U.S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON D.C. 20549

                                   FORM 10-QSB

(Mark one)

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

                For the quarterly period ended SEPTEMBER 30, 2004
                -------------------------------------------------

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     (No Fee Required)

           For the transition period from ____________ to ____________

                         Commission file number 0-29192
                         ------------------------------

                    PURADYN FILTER TECHNOLOGIES INCORPORATED
                    ----------------------------------------
                 (Name of small business issuer in its charter)

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

               2017 High Ridge Road, Boynton Beach, Florida   33426
               ------------------------------------------------------
               (Address of principal executive offices)    (Zip Code)

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that Puradyn Filter Technologies Incorporated was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [x] No [ ]

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

As of November 12, 2004, there were 17,452,164 shares of registrant's common
stock outstanding, par value $.001.

<PAGE>
                    Puradyn Filter Technologies Incorporated
                    Index to Quarterly Report on Form 10-QSB

Part I.  Financial Information                                            Page

Item 1.  Financial Statements (Unaudited)

                  Condensed Consolidated Balance Sheet -
                  September 30, 2004........................................3

                  Condensed Consolidated Statements of Operations -
                  Three months and nine months ended
                  September 30, 2004 and 2003...............................4

                  Condensed Consolidated Statements of Cash Flows -
                  Nine months ended September 30, 2004 and 2003.............5

                  Notes to Condensed Consolidated Financial Statements......6

Item 2.           Management's Discussion and Analysis or
                  Plan of Operations.......................................12

Item 3.           Controls and Procedures..................................19

Part II. Other Information

Item 1.           Legal Proceedings........................................19

Item 2.           Changes in Securities and Use of Proceeds................19

Item 6.           Exhibits.................................................19

Signatures.................................................................20


                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                    Puradyn Filter Technologies Incorporated
                      Condensed Consolidated Balance Sheet
                               September 30, 2004
                                   (Unaudited)
<TABLE>
<S>                                                                                <C>
Assets
Current assets:
     Cash and cash equivalents                                                     $    402,930
     Accounts receivable, net of allowance for uncollectible accounts of $20,604        292,301
     Inventories                                                                      1,294,750
     Prepaid expenses and other current assets                                          233,333
                                                                                   ------------
Total current assets                                                                  2,223,314

Property and equipment, net                                                             587,815
Deferred financing costs, net                                                           169,806
Other noncurrent assets                                                                 107,597
                                                                                   ------------
Total assets                                                                       $  3,088,532
                                                                                   ============

Liabilities and stockholders' deficit
Current liabilities:
     Accounts payable                                                              $    291,576
     Accrued liabilities                                                                532,189
     Current portion of capital lease obligation                                          4,401
     Deferred revenue                                                                    47,366
                                                                                   ------------
Total current liabilities                                                               875,532

Capital lease obligation, less current portion                                           11,796
Notes payable to stockholder                                                          4,501,900

Stockholders' deficit:
     Preferred stock, $.001 par value:
         Authorized shares - 500,000; none issued and outstanding                            --
     Common stock, $.001 par value:
         Authorized shares - 30,000,000; 17,452,164 issued and outstanding               17,452
     Additional paid-in capital                                                      35,486,248
     Notes receivable from stockholders, including accrued interest                  (1,028,409)
     Accumulated deficit                                                            (36,731,313)
     Accumulated other comprehensive loss                                               (44,674)
                                                                                   ------------
Total stockholders' deficit                                                          (2,300,696)
                                                                                   ------------
Total liabilities and stockholders' deficit                                        $  3,088,532
                                                                                   ============
</TABLE>

See accompanying notes.

                                       3
<PAGE>
                    Puradyn Filter Technologies Incorporated
                 Condensed Consolidated Statements of Operations
     For the Three Months and Nine Months Ended September 30, 2004 and 2003
                                   (Unaudited)
<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED                NINE MONTHS ENDED
                                           SEPTEMBER 30,                    SEPTEMBER 30,
                                    ----------------------------    ----------------------------
                                        2004            2003            2004            2003
                                    ------------    ------------    ------------    ------------
<S>                                 <C>             <C>             <C>             <C>
Net sales                           $    515,330    $    507,417    $  1,756,054    $  1,572,911

Costs and expenses:
     Cost of products sold               611,957         620,522       1,887,208       1,787,450
     Salaries and wages                  415,326         427,308       1,227,595       1,338,900
     Selling and administrative          374,008         409,367       1,148,203       1,297,989
     Stock based compensation           (161,530)       (116,464)         75,692          12,706
                                    ------------    ------------    ------------    ------------
                                       1,239,761       1,340,733       4,338,698       4,437,045
                                    ------------    ------------    ------------    ------------
Loss from operations                    (724,431)       (833,316)     (2,582,644)     (2,864,134)

Other income (expense):
     Interest income                      13,166          13,078          40,299          38,526
     Interest expense                    (81,247)        (89,276)       (236,882)       (233,365)
                                    ------------    ------------    ------------    ------------
Total other expense, net                 (68,081)        (76,198)       (196,583)       (194,839)
                                    ------------    ------------    ------------    ------------

Net loss                            $   (792,512)   $   (909,514)   $ (2,779,227)   $ (3,058,973)
                                    ============    ============    ============    ============

Basic and diluted loss per common
share                               $      (0.05)   $      (0.06)   $      (0.16)   $      (0.20)
                                    ============    ============    ============    ============

Weighted average common shares
outstanding                           17,452,164      15,692,164      17,220,120      15,679,898
                                    ============    ============    ============    ============
</TABLE>

See accompanying notes.

