Table of Contents

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|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            
|                                  
|(Mark One)                        
|                                  
|                                  
|Form 10-Q                         
|                                  

|                                                                                 |                                                                                         
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|x                                                                                | QUARTERLY REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                                                 |                                                                                         
|For the
 quarterly period ended March 31, 2011                                  
|                                                                                 |                                                                                         
|or                                                                              
|                                                                                 |                                                                                         
|o                                                                                | TRANSITION REPORT UNDER 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.


Yes x No o


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 (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o

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

|                                             |   |                            |  
|-------------------------------------------- | - | -------------------------- | -
|Large
 accelerated filer                     | o | Accelerated
 filer         | o
|Non-accelerated
 filer                       | o | Smaller
 reporting company | x
|(Do not
 check if smaller reporting company) |   |                            |  

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act)


Yes o No x


Indicate the
number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date. 46,542,260 shares of common stock are issued
and outstanding as of May 16, 2011.

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TABLE OF CONTENTS

|                                 |                                                                                                            |  |         
|-------------------------------- | ---------------------------------------------------------------------------------------------------------- |  | --------
|                                 |                                                                                                            |  | Page No.
|PART I. -
 FINANCIAL INFORMATION |                                                                                                            | 
|Item 1.                          | Financial Statements                                                                                       |  |         
|                                 | Condensed Consolidated Balance Sheets  As of March 31, 2011
 (unaudited) and December 31, 2010            |  | 3       
|                                 | Condensed Consolidated Statements of Operations  Three months ended
 March 31, 2011 and 2010 (unaudited)  |  | 4       
|                                 | Condensed Consolidated Statements of Cash Flows  Three months ended
 March 31, 2011 and 2010 (unaudited)  |  | 5       
|                                 | Condensed Consolidated Statement of Stockholders Deficit  Three
 months ended March 31, 2011 (unaudited) |  | 6       
|                                 | Notes to Condensed Consolidated Financial Statements                                                       |  | 7       
|Item 2.                          | Managements Discussion and Analysis of Financial Condition and
 Results of Operations.                    |  | 13      
|Item 3.                          | Quantitative and Qualitative Disclosures About Market Risk.                                                |  | 20      
|Item 4.                          | Controls and Procedures.                                                                                   |  | 20      
|PART II -
 OTHER INFORMATION     |                                                                                                            | 
|Item 1.                          | Legal Proceedings.                                                                                         |  | 21      
|Item 1A.                         | Risk Factors.                                                                                              |  | 21      
|Item 2.                          | Unregistered Sales of Equity Securities and Use of Proceeds.                                               |  | 21      
|Item 3.                          | Defaults Upon Senior Securities.                                                                           |  | 21      
|Item 4.                          | (Removed and Reserved).                                                                                    |  | 21      
|Item 5.                          | Other Information.                                                                                         |  | 21      
|Item 6.                          | Exhibits.                                                                                                  |  | 22      

OTHER PERTINENT INFORMATION

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

When
used in this report, the terms Puradyn, the Company, we, our, and us
refers to Puradyn Filter Technologies Incorporated, a Delaware corporation, and
our subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION

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

| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | our history of losses and
 uncertainty that we will be able to continue as a going concern,           
| |  | our ability to generate
 net sales in an amount to pay our operating expenses,                        
| |  | our need for additional
 financing and uncertainties related to our ability to obtain these funds,    
| |  | our ability to repay the
 outstanding debt of $6.5 million at March 31, 2011 due our Chairman and CEO,
| |  | our reliance on sales to a
 limited number of customers,                                              
| |  | our dependence on a
 limited number of distributors,                                                  
| |  | our ability to compete,                                                                               
| |  | our ability to protect our
 intellectual property,                                                    
| |  | market overhang issues,
 and                                                                          
| |  | the application of Penny
 Stock Rules to the trading in our stock.                                    

Most
of these factors are difficult to predict accurately and are generally beyond
our control. You should consider the areas of risk described in connection with
any forward-looking statements that may be made herein. Readers are cautioned
not to place undue reliance on these forward-looking statements and readers
should carefully review our Annual Report on Form 10-K for the year ended
December 31, 2010, including the risks described in Part I. Item 1A. Risk
Factors, 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.

2

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Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL
STATEMENTS

Puradyn Filter Technologies Incorporated
Condensed Consolidated Balance Sheets

|                                                                                                       |  |                              |             |                   |   |               |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ----------- | ----------------- | - | ------------- | -
|                                                                                                       |  | March 31, 2011 
 (Unaudited) |             | December 31, 2010 |  
|Assets                                                                                                 |  |                              |             |                   |  
|Current assets:                                                                                        |  |                              |             |                   |   |               |  
|Cash and cash equivalents                                                                              |  | $                            | 44,749      |                   | $ | 49,813        |  
|Accounts receivable, net of allowance for uncollectible accounts of
 $32,898 and $32,654, respectively |  |                              | 471,065     |                   |   | 166,367       |  
|Inventories, net                                                                                       |  |                              | 790,230     |                   |   | 774,818       |  
|Prepaid expenses and other current assets                                                              |  |                              | 49,615      |                   |   | 52,828        |  
|Total current assets                                                                                   |  |                              | 1,355,659   |                   |   | 1,043,826     |  
|Property and equipment, net                                                                            |  |                              | 116,690     |                   |   | 123,506       |  
|Other noncurrent assets                                                                                |  |                              | 51,961      |                   |   | 78,625        |  
|Deferred financing costs, net                                                                          |  |                              | 1,761       |                   |   | 2,013         |  
|Total assets                                                                                           |  | $                            | 1,526,071   |                   | $ | 1,247,970     |  
|                                                                                                       |  |                              |             |                   |   |               |  
|Liabilities and stockholders deficit                                                                  |  |                              |             |                   |   |               |  
|Current liabilities:                                                                                   |  |                              |             |                   |   |               |  
|Accounts payable                                                                                       |  | $                            | 424,372     |                   | $ | 217,248       |  
|Accrued liabilities                                                                                    |  |                              | 1,350,760   |                   |   | 1,262,798     |  
|Current portion of capital lease obligation                                                            |  |                              | 847         |                   |   | 1,989         |  
|Deferred revenue                                                                                       |  |                              | 971         |                   |   | 2,743         |  
|Total current liabilities                                                                              |  |                              | 1,776,950   |                   |   | 1,484,778     |  
|                                                                                                       |  |                              |             |                   |   |               |  
|Notes Payable - stockholder                                                                            |  |                              | 6,511,914   |                   |   | 6,361,914     |  
|Total Long Term Liabilities                                                                            |  |                              | 6,511,914   |                   |   | 6,361,914     |  
|Total Liabilities                                                                                      |  |                              | 8,288,864   |                   |   | 7,846,692     |  
|                                                                                                       |  |                              |             |                   |   |               |  
|Commitments and contingencies                                                                          |  |                              |            |                   |   |              |  
|Stockholders deficit:                                                                                 |  |                              |             |                   |   |               |  
|Preferred stock, $.001 par value:                                                                      |  |                              |            |                   |   |              |  
|Authorized shares  500,000; None issued and outstanding                                               |  |                              |             |                   |   |               |  
|Common stock, $.001 par value:                                                                         |  |                              |             |                   |   |               |  
|Authorized shares  50,000,000                                                                         |  |                              |             |                   |   |               |  
|Issued and outstanding  46,482,260 and 46,070,437, respectively                                       |  |                              | 46,483      |                   |   | 46,071        |  
|Additional paid-in capital                                                                             |  |                              | 46,241,460  |                   |   | 46,079,970    |  
|Notes receivable from stockholders                                                                     |  |                              | (756,250    | )                 |   | (756,250      | )
|Accumulated deficit                                                                                    |  |                              | (52,440,848 | )                 |   | (52,
 114,411 | )
|Accumulated other comprehensive income                                                                 |  |                              | 146,362     |                   |   | 145,898       |  
|Total stockholders deficit                                                                            |  |                              | (6,762,793  | )                 |   | (6,598,722    | )
|Total liabilities and stockholders deficit                                                            |  | $                            | 1,526,071   |                   | $ | 1,247,970     |  

See accompanying notes to condensed consolidated financial
statements.

