19, 1997.  The proceeds  from the QIP
loan shall be used solely for general operating  expenses and to hire additional
marketing employees for the Company.  The balance of long term debt was $358,813
at June 30, 1997, and included a former  shareholder loan of $303,297 due to the
Estate of Willard Taylor.

      At June 30,  1997,  the  Company  owed  approximately  $462,000 in current
liabilities  to various trade and other  unrelated  creditors.  These  creditors
continue to provide services to the Company;  however, there can be no assurance
that they will  continue  to do so in the future  while all or a portion of such
amounts remains  outstanding.  The Company has made certain payments and intends
to use a portion of existing  funds and future  financings  to repay the amounts
due to creditors.

                                       13

<PAGE>


      Consistent with industry practices, the Company may accept product returns
or provide other credits in the event that a distributor  holds excess inventory
of the Company's  products.  The Company's  sales are made on credit terms which
vary significantly depending on the nature of the sale. In addition, the Company
does not hold  collateral to secure  payment from its United States and Canadian
distributors.  Therefore,  a default in payment by one or more of the  Company's
United States and Canadian  distributors or customers could adversely affect the
Company's business,  results of operations and financial condition.  The Company
believes it has established sufficient reserves to accurately reflect the amount
or  likelihood  of product  returns or credits  and  uncollectible  receivables.
However,  there  can be no  assurance  that  actual  returns  and  uncollectible
receivables will not exceed the Company's reserves.  Any significant increase in
product returns or uncollected  accounts receivable beyond reserves could have a
material  adverse  effect on the Company's  business,  results of operations and
financial condition. The Company has not experienced material product returns or
uncollectible receivables in the past.

      Sales of the Company's products will depend principally on end user demand
for such products. The oil filtration industry has historically been competitive
and, as is typically the case with  innovative  products,  the ultimate level of
demand for the  Company's  products is subject to a high degree of  uncertainty.
Developing market acceptance, particularly worldwide, for the Company's existing
and  proposed  products  will  require  substantial  marketing  efforts  and the
expenditure  of a  significant  amount  of  funds  to  inform  customers  of the
perceived benefits and cost advantages of its products.

      The Company  currently is not generating  sufficient  revenues to fund its
existing and planned expansion of its operations.  Accordingly,  the Company has
embarked and is  implementing  plans to raise  additional  capital.  The Company
intends to use such  additional  financing to increase its  marketing  and sales
efforts,  including the hiring of additional  sales and technical  personnel and
related  costs,   implementation  of  advertising,   promotional  and  marketing
programs,  and  additional  fleet testing  programs.  Additionally,  the Company
intends  to   continue   hiring   additional   manufacturing,   operating,   and
administrative  personnel and acquire additional capital equipment and leasehold
improvements to meet expected production increases. Prior to the due date of the
Company's $2,000,000  obligation to QIP, the Company plans on completing another
financing which will enable it to repay such loan to QIP and provide  sufficient
capital to continue its expansion plans. However, there can be no assurance that
such financing will be successful.

      The  above  is not an  all  inclusive  listing  of the  Company's  planned
expenditures. In the event that the proceeds from future offerings or financings
are not  received,  the Company will not be able to fully  implement its current
plans. The inability to obtain  additional  financing when needed,  would have a
material  adverse  effect on the  Company,  including  requiring  the Company to
curtail or cease its operations.

IMPACT OF INFLATION

      Inflation  has not had a significant  impact on the Company's  operations.
However, any significant  decrease in the price for oil or labor,  environmental

                                       14

<PAGE>

compliance  costs,  and engine  replacement  costs  could  adversely  impact the
Company's  end  users  cost/benefit  analysis  as to the  use  of the  Company's
products.

QUARTERLY FLUCTUATIONS

      The Company's operating results may fluctuate significantly from period to
period  as  a  result  of a  variety  of  factors,  including  product  returns,
purchasing patterns of consumers, the length of the Company's sales cycle to key
customers and  distributors,  the timing of the introduction of new products and
product enhancements by the Company and its competitors,  technological factors,
variations  in  sales by  product  and  distribution  channel,  and  competitive
pricing.  Consequently, the Company's product revenues may vary significantly by
quarter  and  the  Company's   operating  results  may  experience   significant
fluctuations.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

   a)   Exhibits:
        Exhibit 27 - Financial Data Schedule (Electronic filing only)

   b)   Reports on Form 8-K.
        On July 21, 1997,  the Company  filed a report on Form 8-K reporting (1)
        its entering into a Securities  Purchase  Agreement dated as of June 19,
        1997 among  Quantum  Industrial  Partners LDC, T/F  Purifiner,  Inc. and
        members  of the Ford and Taylor  families  and (2) the  commencement  of
        certain legal proceedings against the Company.

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                                 T/F PURIFINER, INC.
                                                 -------------------
                                                    (Registrant)


Date:  August 11, 1997                         By  /s/ Keith T.J. Hart
                                                 -------------------------------
                                                     Keith T.J. Hart
                                                     Chief Executive Officer and
                                                     Chief Financial Officer




                                        15