                                       4
<PAGE>

                    Puradyn Filter Technologies Incorporated
                 Condensed Consolidated Statements of Cash Flows
              For the Nine Months Ended September 30, 2004 and 2003
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                            --------------------------
                                                               2004           2003
                                                            -----------    -----------
<S>                                                         <C>            <C>
OPERATING ACTIVITIES
Net cash used in operating activities                       $(2,392,022)   $(2,775,145)
                                                            -----------    -----------
INVESTING ACTIVITIES
   Purchases of property and equipment                          (70,500)      (109,541)
                                                            -----------    -----------
Net cash used in investing activities                           (70,500)      (109,541)
                                                            -----------    -----------

FINANCING ACTIVITIES
   Proceeds from exercise of stock options                       10,000         42,666
   Proceeds from private placement, net of expenses           1,964,480             --
   Proceeds from notes payable to stockholder                 1,500,000      2,501,900
   Payments on notes payable to stockholder                  (2,000,000)            --
   Proceeds from short term loan payable to officer                  --        100,000
   Payments on short term loan payable to officer                    --       (100,000)
   Payment of capital lease obligations                          (3,006)        (3,382)
                                                            -----------    -----------
Net cash provided by financing activities                     1,471,474      2,541,184
                                                            -----------    -----------

Effect of exchange rate changes on cash and cash
     equivalents                                                   (852)       (34,209)
                                                            -----------    -----------

Decrease in cash and cash equivalents                          (991,900)      (377,711)

Cash and cash equivalents at beginning of period              1,394,830        633,024
                                                            -----------    -----------
Cash and cash equivalents at end of period                  $   402,930    $   255,313

                                                            ===========    ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest                                      $   135,072    $   101,554
                                                            ===========    ===========

NONCASH INVESTING AND FINANCING ACTIVITIES

Warrants issued for deferred financing and capital
raising costs                                               $   112,500    $   212,500
                                                            ===========    ===========
Common stock options issued in lieu of officer cash bonus   $        --    $    80,000
                                                            ===========    ===========
</TABLE>

See accompanying notes.

                                       5
<PAGE>
                    Puradyn Filter Technologies Incorporated
              Notes to Condensed Consolidated Financial Statements
                               September 30, 2004
                                   (Unaudited)

1.   BASIS OF PRESENTATION 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-QSB
and Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments consisting of a normal and recurring nature considered necessary for
a fair presentation have been included. Operating results for the three-month
and nine-month periods ended September 30, 2004 may not necessarily be
indicative of the results that may be expected for the year ending December 31,
2004.

For further information, refer to Puradyn Filter Technologies Incorporated's
(the Company) consolidated financial statements and footnotes thereto included
in the Form 10-KSB for the year ended December 31, 2003.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities - an
Interpretation of ARB No. 51 (FIN 46), which addresses consolidation of variable
interest entities. FIN 46 expands the criteria for consideration in determining
whether a variable interest entity should be consolidated by a business entity,
and requires existing unconsolidated variable interest entities (which include,
but are not limited to, Special Purpose Entities, or SPEs) to be consolidated by
their primary beneficiaries if the entities do not effectively disperse risks
among parties involved. This interpretation applies immediately to variable
interest entities created after January 31, 2003, and to variable interest
entities in which an enterprise obtains an interest after that date. Originally,
FIN 46 applied to the first interim period beginning after June 15, 2003, to
variable interest entities in which an enterprise holds a variable interest that
it acquired before February 1, 2003. However, in December 2003, the FASB issued
FASB Staff Position No. FIN 46-e, Effective Date of FASB Interpretation No. 46,
Consolidation of Variable Interest Held by a Public Entity (FSP 46-e) that
delayed the implementation date for the Company to the first interim or annual
period ending after December 15, 2004. The Company does not anticipate that the
adoption of the new interpretation will have an effect on the Company's
financial position or the results of its operations.

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

SFAS No. 128, 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
2,933,570 for the three-month and nine-month periods ended September 30, 2004
and 2,753,570 for the three-month and nine-month periods ended September 30,
2003, respectively.

                                       6
<PAGE>

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 September 30, 2004:

               Raw materials             $  852,003
               Finished goods               442,747
                                         ----------
                                         $1,294,750
                                         ==========

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 approximately $34,000 and $45,000 for the
three-months ended September 30, 2004 and 2003, respectively, and approximately
$106,000 and $129,000 for the nine-months ended September 30, 2004 and 2003,
respectively. The deferred financing costs related to the $2.5 million
commitment provided by the Company's stockholder, who is also a Board Member,
totaled $318,000 and were initially amortized over the nine-month draw down
period ending December 31, 2002. Upon the first draw in August 2002, the
amortization period was extended to 18 months or through December 31, 2003. On
March 14, 2003, the Company recorded additional deferred financing costs of
$214,400 related to an additional $3.5 million commitment provided by the same
stockholder, with a payback date of December 31, 2004. The deferred financing
costs of $214,400 were amortized over the payback period. In addition, the
repayment period for the $2.5 million commitment was extended to December 31,
2004. Effective March 14, 2003, the Company began amortizing the remaining
balance of deferred financing costs for the $2.5 million commitment
prospectively over the extended payback period. On February 2, 2004, the payback
period for both the $2.5 and $3.5 million commitments was extended to December
31, 2005 (see Note 2), resulting in the addition of approximately $94,000 of
related deferred financing costs. Effective February 2, 2004, the Company began
amortizing the remaining balance of deferred financing costs for both the $2.5
and $3.5 million commitments prospectively over the extended payback period.
Accumulated amortization of deferred financing costs as of September 30, 2004
was approximately $456,000.