3

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Table of Contents

Puradyn Filter Technologies Incorporated
Condensed Consolidated Statements of Operations
(Unaudited)

|                                                              |  |                                      |            |      |   |            |  
|------------------------------------------------------------- |  | ------------------------------------ | ---------- | ---- | - | ---------- | -
|                                                              |  | For the Three Months Ended
 March 31 |           
|                                                              |  | 2011                                 |            | 2010 |  
|                                                              |  |                                      |            |      |   |            |  
|Net sales                                                     |  | $                                    | 883,392    |      | $ | 674,261    |  
|                                                              |  |                                      |            |      |   |            |  
|Costs and expenses:                                           |  |                                      |            |      |   |            |  
|Cost of products sold                                         |  |                                      | 589,174    |      |   | 401,498    |  
|Salaries and wages                                            |  |                                      | 274,163    |      |   | 239,486    |  
|Selling and administrative                                    |  |                                      | 305,647    |      |   | 265,044    |  
|Total Operating Costs                                         |  |                                      | 1,168,984  |      |   | 906,028    |  
|Loss from operations                                          |  |                                      | (285,592   | )    |   | (231,767   | )
|                                                              |  |                                      |            |      |   |            |  
|Other
income (expense):                                       |  |                                      |            |      |   |            |  
|Interest income                                               |  |                                      |           |      |   | 56         |  
|Interest expense                                              |  |                                      | (40,845    | )    |   | (37,356    | )
|Total other income
 (expense)                                 |  |                                      | (40,845    | )    |   | (37,300    | )
|Net loss before income tax
 expense                           |  |                                      | (326,437   | )    |   | (269,067   | )
|Income tax expense                                            |  |                                      |            |      |   |            |  
|Net loss                                                      |  | $                                    | (326,437   | )    | $ | (269,067   | )
|Basic and diluted loss per
 common share                      |  | $                                    | (0.01      | )    | $ | (0.01      | )
|Basic and diluted weighted
 average common shares outstanding |  |                                      | 46,393,553 |      |   | 40,481,850 |  

See accompanying notes to condensed consolidated financial
statements.

4

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Puradyn Filter Technologies Incorporated
Consolidated Statements of Cash Flows(Unaudited)

|                                                                                                     |  |                                     |          |      |   |          |  
|---------------------------------------------------------------------------------------------------- |  | ----------------------------------- | -------- | ---- | - | -------- | -
|                                                                                                     |  | For the Three Months Ended March 31 |         
|                                                                                                     |  | 2011                                |          | 2010 |  
|Operating
 activities                                                                                |  |                                     |          |      |   |          |  
|                                                                                                     |  |                                     |          |      |   |          |  
|Net loss                                                                                             |  | $                                   | (326,437 | )    | $ | (269,067 | )
|Adjustments to reconcile net loss to net cash used in operating
 activities:                         |  |                                     |          |      |   |          |  
|Depreciation and amortization                                                                        |  |                                     | 11,848   |      |   | 11,220   |  
|Provision for bad debts                                                                              |  |                                     | 244      |      |   | (368     | )
|Amortization of deferred financing costs included in interest expense                                |  |                                     | 252      |      |   | 1,007    |  
|Deferred compensation                                                                                |  |                                     | 47,431   |      |   | 32,755   |  
|Compensation expense on stock-based arrangements with employees,
 consultants, investors and vendors |  |                                     | 61,902   |      |   | 37,706   |  
|Changes in operating assets and liabilities:                                                         |  |                                     |          |      |   |          |  
|Accounts receivable                                                                                  |  |                                     | (304,942 | )    |   | (151,498 | )
|Inventories                                                                                          |  |                                     | (15,412  | )    |   | (193,806 | )
|Prepaid expenses and other current assets                                                            |  |                                     | 29,876   |      |   | 1,466    |  
|Accounts payable                                                                                     |  |                                     | 207,125  |      |   | 184,340  |  
|Accrued liabilities                                                                                  |  |                                     | 40,531   |      |   | 3,734    |  
|Deferred revenues                                                                                    |  |                                     | (1,772   | )    |   | (9,225   | )
|Net cash used in operating activities                                                                |  |                                     | (249,354 | )    |   | (351,736 | )
|                                                                                                     |  |                                     |          |      |   |          |  
|Investing activities                                                                                 |  |                                     |          |      |   |          |  
|Purchases of property and equipment                                                                  |  |                                     | (5,032   | )    |   | (9,369   | )
|Net cash used in investing activities                                                                |  |                                     | (5,032   | )    |   | (9,369   | )
|                                                                                                     |  |                                     |          |      |   |          |  
|Financing activities                                                                                 |  |                                     |          |      |   |          |  
|Proceeds from sale of common stock                                                                   |  |                                     | 100,000  |      |   | 100,000  |  
|Proceeds from issuance of notes payable to stockholder                                               |  |                                     | 150,000  |      |   | 222,000  |  
|Payment of capital lease obligations                                                                 |  |                                     | (1,142   | )    |   | (675     | )
|Net cash provided by financing activities                                                            |  |                                     | 248,858  |      |   | 321,325  |  
|Effect of exchange rate changes on cash and cash equivalents                                         |  |                                     | 464      |      |   | (976     | )
|Net decrease in cash and cash equivalents                                                            |  |                                     | (5,064   | )    |   | (40,756  | )
|Cash and cash equivalents at beginning of period                                                     |  |                                     | 49,813   |      |   | 140,266  |  
|Cash and cash equivalents at end of period                                                           |  | $                                   | 44,749   |      | $ | 99,510   |  
|                                                                                                     |  |                                     |          |      |   |          |  
|Supplemental cash flow information:                                                                  |  |                                     |          |      |   |          |  
|Cash paid for interest                                                                               |  | $                                   | 39,067   |      | $ | 37,356   |  
|                                                                                                     |  |                                     |          |      |   |          |  
|Noncash Investing and Financing:                                                                     |  |                                     |          |      |   |          |  
|                                                                                                     |  |                                     |          |      |   |          |  

See accompanying notes to condensed consolidated financial
statements.

5

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Table of Contents

Puradyn Filter Technologies Incorporated
Condensed Consolidated Statements of Changes in
Stockholders Deficit
For the Three Months Ended March 31, 2011
(Unaudited)

|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|---------------------------------------------------------------- |  | ------------ | ------------ | ---------------------------- | - | ------------------------------------- |  | -------------------- | ---------- | ------------------------------------------------ | - | ------------------------------- | - | - | ----------- | - | - | ------- |  | - | ---------- | -
|                                                                 |  |              |              | Additional
 Paid-in
 Capital |   | Notes
 Receivable
 From
 Stockholders |  | Accumulated
 Deficit |            | Accumulated
 Other
 Comprehensive
 Income (Loss) |   | Total 
 Stockholders 
 Deficit |  
|                                                                 |  | Common Stock |              |                              |   |                                       |  |                     
|                                                                 |  | Shares       |              | Amount                       |   |                                       |  |                      |            |                                                 
|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|Balance at
 December 31, 2010                                    |  |              | 46,070,
 076 |                              | $ | 46,071                                |  | $                    | 46,079,970 |                                                  | $ | (756,250                        | ) | $ | (52,114,411 | ) | $ | 145,898 |  | $ | (6,598,722 | )
|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|Foreign currency
 translation adjustment                         |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   | 464     |  |   | 464        |  
|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|Net loss                                                         |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   | (326,437    | ) |   |        |  |   | (326,437   | )
|Total comprehensive loss                                         |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   | (326,437    | ) |   | 464     |  |   | (325,973   | )
|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|Common stock issued for private placement, net of issuance costs |  |              | 392,184      |                              |   | 392                                   |  |                      | 17,980     |                                                  |   |                                 |   |   |             |   |   |         |  |   | 18,000     |  
|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|Issuance of shares and warrants to vendors                       |  |              | 20,000       |                              |   | 20                                    |  |                      | 99,608     |                                                  |   |                                 |   |   |             |   |   |         |  |   | 100,000    |  
|Compensation expense associated with unvested option awards      |  |              |              |                              |   |                                       |  |                      | 43,902     |                                                  |   |                                 |   |   |             |   |   |         |  |   | 43,902     |  
|                                                                 |  |              |              |                              |   |                                       |  |                      |            |                                                  |   |                                 |   |   |             |   |   |         |  |   |            |  
|Balance at March 31, 2011                                        |  |              | 46,482,260   |                              | $ | 46,483                                |  | $                    | 46,241,460 |                                                  | $ | (756,250                        | ) | $ | (52,440,848 | ) | $ | 146,362 |  | $ | (6,762,793 | )