Stock Option Plans

The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
25) and FASB Interpretation No. 44, Accounting for Certain Transactions
Involving Stock Compensation (FIN 44), and provides pro forma disclosures of the
compensation expense determined under the fair value provisions of SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS 123). The Company does not record
compensation expense using the fair value provisions, because the alternative
fair value accounting provided for under SFAS 123 requires the use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, in situations where the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

The Company leases its employees from a payroll leasing company. The Company's
leased employees meet the definition of employees as specified by FIN 44 for
purposes of applying APB 25.

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


                                       7
<PAGE>

option or warrant, whichever is more reliably measurable in accordance with SFAS
123 and EITF 96-18, Accounting for Equity Investments That are Issued to Other
Than Employees for Acquiring or in Conjunction with Selling Goods or Services.
The related expense is recognized over the period the services are provided.

Pro forma information regarding net loss and loss per common share as if the
Company had accounted for its employee stock options under the fair value method
of SFAS 123 is presented below. For purposes of pro forma disclosure, the
estimated fair value of the options is amortized to expense over the options'
vesting period. The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED           NINE MONTHS ENDED
                                       SEPTEMBER 30,               SEPTEMBER 30,
                                 ------------------------    --------------------------
                                   2004           2003          2004            2003
                                 ---------    -----------    -----------    -----------
<S>                              <C>          <C>            <C>            <C>
Net loss as reported             $(792,512)   $  (909,514)   $(2,779,227)   $(3,058,973)
Stock-based employee
  compensation cost
  (intrinsic value method)              --             --             --             --
Fair value method stock option
     expense                       (28,231)      (299,348)      (653,153)      (916,266)
                                 ---------    -----------    -----------    -----------
Pro forma net loss               $(820,743)   $(1,208,862)   $(3,432,380)   $(3,975,239)
                                 =========    ===========    ===========    ===========
Loss per common share:
  Basic and diluted loss as
   reported                      $   (0.05)   $     (0.06)   $     (0.16)   $     (0.20)
  Basic and diluted loss
   pro forma                     $   (0.05)   $     (0.08)   $     (0.20)   $     (0.25)
</TABLE>

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
Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements
(SAB 104), 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 Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN 45), 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 calculated as the gross sales
multiplied by the historical warranty expense return rate. Deferred revenue of
approximately $4,500, related to the replacement of warranty products, and


                                       8
<PAGE>

accrued warranty expense of approximately $42,000, are included in the
accompanying condensed consolidated balance sheet as of September 30, 2004.

The following table shows the changes in the aggregate product warranty
liability for the nine months ended September 30, 2004:

            Balance as of December 31, 2003                         $ 42,573
            Less: Payments made                                      (36,439)
                  Change in prior period estimate                      1,460
                  Add: Provision for current period warranties        34,583
                                                                    --------
                  Balance as of September 30, 2004                  $ 42,177
                                                                    ========

Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income (SFAS 130) 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 September 30, 2004 and 2003 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 and nine-months
ended September 30, 2004 and 2003:
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                                  SEPTEMBER 30,              SEPTEMBER 30,
                                             ----------------------    --------------------------
                                               2004          2003          2004           2003
                                             ---------    ---------    -----------    -----------
<S>                                          <C>          <C>          <C>            <C>
Net loss                                     $(792,512)   $(909,514)   $(2,779,227)   $(3,058,973)
                                             ---------    ---------    -----------    -----------

Other comprehensive income (loss):
   Foreign currency translation adjustment       3,154       (5,263)          (852)       (34,209)
                                             ---------    ---------    -----------    -----------
Total other comprehensive income (loss)          3,154       (5,263)          (852)       (34,209)
                                             ---------    ---------    -----------    -----------
Comprehensive loss                           $(789,358)   $(914,777)   $(2,780,079)   $(3,093,182)
                                             =========    =========    ===========    ===========
</TABLE>

Reclassifications

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

2. ISSUES AFFECTING LIQUIDITY AND MANAGEMENT'S PLANS

The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has sustained losses since
inception in 1987 and used net cash in operations of approximately $2,392,000
and $2,775,000 during the nine-months ended September 30, 2004 and 2003,
respectively. As a result, the Company has had to rely principally on private
equity funding, including the conversion of debt into stock, as well as
stockholder loans to fund its activities to date.

On March 28, 2002 and March 14, 2003, respectively, the Company executed a
binding agreement with one of its stockholders, who is also a Board Member, to
fund up to $2.5 million through March 31, 2003 and an additional $3.5 million
through December 31, 2003. Under the terms of the agreements, the Company can
draw amounts as needed in multiples of $500,000 to fund operations subject to


                                       9
<PAGE>

Board of Director approval. Amounts drawn bear interest at the prime rate per
annum (4.75% at September 30, 2004), payable monthly and were to become due and
payable on December 31, 2003 and December 31, 2004, respectively, or upon a
change in control of the Company or consummation of any other financing over
$3.0 million or over $7.0 million in the aggregate. In March 2003, the payback
date for the first agreement was extended to December 31, 2004.

On February 2, 2004, the stockholder amended both agreements to extend the
payback dates to December 31, 2005 and to waive the funding requirement
mandating payback terms until such time as the Company has raised an additional
$7.0 million over the $3.5 million raised in the Company's recent 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 March 2004, the Company had repaid $2.0
million of the $5.0 million it had drawn from the available funds. Both of the
lines allow for discretionary principal payments, which add to the availability
of additional funds that the Company may draw. During the nine-months ended
September 30, 2004, the Company had drawn an additional $1,500,000 of the
available balance. In October 2004, an additional $500,000 draw was made.

In addition, as part of the February 2, 2004 amendment described above, the
second agreement was amended to allow the Company to draw the remaining
available balance ($1.5 million as of September 30, 2004) through December 31,
2004. In consideration for the amendments, as well as for efforts in obtaining
private placement funding, the Company granted the stockholder 150,000 common
stock purchase warrants at an exercise price equal to the closing market price
of the Company's stock on the date of grant (see Note 3).

In December 2003, the Company issued 750,000 shares of common stock for gross
proceeds of $1.5 million from its recent private placement offering
(approximately $1.47 million net of related expenses) to a third party investor.
In March 2004, an additional 1.0 million shares of common stock were issued to
the same investor for gross proceeds of $2.0 million (approximately $1.98
million net of related expenses.) The $2.0 million of gross proceeds was used to
reduce the outstanding principal balance of the notes payable to stockholder.
There is no assurance that the Company will raise any additional proceeds from
future private placements. Subscriptions for the recent private placement
expired on April 30, 2004.

The Company anticipates increased cash flows from 2004 sales activity; however,
additional cash will still be needed to support operations. Management believes
that the commitments received from its stockholder, the funds received from its
recent current private placement offering, as well as cash from sales and
current working capital will be sufficient to sustain its operations at its
current level through January 1, 2005. However, if budgeted sales levels are not
achieved and/or significant unanticipated expenditures occur, the Company may
have to modify its business plan, reduce or discontinue some of its operations
or seek a buyer for all or part of its assets to continue as a going concern
through 2004.

3. COMMON STOCK

On March 12, 2004, the Company received gross cash proceeds of $2.0 million from
the sale of 1.0 million shares of common stock from its private placement
offering, which expired on April 30, 2004. The funds were used to reduce the
outstanding principal balance of the notes payable to stockholder (see Note 2).
The Company incurred related offering costs of approximately $21,000.

On February 2, 2004, the two binding funding agreements with a stockholder, who
is also a Board member, were amended (see Note 2). In consideration for the
amendments, as well as for efforts in obtaining private placement funding, the
Company granted the stockholder 150,000 fully vested common stock purchase
warrants. The fair value of the warrants was estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions: risk
free interest rate of 2.43%, volatility factor of the expected market price of
the Company's common stock of .526, a dividend yield of zero, and a weighted
average expected life of 3 years. The warrants have an exercise price of $2.00,
which was equal to quoted market value on the date of grant. The fair value of
the warrants was estimated at $112,500. The Company accrued $18,750 of the fair
value related to the services rendered by the stockholder in association with
the private placement funds raised in December 2003, in the 2003 consolidated
balance sheet in Form 10-KSB, and recorded a deferred charge of $93,750 in


                                       10
<PAGE>

February 2004 for the amendments to the commitment agreements, which is being
amortized over the repayment period of 23 months.

4. STOCK OPTIONS

During the nine-months ended September 30, 2004 and 2003, employees of the
Company exercised 10,000 and 43,775, respectively, of common stock options. The
Company received $10,000 and $42,666, respectively, in cash proceeds in exchange
for the shares issued.

During the three-month periods ended September 30, 2004 and 2003, the Company
recognized a credit to operations of approximately $162,000 and $117,000,
respectively (under the intrinsic value method), relating to outstanding
variable option awards, which is included in stock based compensation expense.
During the nine-month periods ended September 30, 2004 and 2003, the Company
recognized a credit to operations of approximately $187,000 and compensation
expense of approximately $13,000, respectively, relating to variable option
awards, which is included stock based compensation expense. At September 30,
2004, approximately 212,000 awards subject to variable accounting remained
outstanding with an average exercise price of $0.47.

On March 9, 2004, the Company extended the expiration date of the exercise
period of 270,000 fully vested stock options for a retired employee who left the
Company in August 2003. The Company's Stock Option Plan permits an employee to
exercise their stock options for up to one month after their termination date,
at which time they expire. The exercise price of the options ranges from $1.00
to $8.50. In accordance with FIN 44, the Company compared the options' intrinsic
value on the modification date to the original intrinsic value on the date of
grant. The Company recorded approximately $263,000 of compensation expense
related to this modification, which is included in stock based compensation
expense for the nine-month period ended September 30, 2004.

5. NOTES PAYABLE TO STOCKHOLDER

As of September 30, 2004, the Company had drawn a gross aggregate of
approximately $6.5 million from the two available lines-of-credit, which are
provided by a stockholder, who is also a Board Member, of the Company (see Notes
2 and 3). Amounts drawn bear interest at the prime rate (4.75% as of September
30, 2004) payable monthly and become due and payable on December 31, 2005; or
until such time as the Company has raised an additional $7.0 million over the
$3.5 million raised in the Company's recent 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 March 2004, the Company repaid $2.0 million of the outstanding
balance, with the funds received from the private placement (see Note 3). Both
of the lines allow for discretionary principal payments, which add to the
availability of additional funds that the Company may draw. In October 2004, an
additional $500,000 draw was made, leaving $1.0 million available to draw as of
the date of this filing.

For the three-months ended September 30, 2004 and 2003, the Company recorded
approximately $46,000 and $42,500, respectively, and for the nine-months ended
September 30, 2004 and 2003, the Company recorded approximately $128,000 and
$101,500, respectively, of interest expense related to the notes payable to
stockholder, which is included in interest expense in the accompanying condensed
consolidated statements of operations.