See accompanying notes to condensed consolidated financial
statements.

6

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Table of Contents

Puradyn Filter Technologies Incorporated
Notes to Condensed Consolidated Financial
Statements
(Unaudited)

|   |                                                                                     
|-- | ------------------------------------------------------------------------------------
|1. | Basis of Presentation, Going Concern and Summary of Significant
 Accounting Policies

Basis of
Presentation

The
accompanying unaudited condensed consolidated 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, 2011 may not necessarily be indicative of
the results that may be expected for the year ending December 31, 2011.

For further
information, refer to Puradyn Filter Technologies Incorporateds (the
Company) consolidated financial statements and footnotes thereto included in
the Form 10-K for the year ended December 31, 2010.

Going Concern

The
Companys financial statements have been prepared on the basis that it will
operate as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company has incurred net losses each year
since inception and has relied on the sale of its stock from time to time and
loans from third parties and from related parties to fund its operations.

These
recurring operating losses, liabilities exceeding assets and the reliance on
cash inflows from an institutional investor and current stockholder led the
Companys independent auditors Webb & Company, P.A. to include a statement
in its audit report relating to the Companys audited consolidated financial
statements for the year ended December 31, 2010 expressing substantial doubt
about the Companys ability to continue as a going concern.

The Company
has been addressing the liquidity and working capital issues and continues to
attempt to raise additional capital with institutional and private investors
and current stockholders. Management continues to implement cost reductions in
an effort to improve margins, including securing alternative suppliers for raw
materials and manufacturing and anticipates that these cost reductions will
positively impact our results of operations during the balance of 2011 and
beyond. Although management has refrained from raising product prices despite
increased costs in raw materials since 2009, management anticipates increasing
product pricing in 2011, subject to market conditions.

Use of Estimates

The
preparation of condensed consolidated 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 consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.

Basic and Diluted Loss Per Share

FASB ASC
260, Earnings Per Share, requires
a dual presentation of basic and diluted earnings per share. However, because
of the Companys net losses, the effect of outstanding stock options and
warrants would be anti-dilutive and, accordingly, is excluded from the
computation of diluted loss per share. The number of such shares excluded from
the computation of loss per share totaled 6,750,842 and 6,492,608 for the three
months ended March 31, 2011 and 2010, respectively.

Stock Compensation

The Company adopted FASB ASC 718, Compensation  Stock Compensation,
effective January 1, 2006 using the modified prospective application method of
adoption which requires us to record compensation cost related to unvested
stock awards as of December 31, 2005, recognizing the amortized grant date fair
value in accordance with provisions of FASB ASC 718 on straight line basis over
the service periods of each award. We have estimated forfeiture rates based on
our historical experience. Stock option compensation expense for the periods
ended March 31, 2011 and March 31, 2010 have been recognized as a component of
cost of goods sold and general and administrative expenses in the accompanying
Consolidated Financial Statements.

7

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Table of Contents

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

Inventories

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

Inventories
consisted of the following at March 31, 2011 and December 31, 2010,
respectively:

|                    |  |                |          |                   |   |          |  
|------------------- |  | -------------- | -------- | ----------------- | - | -------- | -
|                    |  | March 31, 2011 |          | December 31, 2010 |  
|Raw materials       |  | $              | 960,195  |                   | $ | 864,812  |  
|Work In Progress    |  |                | 3,257    |                   |   | 11,682   |  
|Finished goods      |  |                | 97,867   |                   |   | 169,413  |  
|Valuation allowance |  |                | (271,089 | )                 |   | (271,089 | )
|Inventory, net      |  | $              | 790,230  |                   | $ | 774,818  |  

Deferred
Financing Costs

The Company
capitalizes financing costs and amortizes them using the straight-line method,
which approximates the effective interest method, over the term of the related
debt. Amortization of deferred financing costs is included in interest expense
and totaled $252 and $1,007 for the three-months ended March 31, 2011 and 2010,
respectively. Accumulated amortization of deferred financing costs as of March
31, 2011 and 2010 was $679,389 and $678,130, respectively.

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 collectibility is reasonably assured in accordance with
FASB ASC 605, Revenue Recognition,
as amended and interpreted. Cash received by the Company prior to shipment is
recorded as deferred revenue. Sales are made to customers under terms allowing
certain limited rights of return and other limited product and performance
warranties for which provision has been made in the accompanying condensed
consolidated financial statements.

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

Product Warranty Costs

As required
by FASB ASC 460, 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 consolidated financial statements and is
calculated as the gross sales multiplied by the historical warranty expense
return rate. For the three months ended March 31, 2011, there was no change to
the reserve for warranty liability as the reserve balance was sufficient to
absorb any warranty costs that might be incurred from the sales activity for
the period.

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The
following table shows the changes in the aggregate product warranty liability
for the three-months ended March 31, 2011:

|                                              |  |   |        | 
|--------------------------------------------- |  | - | ------ | 
|Balance as of December 31,
2010               |  | $ | 38,787 | 
|Less: Payments made                           |  |   |       | 
|Add: Provision for current
 period warranties |  |   |       | 
|Balance as of March 31,
2011                  |  | $ | 38,787 | 

Comprehensive Income

FASB ASC
220, Comprehensive Income
establishes rules for reporting and displaying of comprehensive income and its
components. Comprehensive income is the sum of net loss as reported in the
consolidated statements of operations and other comprehensive income
transactions. Other comprehensive income transactions that currently apply to
the Company result from changes in exchange rates used in translating the
financial statements of its wholly owned subsidiary, Puradyn Filter
Technologies, Ltd. (Ltd.). Comprehensive loss as of March 31, 2011 and 2010
is not shown net of taxes because the Companys deferred tax asset has been
fully offset by a valuation allowance.

Comprehensive
loss consisted of the following for the three-months ended March 31, 2011 and
2010:

|                                        |  |                              |          |      |   |          |  
|--------------------------------------- |  | ---------------------------- | -------- | ---- | - | -------- | -
|                                        |  | Three Months Ended
 March 31 |         
|                                        |  | 2011                         |          | 2010 |  
|Net loss                                |  | $                            | (326,437 | )    | $ | (269,067 | )
|Other comprehensive loss:               |  |                              |          |      |   |          |  
|Foreign currency translation adjustment |  |                              | 464      |      |   | (976     | )
|Comprehensive loss                      |  | $                            | (325,973 | )    | $ | (270,043 | )

New
Accounting Standards

In
December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic
805): Disclosure of supplementary pro forma information for business
combinations, which amended guidance to clarify the acquisition date that
should be used for reporting pro-forma financial information for business
combinations. If comparative financial statements are presented, the pro-forma
revenue and earnings of the combined entity for the comparable prior reporting
period should be reported as though the acquisition date for all business
combinations that occurred during the current year had been completed as of the
beginning of the comparable prior annual reporting period. The amendments in
this guidance are effective prospectively for business combinations for which
the acquisition date is on or after January 1, 2011. There will be no
impact in the Companys operations or financial condition as the amendments
relate only to additional disclosures.