6. COMMITMENTS AND CONTINGENCIES

MALT LITIGATION

In connection with the Company being granted worldwide manufacturing and
marketing rights for certain of the Purifiner products, a royalty agreement was
entered into with a term equal to the life of the related patents or any


                                       11
<PAGE>

improvements thereto. Pursuant to this royalty agreement, the owner of the
patents was to receive 5% of the net unit sale price of all covered Purifiner
products, as defined. Additionally, 1% of the net sales price of replacement oil
filter elements was to be paid as a royalty on certain Puradyn filters for the
use of the U.S. Purifiner trademark. The Company is no longer retaining the
Purifiner patents or trademarks and accordingly is not renewing them upon
expiration.

In May 1994, the Company and the patent owner entered into a settlement
agreement relating to royalties under which the patent owner was entitled to a
minimum annual royalty of $24,000, payable in monthly installments of $2,000. In
February 1997, the patent owner filed an action against the Company for
nonpayment of approximately $20,000 of royalties claimed by him, seeking a
permanent injunction against the Company's manufacturing and selling of the
covered Purifiner products. On March 2, 1999, the trial court ruled that the
patent owner was not entitled to any injunctive relief but was entitled to
$20,169 in past royalties, which the Company paid. The patent owner filed a
motion for additional damages and attorney fees and on December 13, 2000, the
Court found the patent owner was entitled to an additional $15,505. The Company
appealed that judgment but paid the additional judgment. Thereafter, on February
22, 2002, the trial court ordered the Company to pay the sum of $18,049 for the
patent owner's attorney's fees and court costs, for which the Company posted a
bond in the amount of $22,238 to secure payment. That order was appealed and
combined with the first appeal. On April 24th, 2002, the judgment for attorney's
fees and court costs was reversed. In May 2002, the bond was discharged and in
June 2002, the funds were released to the Company. In April 2003, the patent
owner posed two discovery requests, in order to extend the time remaining before
automatic dismissal of his claim.

On May 27, 2004, the Company filed responses to the interrogatories. The Court
sent notices to certain current and one former employee of the Company to take
depositions in August 2004, which are now pending a rescheduling date. The
Company does not believe the likelihood of an unfavorable outcome is probable.

INVESTMENT BANKING AGREEMENT

On December 18, 2003, the Company entered into a one-year agreement with an
investment-banking firm in Boca Raton, Florida, to assist in raising
approximately $3.0 to $5.0 million in equity capital. The Company agreed to pay
a fee of 7% of any gross proceeds received by the Company as a result of this
firm's services, as well as all reasonable out-of-pocket fees, expenses and
costs incurred in connection with the performance of its services under the
agreement. The agreement excluded the capital raised by the Company in December
2003 and March 2004, as described in Notes 2 and 3. On October 22, 2004, the
agreement was mutually terminated. No equity capital was raised pursuant to this
agreement.

7. SUBSEQUENT EVENTS

On October 26, 2004, the Company engaged Imperial Capital, LLC ("IC") as an
exclusive financial advisor to the Company. IC will assist the Company in
raising additional capital, as well as possibly pursuing a strategic partner
from a mutually related field to enhance the Company's ability to develop
business.

In consideration for IC's services, the Company agreed to pay a $100,000
non-refundable retainer, as well as an advance for future out of pocket expenses
incurred by IC. Upon the consummation of a transaction, as defined by the
agreement, the Company will pay a success fee of 2.5% of the principal amount of
any debt or equity securities sold or the consideration received from a
strategic relationship. The agreement may be terminated by either party upon 30
days written notice.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Form 10-KSB for the year ended December 31, 2003.

                                       12
<PAGE>

Other than historical and factual statements, the matters and items discussed in
this Quarterly Report on Form 10-QSB are forward-looking statements that involve
risks and uncertainties. Actual results of the Company may differ materially
from the results discussed in the forward-looking statements. Certain factors
that could contribute to such differences are discussed with the forward-looking
statements throughout this report. Except as required by law or regulation, we
do not undertake any obligation to publicly update forward-looking statements to
reflect events or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events.

General

         The Company was formed in 1987 and was inactive until it commenced
limited operations in 1991 when it obtained worldwide manufacturing and
marketing rights to the Purifiner(R) product, now called the PURADYN(R) Bypass
Oil Filtration System or the "PURADYN" system.

         Sales of the Company's products 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.

         Through industry data research, we have been able to identify the
potential applications where management believes market penetration is most
accessible. To the best of our knowledge, no show of market data exists for
bypass filtration and currently, we believe no bypass oil filtration system has
captured a substantial share of the estimated recurring $13 billion potential
industry. 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:

         o    A competitively priced, value-added unique product offering
              substantial end-user savings related to oil maintenance costs
         o    An alternative solution to the rising costs and increasing
              dependence on foreign oil
         o    Compliant with existing and reasonably foreseeable environmental
              regulations

         In 2001, the Company redirected the focus of its sales strategy from
individual sales and distribution efforts to the development of a strong
nationwide distribution network that will not only sell but also install and
service our product. With this foundation established, we are more focused on
large potential key customers and segments of the industry that would benefit
most from the advantages of a nationwide distribution network.

         Additionally, we began to refocus our sales and marketing efforts to
target areas and issues specific to the bypass oil filtration industry. These
efforts include identifying customer needs and educating the customer on the
total benefits of our system concerning oil maintenance costs and procedures,
specifically, that oil does not need to be changed on a regular basis and the
drain interval can be safely extended, provided that oil analysis verifies the
oil is clean.

         This strategy includes focus on:

         o    The expansion of existing strategic relationships and development
              of new relationships and partnerships to further sales growth and
              gain distribution strength in order to accelerate product
              acceptance
         o    Continued development and expansion of our distribution network
              with qualified distributors in order to establish a sales- and
              service-oriented nationwide infrastructure
         o    Continuing to target existing and new medium-to-large sized
              fleets, industrial/construction business and major diesel engine
              and generator set OEMs

                                       13
<PAGE>

         o    Creating customer `pull-through', a sustained level of request for
              our product on the OEM level
         o    Closely monitoring customer evaluations to ensure the salient
              aspects and benefits of our system are addressed on a timely basis
         o    Converting customer evaluations into sales, both immediate and
              long term

         The Company directly and/or with the assistance of its sales
representatives, warehouse distributors, dealers or other agents, markets its
products primarily to national accounts. Our sales policy includes allowing the
customer 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 downtime or servicing patterns and applications, which may extend the
evaluation period. Consequently, the sales cycle can be relatively long.
Management believes that this evaluation period will continue to be shortened as
our products gain wider acceptance, support and usage from well-known customers
and OEMs. In 2003 and 2004, the Company conducted a record number of 80
evaluations, most of which are currently ongoing.

         While this is a long-term and ongoing commitment, we believe we have
achieved a limited amount of industry acceptance. We also believe that industry
acceptance resulting in sales will continue to grow in 2004; 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 US Department of Energy selected the PURADYN system to evaluate the
benefits of bypass oil filtration in October 2002. The test was designed not
only to assess the performance and benefits of the technology, but also to
determine if the savings warrant the installation of these types of systems on
Federal vehicles. To date, results of the study indicate that there is an
estimated 80% savings in oil using bypass oil filtration. In addition, a section
of the proposed National Energy Bill includes research into bypass oil
filtration to analyze the potential benefits in terms of reduced demand for oil
and protecting the environment.

         We believe that the renewed interest shown in the technology of bypass
oil filtration as an alternative to rising oil prices, dependence upon foreign
oil, with the added benefit of being economically and environmentally
beneficial, will timely and favorably position the Company as a manufacturer of
this type of product.

         Effective June 1, 2000, the Company formed a wholly owned subsidiary,
Puradyn Filter Technologies, Ltd ("Ltd."), in the United Kingdom to sell the
Company's products in Europe, the Middle East and Africa. The subsidiary was the
result of the dissolution of a joint venture (TF Purifiner, Ltd.) the Company
had with Centrax, Ltd. The results of Ltd. have been consolidated with the
Company since June 1, 2000.

         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 for which collectibility is reasonably
assured in accordance with Staff Accounting Bulletin (SAB) No. 104, Revenue
Recognition in Financial Statements, as amended and interpreted. Cash received
by the Company prior to shipment is recorded as deferred revenue. Sales are made
to certain 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. Management
believes, based on past experience and future expectations, that such limited
return rights and warranties will not have a material adverse effect on the
Company's financial statements.

                                       14
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 2004
COMPARED TO THE THREE-MONTHS ENDED SEPTEMBER 30, 2003

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 September 30, 2004 to the
three-months ended September 30, 2003:

                 (IN THOUSANDS)              THREE MONTHS ENDED
                                                SEPTEMBER 30,
                                        ----------------------------
                                          2004       2003     Change
                                        -------    -------    ------
         Net sales                      $   515    $   507    $   8

         Costs and expenses:
           Cost of products sold            612        621       (9)
           Salaries and wages               416        427      (11)
           Selling and administrative       374        409      (35)
           Stock-based compensation        (162)      (116)     (46)
                                        -------    -------    -----
         Total costs and expenses         1,240      1,341     (101)
                                        -------    -------    -----
         Other (expense) income:
            Interest income                  13         13       --
            Interest expense                (81)       (89)      (8)
                                        -------    -------    -----
         Total other expense, net           (68)       (76)      (8)
                                        -------    -------    -----
         Net loss                       $  (793)   $  (910)   $(117)
                                        =======    =======    =====

NET SALES

Net sales increased by approximately 2% from approximately $507,000 in 2003 to
approximately $515,000 in 2004. During the three-months ended June 30, 2003, the
Company, in accordance with the requirements of SFAS No. 48, Revenue Recognition
When Right of Return Exists (SFAS 48) and SAB 104, recorded a provision for
sales returns of approximately $146,000 related to a product enhancement
exchange, which was not required to correct any product quality or performance
issues. The reversal of the provision from the customer product exchange, which
was reshipped to the customer, occurred during the three-months ended September
30, 2003. The revenue was recognized upon reshipment of the enhanced product.
Excluding the effect of the sales return allowance reversal recorded in 2003,
net sales increased approximately 43%, or $154,000.

The 43% increase is attributable to an increase in sales to two of the Company's
largest customers, as well as one of their international distributors.
Collectively, these three customers had an increase in net sales of
approximately 207% over the comparable period in 2003.

Sales to two customers accounted for approximately 28% and 15% (for a total of
43%) of the consolidated net sales for the three-months ended September 30,
2004. For the three-months ended September 30, 2003, sales to three customers
accounted for approximately 19%, 12% and 11% respectively (for a total of 42%),
of the consolidated net sales. Ltd's net sales increased by approximately 62%
for the three-month period ended September 30, 2004 compared to the three-month
period ended September 30, 2003.

COST OF PRODUCTS SOLD

Cost of products sold decreased by approximately 1% from approximately $621,000
in 2003 to approximately $612,000 in 2004. Excluding the effect of the reversal
of the deferred cost recorded in 2003 of approximately $102,000 related to a
product enhancement exchange (see Net Sales above), cost of products sold
increased approximately 18%, or $93,000, which is due to the 43% increase in net
sales (see Net Sales above).