In
December 2010, the FASB issued ASU 2010-28, Intangible Goodwill and
Other (Topic 350): When to perform Step 2 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. This announcement
provides amendments to the guidance on goodwill impairment testing. The
amendments modify Step 1 of the goodwill impairment test for reporting units
with zero or negative carrying amounts. For those reporting units, an entity is
required to perform Step 2 of the goodwill impairment test if it is more likely
than not that a goodwill impairment exists. In making that determination, an
entity should consider whether there are any adverse qualitative factors
indicating that impairment may exist. The amendments are effective for fiscal
years and interim periods beginning January 1, 2011 and are not expected
to have a material impact on the Companys consolidated financial statements.

|   |                                                   
|-- | --------------------------------------------------
|2. | Issues
 Affecting Liquidity and Managements Plans

The
Companys financial statements have been prepared on the basis that it will operate
as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company has
sustained losses since inception and used net cash in operations of $249,354
and $351,736 during the three-months ended March 31, 2011 and 2010,
respectively. As a result, the Company has had to rely principally on private
equity funding, including stockholder loans to fund its activities to date.

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These
recurring operating losses, liabilities exceeding assets and the reliance on
cash inflows from an institutional investor and current stockholders have led
the Companys independent registered public accounting firm Webb & Company
to include a statement in its audit report relating to the Companys audited
consolidated financial statements for the year ended December 31, 2010
expressing substantial doubt about the Companys ability to continue as a going
concern.

The
Company has been addressing the liquidity and working capital issues and
continues to attempt to raise additional capital with institutional and private
investors and current stockholders. Cost reductions were and continue to be
implemented by the Company, including acquiring alternative suppliers for raw
materials and volume purchase discounts when appropriate, and the company
expects to see results from these reductions, as well as other cost reduction
plans through 2011.

|   |             
|-- | ------------
|3. | Common Stock

On January
10, 2011, the Company received proceeds of $50,000 from the Companys Chairman
and CEO, for the sale of 204,918 shares of common stock at a price of $0.244
per share and, as part of the offering, issued warrants to purchase 20,492
shares of common stock at an exercise price of $0.50, which expire on January
10, 2016. The purchaser was an accredited investor and the transaction was
exempt from registration under the Securities Act of 1933 in reliance on an
exemption provided by Section 4(2) of that act. The Company did not pay any
commissions or finders fees and is using the proceeds for general working
capital.

On January
11, 2011, pursuant to an obligation under an agreement dated January 5, 2010,
for services rendered in December 2010, the Company paid to Emerging Markets
LLC, 20,000 shares of common stock valued at $0.34 per share. The recipient was
an accredited investor and the issuances were exempt from registration under
the Securities Act of 1933 in reliance on an exemption provided by Section 4(2)
of that act.

On February
1, 2011, the Company received proceeds of $50,000 from a Board member, for the
sale of 187,266 shares of common stock at a price of $0.267 per share and, as
part of the offering, issued warrants to purchase 18,727 shares of common stock
at an exercise price of $0.50, which expire on February 1, 2016. The purchaser
was an accredited investor and the transaction was exempt from registration
under the Securities Act of 1933 in reliance on an exemption provided by
Section 4(2) of that act. The Company did not pay any commissions or finders
fees and we are using the proceeds for general working capital.

|   |              
|-- | -------------
|4. | Stock Options

During the
three-month periods ended March 31, 2011 and March 31, 2010, the Company
recognized compensation expense of approximately $-0- and $34,438,
respectively.

On February
7, 2011 an aggregate amount of 820,000 incentive stock options were awarded to
certain employees as partial payment for their services to the Company.

For
the three months ended March 31, 2011 and March 31, 2010, respectively, the
Company recorded stock-based compensation expense of $43,902 and $15,906,
relating to unvested employee stock options.

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

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A summary
of the Companys stock option plans as of March 31, 2011, and changes during
the three month period then ended is presented below:

|                                          |  |                                    |           |                                   |   |     | 
|----------------------------------------- |  | ---------------------------------- | --------- | --------------------------------- | - | --- | 
|                                          |  | Three Months Ended
 March 31, 2011 |          
|                                          |  | Number of Options                  |           | Weighted Average 
 Exercise Price |  
|                                          |  |                                    |           |                                   |   |     | 
|Options outstanding at
 December 31, 2010 |  |                                    | 2,161,583 |                                   | $ | .42 | 
|Options granted                           |  |                                    | 820,000   |                                   |   | .28 | 
|Options exercised                         |  |                                    |          |                                   |   |    | 
|Options cancelled                         |  |                                    |          |                                   |   |    | 
|Options at end of period                  |  |                                    | 2,981,583 |                                   | $ | .38 | 
|Options exercisable at March 31, 2011     |  |                                    | 1,024,041 |                                   | $ | .62 | 

Changes in
the Companys unvested options for the three months ended March 31, 2011 are
summarized as follows:

|                                        |  |                                    |           |                                   |   |     | 
|--------------------------------------- |  | ---------------------------------- | --------- | --------------------------------- | - | --- | 
|                                        |  | Three Months Ended
 March 31, 2011 |          
|                                        |  | Number of Options                  |           | Weighted Average 
 Exercise Price |  
|                                        |  |                                    |           |                                   |   |     | 
|Nonvested options at
 December 31, 2010 |  |                                    | 1,240,795 |                                   | $ | .23 | 
|Options granted                         |  |                                    | 820,000   |                                   |   | .28 | 
|Options vested                          |  |                                    | (103,253  | )                                 |   | .21 | 
|Options forfeited                       |  |                                    |          |                                   |   |    | 
|Nonvested options at March 31, 2011     |  |                                    | 1,957,542 |                                   | $ | .14 | 

|                          |  |                     |           |                                                  |  |                                   |  |                     |      |                                   |  |           |  |   |      | 
|------------------------- |  | ------------------- | --------- | ------------------------------------------------ |  | --------------------------------- |  | ------------------- | ---- | --------------------------------- |  | --------- |  | - | ---- | 
|                          |  | 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 | 
|$0.14
  $1.70            |  |                     | 2,933,583 |                                                  |  | 6.21                              |  | $                   | .27  |                                   |  | 976,041   |  | $ | .53  | 
|$1.99
  $2.60            |  |                     | 48,000    |                                                  |  | 1.83                              |  |                     | 2.32 |                                   |  | 48,000    |  |   | 2.32 | 
|Totals                    |  |                     | 2,981,583 |                                                  |  | 5.28                              |  | $                   | .30  |                                   |  | 1,024,041 |  | $ | .60  | 

A summary
of the Companys warrant activity as of March 31, 2011 and changed during the
three month period then ended is presented below:

|                                           |  |                                    |           |       |   |     | 
|------------------------------------------ |  | ---------------------------------- | --------- | ----- | - | --- | 
|                                           |  | Three
 months ended
March 31, 2011 |          
|                                           |  | Weighted Average Exercise          |          
|                                           |  | Options                            |           | Price |  
|Warrants outstanding at
 December 31, 2010 |  |                                    | 4,558,975 |       | $ | .97 | 
|Granted                                    |  |                                    | 39,219    |       |   | .50 | 
|Exercised                                  |  |                                    |          |       |   |    | 
|Expired                                    |  |                                    |          |       |   |    | 
|Warrants outstanding at
 March 31, 2011    |  |                                    | 4,598,194 |       | $ | .96 | 

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|                          |  |                      |           |                                                     |  |                                    |  |   |      | 
|------------------------- |  | -------------------- | --------- | --------------------------------------------------- |  | ---------------------------------- |  | - | ---- | 
|                          |  | Warrants Outstanding
|Range of 
 Exercise Price |  | Number 
 Outstanding |           | Remaining 
 Average 
 Contractual Life 
 (In Years) |  | Weighted
 Average 
 Exercise Price | 
|$0.50
  $0.75            |  |                      | 1,809,122 |                                                     |  | 3.51                               |  | $ | .52  | 
|$1.25                     |  |                      | 2,789,072 |                                                     |  | 1.81                               |  |   | 1.25 | 
|Totals                    |  |                      | 4,598,194 |                                                     |  | 2.63                               |  | $ | .96  | 

|   |                             
|-- | ----------------------------
|5. | Notes Payable to Stockholder

Beginning
on March 28, 2002, the Company executed a binding agreement with one of its
stockholders, who is also its CEO and a Board member, to fund up to $6.1
million. The original loan agreements, dated March 28, 2002 and March 14, 2003,
were due and payable on December 31, 2003 and December 31, 2004.