                                       15
<PAGE>

SALARIES AND WAGES

Salaries and wages decreased approximately $11,000, or 3%. This decrease is the
result of a net reduction of one employee in the sales and marketing department.


SELLING AND ADMINISTRATIVE EXPENSES

Selling and administrative expenses decreased by approximately $35,000, or 9%,
due primarily to a temporary reduction of advertising in trade publications.

STOCK-BASED COMPENSATION

Stock-based compensation expense decreased approximately $46,000, or 40% related
to certain variable equity awards and other stock-based compensation. As
stock-based compensation expense related to variable awards is subject to
changes in the quoted market value of the Company's common stock, the Company
cannot predict the impact of stock-based compensation expense on operations in
the future.

RESULTS OF OPERATIONS FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO
THE NINE-MONTHS ENDED SEPTEMBER 30, 2003

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 nine-months ended September 30, 2004 to the
nine-months ended September 30, 2003:

                 (IN THOUSANDS)               NINE MONTHS ENDED
                                                SEPTEMBER 30,
                                        ----------------------------
                                          2004       2003     Change
                                        -------    -------    ------
         Net sales                      $ 1,756    $ 1,573    $ 183
                                        -------    -------    -----
         Costs and expenses:
           Cost of products sold          1,887      1,787      100
           Salaries and wages             1,227      1,339     (112)
           Selling and administrative     1,148      1,298     (150)
           Stock-based compensation          76         13       63
                                        -------    -------    -----
         Total costs and expenses         4,338      4,437      (99)
                                        -------    -------    -----
         Other income (expense):
            Interest income                  40         39        1
            Interest expense               (237)      (234)      (3)
                                        -------    -------    -----
         Total other expense, net          (197)      (195)      (2)
                                        -------    -------    -----
         Net loss                       $(2,779)   $(3,059)   $(280)
                                        =======    =======    =====

NET SALES

Net sales increased by approximately 12% from approximately $1,573,000 in 2003
to approximately $1,756,000 in 2004. The increase is primarily due to the
addition of and/or increased sales to certain international distributors.

Sales to two customers individually accounted for approximately 23% and 16% (for
a total of 39%) and 20% and 18% (for a total of 38%) of net sales for the nine
months ended September 30, 2004 and 2003, respectively. The UK subsidiary's
sales increased by approximately 26% for the nine-month period ended September
30, 2004 compared to the nine-month period ended September 30, 2003.

                                       16
<PAGE>

COST OF PRODUCTS SOLD

Cost of products sold increased by approximately 6%, or $100,000, from
approximately $1,787,000 in 2003 to approximately $1,887,000 in 2004. The
increase is directly attributable to the 12% increase in net sales.

SALARIES AND WAGES

Salaries and wages decreased approximately $112,000, or 8%. This decrease is the
result of a net reduction of four employees, representing approximately a
$145,000 decrease, which was offset by vacation accrual and employee salary
adjustments.

SELLING AND ADMINISTRATIVE EXPENSES

Selling and administrative expenses decreased by approximately 12% from
approximately $1,298,000 for the nine-months ended September 30, 2003 to
approximately $1,148,000 for the nine-months ended September 30, 2004, due
primarily to a reduction in spending in the sales and marketing department,
reduced patent expense due to higher costs in the first quarter of 2003 for new
applications that were initiated, and lower professional fees due to the timing
of services rendered.

STOCK-BASED COMPENSATION

The Company recorded approximately $76,000 and $13,000, respectively, of
stock-based compensation expense for the nine-month periods ended September 30,
2004 and 2003, related to certain variable equity awards and other stock-based
compensation. In 2004, the Company incurred compensation expense of
approximately $263,000 related to the extension in March 2004 of the expiration
date of the exercise period of 270,000 fully vested stock options for a retired
employee who left the Company in August 2003. The Company's Stock Option Plan
permits an employee to exercise their stock options for up to one month after
their termination date, at which time they expire. In accordance with FIN 44,
the Company compared the options' intrinsic value on the modification date to
the original intrinsic value on the date of grant. This expense was offset by
approximately a $200,000 decrease in stock-based compensation expense related to
variable awards, resulting in a credit to operating expenses of approximately
$187,000 for the nine-months ended September 30, 2004. As stock-based
compensation expense related to variable awards is subject to changes in the
quoted market value of the Company's common stock, the Company cannot predict
the impact of stock-based compensation expense on operations in the future.

LIQUIDITY AND CAPITAL RESOURCES

         As of September 30, 2004, the Company had cash and cash equivalents of
approximately $403,000. For the nine-month period ended September 30, 2004, net
cash used in operating activities was approximately $2,392,000, which primarily
resulted from the net loss of approximately $2,779,000, partially offset by
changes in working capital items. Net cash used in investing activities was
approximately $71,000 for the purchase of property and equipment. Net cash
provided by financing activities was approximately $1,471,000 for the period,
due to net proceeds from the stockholder loan. The $2.0 million of capital
raised during the period ended March 31, 2004 from the Company's private
placement was offset by the repayment of $2.0 million of the stockholder loans.

         The Company has incurred net losses each year since its 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.