On
February 2, 2004, this executive officer, director and stockholder amended the
original loan agreements to extend the maturity dates to December 31, 2005 and
to waive the funding requirement mandating maturity terms until such time as
the Company has raised an additional $7.0 million over the $3.5 million raised
in the Companys private placement offering; or until such time as the Company
is operating within sufficient cash flow parameters, as defined, to sustain its
operations; or until a disposition of the Company occurs.

In
April 2005, the maturity date of the loan agreement was extended to December
31, 2006. As consideration of this extension, this executive officer, director
and stockholder was granted an additional 100,000 common stock purchase
warrants at an exercise price equal to the closing market price of the
Companys stock on the date of grant. In March of 2006 and in subsequent
Marchs through 2010, the executive officer, director and stockholder extended
the maturity date of the loan agreement annually. On February 24, 2011,
the maturity date of the stockholder loan was extended from December 31, 2011
to December 31, 2012.

As
of March 31, 2011, the Company had drawn the full funding amount under the
agreement of approximately $6.1 million plus an additional $261,914.
Additionally, the stockholder has loaned the Company $150,000 directly, for a
total amount due of $6,511,914. Amounts drawn and received from direct
borrowings bear interest at a weighted average between two facilities, one is
based on a minimum of 2.75% or the prime rate minus one-half percent and the
other is based on Libor plus 1.40 (a weighted average of 2.53% as of March 31,
2011) payable monthly and becoming due and payable on December 31, 2012, or upon a
change in control of the Company or consummation of any other financing over
$7.0 million. Previously, this executive officer, director and
stockholder waived this funding requirement.

For the
three-months ended March 31, 2011 and 2010, the Company recorded approximately
$40,421 and $35,666, respectively, of interest expense related to the notes
payable to this stockholder, which is included in interest expense in the
accompanying condensed consolidated statements of operations.

|   |                              
|-- | -----------------------------
|6. | Commitments and Contingencies

Sales to
two customers individually accounted for approximately 23% and 22% (combined
total of 45%) for the three-months ended March 31, 2011. Sales to two customers
individually accounted for approximately 28% and 15% (combined total of 43%)
for the three-months ended March 31, 2010.

On
January 1, 2011, we entered into a consulting agreement with Emerging Markets
Consulting, LLC, for design, development and dissemination of information about
the company to further its business and opportunities. The agreement is on a
month-to-month basis. As compensation for their services, we agreed to issue
20,000 shares of common stock at the end of each month while the agreement is
in effect. Either party may terminate the agreement with 30 days notice. The
recipient was an accredited or otherwise sophisticated investor who had such
knowledge and experience in business matters and was capable of evaluating the
merits and risks of the prospective investment in our securities. The recipient
had access to business and financial information concerning our company. The
issuance of the shares is exempt from registration under the Securities Act of
1933 in reliance on an exemption provided by Section 4(2) of that act.

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

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|   |                  
|-- | -----------------
|7. | Subsequent Events

On April
11, 2011, the Company  issued to Emerging Markets, LLC, 60,000 shares of common
stock valued at $0.30 per share as compensation per the month-to-month
agreement for consultant work rendered during the three months ended March 31, 2011.

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

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

Cautionary Statements 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 the Companys actual results to differ
materially from those in the forward-looking statements. These factors include,
but are not limited to, the Companys ability to operate as a going concern and to
raise sufficient capital to fund its operations, its ability to satisfy its
obligations as they become due, acceptance of the Companys products, the
Companys dependence on distributors and a few significant customers, risks associated with international operations
and international distribution and other factors. 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 this report in its entirety. Except for the Companys 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.

Overview

Sales
of the Companys products, the puraDYN® bypass
oil filtration system (the Puradyn) and replaceable filter elements will depend
principally upon end user demand for such products and acceptance of the
Companys products by original equipment manufacturers (OEMs). 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 for the Companys existing and proposed products will require
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. As a result of our limited resources, to date we
have not had adequate funds available to undertake these necessary marketing
efforts.

Currently
no bypass oil filtration system has captured a substantial share of the
estimated recurring $15 billion potential market, based upon figures supplied
by The Rhein Report, a diesel engine industry consulting, publishing and market
research company. We believe we are in a unique position to capitalize on the
growing acceptance of bypass oil filtration given that our product and our
Company are positioned as, including, but not limited to:

| |   |                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A
 competitively priced, value-added product based on an advanced, patented
 technology;                                                                                                                                                                                                                                                                                            
| |  | An
 alternative solution to the rising costs and national concerns over
 dependence on foreign oil; and                                                                                                                                                                                                                                                                             
| |  | Providing
 an operational maintenance solution to end users in conjunction with existing
 and reasonably foreseeable federal environmental legislation such as new
 regulation affecting diesel engines and diesel fuels, mandating cleaner
 diesel engines which first went into effect January 1, 2007. Additional and
 more stringent legislation is anticipated in future years.

We
focus our sales strategy on direct sales and distribution efforts as well as on
the development of a strong nationwide distribution network that will not only
sell but also install and support our product. We currently have more than 100
active distributors in the U.S. and internationally. The number of distributors
will constantly change as we add new distributors as well as when OEMs come
onboard with their distribution network.

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We
continue to focus our sales and marketing efforts to target industries more
open to innovative methods to reduce oil maintenance operating costs. These
industries are searching for new and progressive ways, including bypass oil
filtration, to maintain their equipment.

This
strategy includes focus on:

| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The expansion of existing strategic relationships we have with John
 Deere, Avis, and others;                                                                                                               
| |  | Continued development and expansion of our distribution network with
 distributors who are trained by us and stock inventory in order to establish
 a sales- and service-oriented nationwide infrastructure;
| |  | Continuing to target existing and new industrial/construction
 equipment fleets and major diesel engine and generator set OEMs;                                                                             
| |  | Creating customer pull-through, a sustained level of request for
 our product on the OEM level; and                                                                                                       
| |  | Converting customer evaluations into sales, both immediate and long
 term.                                                                                                                                  

While this
is a long-term and ongoing commitment, we believe we have achieved growing
industry acceptance based on recent accomplishments:

| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Increased
 activity in South and Central America.                                                                                      
| |  | Increased
 activity in the open pit mining industry for large haul trucks carrying
 upwards of 250 tons of material from the mine face.
| |  | Extended
 retrofit programs with domestic and international industrial service
 companies.                                             

We believe
that the renewed interest shown in the technology of bypass oil filtration as
an economic alternative to significantly rising oil prices, dependence upon
foreign oil, coupled with the added benefits of being environmentally
beneficial and a means to conserve oil, has timely and favorably positioned the
Company as a manufacturer of a cost efficient green product.

We
also believe that industry acceptance will continue to grow in 2011 as
evidenced by increased sales activity in the first quarter of 2011; however,
there can be no assurance that any of our sales efforts or strategic
relationships will meet managements expectations or result in actual revenues.