         On March 28, 2002 and March 14, 2003, respectively, the Company
executed a binding agreement with one of its stockholders, who is also a Board
Member, to fund up to $2.5 million through March 31, 2003 and an additional $3.5


                                       17
<PAGE>

million through December 31, 2003. Under the terms of the agreements, the
Company can draw amounts as needed in multiples of $500,000 to fund operations
subject to Board of Director approval. Amounts drawn bear interest at the prime
rate per annum (4.75% at September 30, 2004), payable monthly and were to become
due and payable on December 31, 2003 and December 31, 2004, respectively, or
upon a change in control of the Company or consummation of any other financing
over $3.0 million or over $7.0 million in the aggregate. In March 2003, the
payback date for the first agreement was extended to December 31, 2004.

         On February 2, 2004, the stockholder amended both agreements to extend
the payback dates to December 31, 2005 and to waive the funding requirement
mandating payback terms until such time as the Company has raised an additional
$7.0 million over the $3.5 million raised in the Company's recent 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 March 2004, the Company had repaid $2.0
million of the $5.0 million it had drawn from the available funds. Both of the
lines allow for discretionary principal payments, which add to the availability
of additional funds that the Company may draw. During the nine-months ended
September 30, 2004, the Company had drawn an additional $1,500,000, of the
available balance. In October 2004, an additional $500,000 draw was made.

         In addition, as part of the February 2, 2004 amendment described above,
the second agreement was amended to allow the Company to draw the remaining
available balance ($1.5 million as of September 30, 2004) through December 31,
2004. In consideration for the amendments, as well as for efforts in obtaining
private placement funding, the Company granted the stockholder 150,000 common
stock purchase warrants at an exercise price equal to the closing market price
of the Company's stock on the date of grant (see Note 3).

         In December 2003, the Company issued 750,000 shares of common stock for
gross proceeds of $1.5 million from its recent private placement offering
(approximately $1.47 million net of related expenses) to a third party investor.
In March 2004, an additional 1.0 million shares of common stock were issued to
the same investor for gross proceeds of $2.0 million (approximately $1.98
million net of related expenses.) The $2.0 million of gross proceeds was used to
reduce the outstanding principal balance of the notes payable to stockholder.
There is no assurance that the Company will raise any additional proceeds from
future private placements. Subscriptions for the recent private placement
expired on April 30, 2004.

         On December 18, 2003, the Company entered into a one-year agreement
with an investment-banking firm in Boca Raton, Florida, to assist in raising
approximately $3.0 to $5.0 million in equity capital. The Company agreed to pay
a fee of 7% of any gross proceeds received by the Company as a result of this
firm's services, as well as all reasonable out-of-pocket fees, expenses and
costs incurred in connection with the performance of its services under the
agreement. The agreement excluded the capital raised by the Company in December
2003 and March 2004, as described in Notes 2 and 3. On October 22, 2004, the
agreement was mutually terminated. No equity capital was raised pursuant to this
agreement.

         On October 26, 2004, the Company engaged Imperial Capital, LLC ("IC"),
as an exclusive financial advisor to the Company. IC will assist the Company in
raising additional capital, as well as possibly pursuing a strategic partner
from a mutually related field to enhance the Company's ability to develop
business.

         In consideration for IC's services, the Company agreed to pay a
$100,000 non-refundable retainer, as well as an advance for future out of pocket
expenses incurred by IC. Upon the consummation of a transaction, as defined by
the agreement, the Company will pay a success fee of 2.5% of the principal
amount of any debt or equity securities sold or the consideration received from
a strategic relationship. The agreement may be terminated by either party upon
30 days written notice.

               At September 30, 2004, the Company had working capital of
approximately $1.35 million and its current ratio (current assets to current
liabilities) was 2.54 to 1. The Company anticipates increased cash flows from
2004 sales activity; however, additional cash will still be needed to support
operations. Management believes that the commitments received from its
stockholder and the recent private placement offering, as well as cash from
sales and current working capital will be sufficient to sustain its operations
at its current level through January 1, 2005. However, if budgeted sales levels


                                       18
<PAGE>

are not achieved and/or significant unanticipated expenditures occur, the
Company may have to modify its business plan, reduce or discontinue some of its
operations or seek a buyer for all or part of its assets to continue as a going
concern through 2004.

         The Company's wholly owned subsidiary, Ltd., moved to new office space
in September 2003 by assuming the existing lease, which expired in August 2004.
A new lease is currently being negotiated.

         Consistent with industry practices, the Company may accept product
returns or provide other credits in the event that a distributor holds excess
inventory of the Company's products. The Company's sales are made on credit
terms, which vary depending on the nature of the sale. The Company believes it
has established sufficient reserves to accurately reflect the amount or
likelihood of product returns or credits and uncollectible receivables. However,
there can be no assurance that actual returns and uncollectible receivables will
not exceed the Company's reserves.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Puradyn Filter Technologies Incorporated's Chief Executive Officer and Chief
Financial Officer have evaluated the Company's disclosure controls and
procedures as of September 30, 2004, and they concluded that these controls and
procedures are effective.

(b) Changes in Internal Controls

There are no significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to September 30, 2004.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         See the Company's 10-QSB filed on August 11, 2004

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 6.  EXHIBITS

31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
         Rule 15d-14(a) of the Securities Act, as amended
31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
         Rule 15d-14(a) of the Securities Act, as amended
32       Certification of Chief Executive Officer and Chief Financial Officer
         Pursuant to 18 U.S.C., as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002

                                       19
<PAGE>

                                   SIGNATURES

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



PURADYN FILTER TECHNOLOGIES INCORPORATED
(Registrant)

By /s/ Lisa M. De La Pointe                       Date: November 12, 2004
---------------------------------
   Lisa M. De La Pointe,
   Chief Financial Office

                                       20