The
Companys sales effort not only involves educating the potential customer on
the benefits of our product, but also allowing the end-user to test and evaluate the Puradyn system on its fleet equipment. While set for a
specific period of time, typically ranging from three to twelve months,
evaluations are often influenced by a number of variables including equipment
type and applications downtime or servicing, which may extend the evaluation
period. Consequently, the sales cycle can be relatively long.

We believe
international sales are especially well suited to our product given that much
of the equipment is located in remote areas, therefore, due solely to logistics
of manpower resources and physically being able to reach the equipment in a
timely manner to perform the necessary oil related maintenance. In addition, in
certain countries, fuel and emission regulations are not as stringent as in
North America, causing engines to operate under more severe conditions. Certain
applications representing a higher and more immediate return on investment are
prevalent in use outside of North America and end-users consequently are more
receptive to the total maintenance package including the use of oil analysis,
which the Puradyn
system requires to verify oil condition.

Our focus
on specific industries, which began in 2009, has shown to pay dividends into
2011, with these certain niche industries representing over 50% of sales as
compared to 20% in the base period in 2009.

Optimizing
our limited resources and obtaining sufficient capital will be key to
accomplishing our goals. We will need to remain focused on working with OEMs,
continue developing the independent distributors we have onboard and maintain
growth within the major accounts using our system. To accomplish these tasks,
we will need to obtain capital funding and add appropriate sales and marketing
support to be sure our distributors and customers are served. We added an
engineer during the period ended March 31, 2011 and will evaluate further
manpower needs as we grow our OEM account list. The expansion into the OEM area
is rewarding in the aspect that it provides a steady flow of material
requirements for our manufacturing facility. Additionally, OEM business allows
us more stability in retaining trained manufacturing personnel, a stronger
supply chain with steady production, economies of scale, and the ability to
better utilize our overhead with higher average material turn rates.

14

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We continue
to address our liquidity and working capital issues as we continue to seek
additional capital from institutional and private investors and current
stockholders. Historically, we have faced difficulties in raising adequate
capital and we anticipate that those efforts will continue given the current
uncertainties facing the capital markets in the U.S. We also continue to
implement cost reductions in an effort to improve margins, including securing
alternative suppliers for raw materials and manufacturing and anticipate these
costs reductions will positively impact our results of operations during the
balance of 2011 and beyond. To facilitate improved cost reductions, during the
fourth quarter of 2010 we added a buyer whose focus is on better material
acquisition costs and more efficient purchasing methods. Although our product
costs have increased over the past few years, we have not fully passed on these
cost increases. We anticipate adjusting our pricing in 2011 to recoup some of
the increased costs we have absorbed, subject to market conditions.

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 the sale of our stock from time to time
and loans from third parties and from related parties to fund our operations.
These recurring operating losses, liabilities exceeding assets and the reliance
on cash inflows from an institutional investor and current stockholder have led
our independent registered public accounting firm Webb & Company P.A. to
include a statement in its audit report relating to audited consolidated
financial statements for the years ended December 31, 2010 and 2009 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. We plan to
continue to provide for our capital requirements through the sale of equity
securities, however, we have no firm commitments from any third party to
provide this financing and we cannot assure you we will be successful in
raising working capital as needed. There are no assurances that we will have
sufficient funds to execute our business plan, pay our obligations as they
become due, or generate positive operating results.

Critical Accounting Policies and Estimates

Our
discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to product returns, bad debts, inventories, financing operations,
warranty obligations and contingencies and litigation. We base our estimates on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.

Allowance for doubtful accounts

We
maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. If the financial
conditions of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. We
provide for potential uncollectible accounts receivable based on customer
specific identification and historical collection experience. If market
conditions continue to 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 is generally net 30 or net 60 days. Once
collection efforts by us and our collection agency are exhausted, the
determination for charging off uncollectible receivables is made.

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Table of Contents

Estimation
of Product Warranty Cost

We
provide for the estimated cost of product warranties at the time revenue is
recognized. While we engage in product quality programs and processes,
including actively monitoring and evaluating the quality of our component
suppliers, our warranty obligation is affected by product failure rates,
material usage and service delivery costs incurred in correcting a product
failure. Should actual product failure rates, material usage or costs or
service delivery costs differ from our estimates, revisions to the estimated
warranty liability would be required.

Inventory
and estimation of inventory obsolescence

Inventories
are valued at the lower of cost or market using the first in, first out (FIFO)
method. Valuation allowances for obsolete and excess inventory and shrinkage
are also recorded. Shrinkage is estimated as a percentage of sales for the
period from the last physical inventory date to the end of the applicable
period. Such estimates are based on experience and the most recent physical
inventory results. The valuation allowances for obsolete and excess inventory
in multiple stages of processing, requires management judgment and estimates
that may impact the ending inventory valuation and valuation allowances that
may affect the reported gross margin for the period.

We
provide for estimated inventory obsolescence or unmarketable inventory in
amounts equal to the difference between the cost of inventory and the estimated
market value based upon assumptions about future demand and market conditions.
If actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.

Impairment
of long-lived assets

We
periodically evaluate the recoverability of the carrying amount of our
long-lived assets under the guidelines of FASB ASC 360, Property, Plant and Equipment.
Factors that we consider in making this evaluation include estimating the undiscounted
net cash flows estimated to result from the assets over their remaining useful
life. Should our estimates of these factors change, our results of operations
and financial condition could be adversely impacted.

Revenue
recognition

Revenue
is recognized when earned. Our revenue recognition policies are in compliance
with the provisions issued in FASB ASC 605, Revenue Recognition. Revenue from product
sales to customers, distributors and resellers is recorded when products that
do not require further services or installation by us are shipped, when there
are no uncertainties surrounding customer acceptance and for which
collectibility is reasonably assured. We provide for sales returns based on an
historical analysis of returns. The estimate is updated for current return
activity and the provision is adjusted accordingly. Should actual returns
exceed managements estimates, the provision may require further adjustment and
accordingly, net sales may decrease.

Results of Operations for the Three-months Ended March 31,
2011 Compared to the Three-months Ended March 31, 2010

The
following table sets forth the amount of increase or decrease represented by
certain items reflected in the Companys condensed consolidated statements of
operations in comparing the three-months ended March 31, 2011 to the
three-months ended March 31, 2010:

|                              |  |                              |           |      |   |          |   |   |         |  
|----------------------------- |  | ---------------------------- | --------- | ---- | - | -------- | - | - | ------- | -
|                              |  | Three Months Ended March 31, |          
|                              |  | 2011                         |           | 2010 |   | Change   |  
|Net sales                     |  | $                            | 883,392   |      | $ | 674,261  |   | $ | 209,131 |  
|                              |  |                              |           |      |   |          |   |   |         |  
|Costs and expenses:           |  |                              |           |      |   |          |   |   |         |  
|Cost of products sold         |  |                              | 589,174   |      |   | 401,498  |   |   | 187,676 |  
|Salaries and wages            |  |                              | 274,163   |      |   | 239,486  |   |   | 34,677  |  
|Selling and administrative    |  |                              | 305,647   |      |   | 265,044  |   |   | 40,603  |  
|                              |  |                              |           |      |   |          |   |   |         |  
|Total costs and expenses      |  |                              | 1,168,984 |      |   | 906,028  |   |   | 262,956 |  
|                              |  |                              |           |      |   |          |   |   |         |  
|Other (expense) income:       |  |                              |           |      |   |          |   |   |         |  
|Interest income               |  |                              |          |      |   | 56       |   |   | (56     | )
|Interest expense              |  |                              | (40,845   | )    |   | (37,356  | ) |   | 3,489   |  
|Total other (expense)
 income |  |                              | (40,845   | )    |   | (37,300  | ) |   | 3,433   |  
|Net loss                      |  | $                            | (326,437  | )    | $ | (269,067 | ) | $ | 57,370  |  

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Net Sales

Net sales increased 31% in the first quarter of 2011 as compared to the
first quarter of 2010. This increase resulted from three factors. These factors
were our focus, beginning in late 2009, on niche industries and our focus on
international customers. We believe some of our customers postponed filter
purchases to generate cost savings in a relatively poor economy.

The increase in sales for the first quarter of 2011 came from increased
purchases from existing customers. We anticipate the trend for the three months
ending March 31, 2011 will remain throughout the balance of the year. Our sales
increases are based on multiple orders from two high volume customers. Also, we
anticipate sales will come from potential customers who complete their testing
phase of our product and roll out our product to their fleet.

Sales to two customers accounted for approximately 23% and 22%,
respectively, of the consolidated net sales for the three-months ended March
31, 2011. For the three-months ended March 31, 2010, sales to two customers
accounted for 28% and 15%, respectively, of the consolidated net sales.

Cost of Products Sold

Gross profit, as a percentage of sales, decreased from 40.5% in the
first quarter of 2010 to 33% in the first quarter of 2011. The increase in cost
of goods sold as a percentage of sales is primarily attributable to the nature
of the products sold. During the three months ended March 31, 2011, sales of
the puraDYN® bypass oil filtration system constituted 37% of sales while replaceable filter element sales constituted
59% of sales. For the same period in 2010, those percentages were 51%
and 44% respectively. Other increases in cost of products sold included higher
costs of raw materials and increased wages and benefit costs. We anticipate
that future periods will experience the same
gross profit as a percentage of sales, absent an increase in our
pricing.

Salaries and Wages

Salaries and wages were 14.5% higher for the quarter ended March 31,
2011 compared to March 31, 2010. On March 22, 2010 we hired a sales associate
and in February 2011 we issued stock options to the employees. These two items
that impacted the expense in 2011 were not in the salaries and wages in the
three months ended March 31, 2010. We do not anticipate any further material
impact on our salary expense by these changes in future periods.

Selling and Administrative Expenses

Selling and administrative expenses increased by 15% for the three
months ended March 31, 2011 from the comparable period in 2010. This increase
was due to an increase in employee benefit costs, professional fees and patent
costs. The increases were partially offset by decreases in travel and
marketing, engineering costs and stock compensation expenses. The increase in
patent costs resulted from our patent applications submitted during the three
months ended March 31, 2011. As we increase our reach to international
customers and develop more specialized products for niche industries, we
anticipate that selling, travel and research and development costs will
increase, but all other expenses will remain stable for the balance of the
year. The following table lists the major categories of expenses
included in Selling and Administrative expenses:

|                             |  |                              |         |      |   |         |  |   |         |  
|---------------------------- |  | ---------------------------- | ------- | ---- | - | ------- |  | - | ------- | -
|                             |  | Three Months Ended March 31, |        
|                             |  | 2011                         |         | 2010 |   | Change  | 
|Employee Benefits &
 Payroll |  | $                            | 64,248  |      | $ | 37,790  |  | $ | 26,458  |  
|Travel & Marketing           |  |                              | 36,993  |      |   | 45,417  |  |   | (8,424  | )
|Depreciation &
 Amortization |  |                              | 9,193   |      |   | 8,706   |  |   | 487     |  
|Engineering                  |  |                              | 2,651   |      |   | 10,222  |  |   | (7,571  | )
|Professional Fees            |  |                              | 54,860  |      |   | 42,248  |  |   | 12,612  |  
|Investor Relations           |  |                              | 18,013  |      |   | 21,795  |  |   | (3,782  | )
|Occupancy Expense            |  |                              | 27,623  |      |   | 28,149  |  |   | (526    | )
|Patent Expense               |  |                              | 76,384  |      |   | 13,796  |  |   | 62,588  |  
|Stock Compensation           |  |                              | 1,700   |      |   | 34,438  |  |   | (32,738 | )
|Bad Debts                    |  |                              |        |      |   | 5,616   |  |   | (5,616  | )
|Other Expenses               |  |                              | 13,981  |      |   | 16,867  |  |   | (3,595  | )
|                             |  |                              |         |      |   |         |  |   |         |  
|Total                        |  | $                            | 305,647 |      | $ | 265,044 |  | $ | 39,893  |  

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Interest Expense

Interest expense remained relatively constant for the period ending
March 31, 2011 as compared to the period ending March 31, 2010 and was incurred
primarily on the outstanding balance of the stockholder notes payable. The
slight increase was due to higher borrowings. The Company pays interest monthly
on the notes payable to the stockholder at the prime rate less one-half
percent, which was a weighted average of 2.54% as of March 31, 2011 as compared
to 2.44% as of March 31, 2010.

Liquidity and Capital Resources

As of March 31, 2011, the Company had cash and cash equivalents of
$44,749, as compared to $49,813 at December 31, 2010. At March 31, 2011, we had
negative working capital of ($421,290) and our current ratio (current assets to
current liabilities) was 0.76 to 1. At December 31, 2010 we had negative
working capital of ($440,952) and our current ratio was 0.70 to 1. The decrease
in working capital deficit and increase in current ratio is primarily
attributable to the increase in accounts receivable, offset by increases in
accounts payable and accrued liabilities.

We
have incurred net losses each year since inception and at March 31, 2011 we had
an accumulated deficit of $52,440,848. Our net sales are not sufficient to fund
our operating expenses. Historically, we have relied on the sale of our stock
from time to time and loans from third parties and from related parties to fund
our operations. During 2010, we raised a total of $445,100 in capital from an
institutional investor and current stockholders and during the three months ended
March 31, 2011 we raised an additional $100,000. In addition, as of March 31,
2011, we owe our stockholder $6.5 million for funds he has advanced to us from
time to time for working capital. Interest expense on this loan was $40,421 for
the three months ended March 31, 2011.

We
do not currently have any commitments for capital expenditures. Our current
cash position is insufficient to cover our current operating needs. While we
anticipate cash flows from 2011 sales activity, additional cash will still be needed
to support operations, meet our working capital needs and satisfy our
obligations as they become due. While we anticipate cash flows from 2011 sales
activity, our operations continue to require more cash than they produce. As a
result of this deficiency, additional cash will still be needed to support
operations, meet our working capital needs and satisfy our obligations as they
become due. While we are actively seeking additional equity investments, we
have no firm commitments from any third parties and there are no assurances we
will be successful in attracting additional capital. In addition, as set forth
above, we owe our stockholder $6.5 million which is due on December 31, 2012 or
(i) at such time as we have raised an additional $7 million over the $3.5
million raised in prior offerings, or (ii) at such time as we are operating
within sufficient cash flow parameters to sustain operations, or (iii) until a
disposition of our company, such as an acquisition or merger, occurs. We do not
have sufficient funds to pay this loan when it becomes due and there are no
assurances the note holder will extend the due date.

We
have implemented measures to preserve our ability to operate, including
organizational changes, a reduction and/or deferral of salaries, reduction in
personnel and renegotiating creditor and collection arrangements. If we are not
successful in raising additional capital in the near future, it is possible we
will be required to accelerate our contingent plans to more aggressively reduce
spending, including drastic reductions in our work force, severe cutbacks in
our production facilities and elimination of overhead costs that do not
contribute to our level of sales activity. If budgeted sales levels are not
achieved and/or significant unanticipated expenditures occur, or if we are not
able to raise additional investment capital, we may have to modify our business
plan, reduce or discontinue some of our operations or seek a buyer for part of
its assets to continue as a going concern through 2011. There can be no
assurance that we will be able to raise additional capital or that sales will
increase to the level required to generate profitable operations to provide
positive cash flow from operations. In that event, it is possible that
stockholders could lose their entire investment in our company. These factors
raise substantial doubt about our ability to continue as a going concern.

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Cash
Flows

Operating activities

For the three-month period ended March 31, 2011 net cash used in
operating activities was $249,354, which primarily resulted from the net loss
of $326,437. The utilization of cash in operations is primarily attributable to
the increase in accounts receivable in the amount of $304,942 offset by an
increase in accounts payable of $207,125.

For the three-month period ended March 31, 2010 net cash used in
operating activities was $351,736, which primarily resulted from the net loss
of $269,067. The utilization of cash in operations is primarily attributable to
the increase in accounts receivable in the amount of $151,498, an increase in
inventories in the amount of $193,806 offset by an increase in accounts payable
of $184,340.

Investing activities

For the three months ending March 31, 2011, $5,032 was used in
investing activities for the purchase of equipment.

For the three months ending March 31, 2010, $9,369 was used in
investing activities for the purchase of equipment.

Financing activities

Net
cash provided by financing activities was $248,858 for the three months ended
March 31, 2011, composed of $100,000 in proceeds received from stock issued for
cash and $150,000 in loans from our stockholder as described above, less $1,142
in payment of capital lease obligations. Net cash provided by financing
activities was $321,325 for the period ending March 31, 2010, composed of
$100,000 of net proceeds received from stock issued for cash and $222,000 in
advances under the line of credit from our stockholder as described above less
$675 in payment of capital lease obligations.

New Accounting Standards

In
December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic
805): Disclosure of supplementary pro forma information for business
combinations, which amended guidance to clarify the acquisition date that
should be used for reporting pro-forma financial information for business
combinations. If comparative financial statements are presented, the pro-forma
revenue and earnings of the combined entity for the comparable prior reporting
period should be reported as though the acquisition date for all business
combinations that occurred during the current year had been completed as of the
beginning of the comparable prior annual reporting period. The amendments in
this guidance are effective prospectively for business combinations for which
the acquisition date is on or after January 1, 2011. There will be no
impact in the Companys operations or financial condition as the amendments
relate only to additional disclosures.

In
December 2010, the FASB issued ASU 2010-28, Intangible Goodwill and
Other (Topic 350): When to perform Step 2 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. This announcement
provides amendments to the guidance on goodwill impairment testing. The amendments
modify Step 1 of the goodwill impairment test for reporting units with zero or
negative carrying amounts. For those reporting units, an entity is required to
perform Step 2 of the goodwill impairment test if it is more likely than not
that a goodwill impairment exists. In making that determination, an entity
should consider whether there are any adverse qualitative factors indicating
that impairment may exist. The amendments are effective for fiscal years and
interim periods beginning January 1, 2011 and are not expected to have a
material impact on the Companys consolidated financial statements.

Impact
of Inflation and Foreign Currency Translation

Inflation
has not had a significant impact on the Companys operations. However, any
significant decrease in the price for oil or labor, environmental 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. While we
no longer have operations in Great Britain, we maintain a small amount of cash
on deposit in a bank account related to Ltd.s previous operations and we
continue to collect outstanding accounts receivable. These activities resulted
in a minor foreign currency translation adjustment during the three month
period ending March 31, 2011 and 2010. The exchange rate, the Great British
pound to the U.S. dollar fluctuated from 1.5928 on December 31, 2010 to 1.6032
on March 31, 2011.

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Off Balance Sheet Financing

None. The
Company has not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of any third parties, nor has
it entered into any derivative contracts that are indexed to our shares and
classified as stockholders equity or that are not reflected in our
consolidated financial statements. Furthermore, the Company does not have any
retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity.
We do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing
or hedging services with us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.

Not
applicable for a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our
management, which includes our Chief Executive Officer 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-15(e) promulgated under the Securities and Exchange Act of 1934, as
amended) as of March 31, 2011. Based on that evaluation, our Chief Executive Officer
and our Vice President who serves as our principal financial officer, concluded
that as of March 31, 2011, 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.

Our
management does not expect that our disclosure controls or our internal
controls will prevent all error and fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. In addition, 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, within a company 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. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people or by management override of the control. The design of any
systems of controls also 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.
Over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of these inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls Over Financial Reporting

In its assessment of internal control over financial reporting as of
December 31, 2010 our management determined that there were material weaknesses
in our internal control over financial reporting as a result of not maintaining
effective controls to timely monitor and review the performance of our physical
inventory observations and counting procedures and related count adjustments in
our automated inventory system, resulting in errors in the recorded inventory
balances. Additionally, management did not properly review and identify slow
moving and obsolete inventory. During the three months ending March 31, 2011 we
enhanced our existing internal policies to remediate this material weakness.

To
remediate the material weakness surrounding the inventory issue described
above, the following actions were taken during the period ended March 31, 2011:

| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Completed a full
 wall-to-wall physical inventory count at March 31, 2011;

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| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |   |                                                                                                               
| |  | Commenced periodic review
 and additional analysis procedures to identify slow moving and obsolete
 items;    
| |   |                                                                                                               
| |  | Provided related training
 to staff to help ensure that these procedures are properly
 performed; and         
| |   |                                                                                                               
| |  | Revised the physical
 counting procedure to provide second and third tier recounts to verify
 observed counts.

Additionally,
we performed a complete review of inventory processes and procedures to
identify and adopt measures to further improve and strengthen our overall
control environment, and will continue to monitor vigorously the effectiveness
of these processes, procedures and controls.

Other than
the foregoing, there have been no changes in our internal control over
financial reporting in our last quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

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, 2010. There has been no material change in our risk factors from those
previously discussed in the Annual Report on Form 10-K.

ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On
January 1, 2011, we entered into a consulting agreement with Emerging Markets
Consulting, LLC, for design, development and dissemination of information about
the company to further its business and opportunities. The agreement is based
upon a month-to-month basis. As compensation for their services, we agreed to
issue 20,000 shares of common stock at the end of each month while the
agreement is in effect. Either party may terminate the agreement with 30 days
notice. On January 11, 2011, for services rendered in December 2010, the
Company  issued to Emerging Markets LLC, 20,000 shares of common stock valued at
$0.34 per share. On April 11, 2011, the Company issued to Emerging Markets, LLC,
60,000 shares of common stock valued at $0.30 per share as compensation per the
month-to-month agreement for consultant work. On April 28, 2011, the Company
terminated the month-to-month agreement with Emerging Markets, LLC. The
recipient was an accredited or otherwise sophisticated investor who had such
knowledge and experience in business matters and was capable of evaluating the
merits and risks of the prospective investment in our securities. The recipient
had access to business and financial information concerning our company. The
issuance of the shares is exempt from registration under the Securities Act of
1933 in reliance on an exemption provided by Section 4(2) of that act.

On February
24, 2011, the repayment date of the stockholder loan was extended from December
31, 2011 to December 31, 2012.

ITEM
3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM
4. (REMOVED AND RESERVED)

ITEM
5. OTHER INFORMATION.

Between
February 9, 2011 and April 5, 2011, the Company received loans in various
amounts totaling $175,000, from the Companys Chairman and CEO, as advances for
working capital needs. The loans bear interest at the same rate of interest as
the credit facility provided by the stockholder under the note dated March 28,
2002. These advances do not have a specific due date but are to be paid based
on Managements determination of the Companys ability to pay and cash flow. We
are using the proceeds for working capital.

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ITEM
6. EXHIBITS.

|     |                                                                     
|---- | --------------------------------------------------------------------
|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          

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 16, 2011 | By /s/ Joseph V. Vittoria                                                                                                 
|                   | Joseph V. Vittoria,
 Chairman and Chief Executive Officer, principal executive officer                                    
|                   |                                                                                                                           
|Date: May 16, 2011 | By /s/ Alan J. Sandler                                                                                                    
|                   | Alan J. Sandler, Secretary
 to the Board, Vice President and principal financial officer and principal
 accounting officer

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