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

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

             For the quarterly period ended September 30, 1996

                                     OR

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

            For the transition period from ___________ to ___________

                         Commission File Number 1-11991
                               T/F PURIFINER, INC.
        (Exact name of small business issuer as specified in its charter)


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

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

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

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

                           -------------------------

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

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

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

                  Yes    [ ]                    No   [ ]

APPLICABLE   ONLY  TO  CORPORATE   ISSUERS:   State  the  number  of  shares
outstanding  of each of the  issuer's  classes of common  equity,  as of the
latest practicable date: October 15, 1996:  1,535,450.
================================================================================

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                               T/F Purifiner, Inc.
                            Condensed Balance Sheet
                               September 30, 1996
                                   (Unaudited)

Assets

Current assets:
  Cash                                                              $   118,790
  Trade accounts receivable, net                                        156,758
  Inventories                                                           272,390
  Prepaid expenses and other current assets                              41,009
                                                                    -----------
Total current assets                                                    588,947

Property and equipment, net                                             147,020
Patents and trademarks, net                                             287,082
Costs in excess of net assets acquired, net                             134,990
Other assets                                                            163,101
                                                                    -----------
                                                                    $ 1,321,140
Liabilities and capital deficiency
Current liabilities:
  Accounts payable - trade                                          $   146,130
  Accrued expenses                                                      342,091
  Customer deposits and other                                           171,645
  Accrued interest and other payables-related parties                     3,246
  Current portion of notes payable and capital lease obligations          7,554
  Shareholder loans                                                     502,026
                                                                    -----------
Total current liabilities                                             1,172,692

Notes payable and capital lease obligations                              14,519
Other notes payable and accrued interest                                427,152
Deferred rent                                                            20,809
Liability to equity investee                                             16,493
                                                                    -----------
Total liabilities                                                     1,651,665

Contingencies

Capital deficiency:
  Common Stock, $.001 par value                                           1,520
  Preferred Stock, $.001 par value                                         --
  Additional paid-in-capital                                          2,716,872
  Accumulated deficit                                                (3,048,917)
                                                                    -----------
                                                                       (330,525)
                                                                    -----------
                                                                    $ 1,321,140
                                                                    ===========
See accompanying notes to condensed financial statements.

                                        1

<PAGE>

                               T/F Purifiner, Inc.

                       Condensed Statements of Operations

         For the Three and Nine Months Ended September 30, 1995 and 1996
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                  Three Months Ended          Nine Months Ended
                                                      September 30,              September 30,
                                             -------------------------     --------------------------  
                                                   1995           1996         1995          1996
                                                   ----           ----         ----          ----
<S>                                          <C>                <C>        <C>            <C>        
Net sales                                    $   315,146        378,528    $ 1,083,733    $ 1,219,825
Cost of sales                                    141,138        201,097        522,096        694,966
                                             -----------    -----------    -----------    -----------
Gross profit                                     174,008        177,431        561,637        524,859


Operating expenses:
  Selling                                        153,341        273,567        484,557        625,777

  General and administrative                     143,148        178,235        387,840        503,629
  Deferred profit                                   --           (7,117)          --           12,323
                                             -----------    -----------    -----------    -----------
                                                 296,489        444,685        872,397      1,141,729
                                             -----------    -----------    -----------    -----------

Operating loss                                  (122,481)      (267,254)      (310,760)      (616,870)
Interest expense                                   9,497          7,018         18,549         24,417
                                             -----------    -----------    -----------    -----------


Net loss                                     $  (131,978)   $  (274,272)   $  (329,309)   $  (641,287)
                                             ===========    ===========    ===========    ===========

Loss per common share                        $      (.12)   $      (.19)   $      (.30)   $      (.50)
                                             ===========    ===========    ===========    ===========

Weighted average common shares outstanding     1,117,200      1,450,998      1,104,261      1,283,067
                                             ===========    ===========    ===========    ===========
</TABLE>


See accompanying notes to condensed financial statements.


























                                        2


<PAGE>


                               T/F Purifiner, Inc.

                         Condensed Statements of Changes
                in Redeemable Common Stock and Capital Deficiency
                                   (Unaudited)
<TABLE>
<CAPTION>

                                  Redeemable                                
                                 Common Stock         Common   Stock       Additional                             Total  
                                 ------------        -------------------    Paid-In-  Accumulated  Subscription   Capital
                               Shares     Amount     Shares       Amount    Capital      Deficit   Receivables   Defieiency
                             -----------------------------------------------------------------------------------------------
<S>                            <C>      <C>          <C>         <C>        <C>       <C>           <C>        <C>         
Balance at January 1, 1996        -     $     -      1,117,200   $ 1,117    $962,375  $(2,407,630)  $(7,000)   $(1,451,138)

Proceeds from sale of
  redeemable Common Stock,
  net                          157,377      594,000       -         -        (20,544)        -         -           (20,544)

Issuance of Common Stock
  to acquire D.B. Filters          -          -         36,309        36     136,964         -         -           137,000

Accrued interest on redeemable
  Common Stock                     -        30,335        -         -        (30,335)        -         -           (30,335)

Collection of subscription
  receivables                      -           -          -         -           -            -        7,000          7,000

Other issuances of Common
  Stock                            -           -         7,895         8      39,467         -         -            39,475

Proceeds from sale of Common
  Stock, net                       -           -        81,200        81     390,118         -         -           390,199

Issuance of Common Stock in
  exchange for notes payable       -           -       120,313       120     601,445         -         -           601,565

Issuance of stock options          -           -          -         -         13,205         -         -            13,205

Expiration of redeemable
  common stock put option      (157,377)    (624,335)  157,377       158     624,177         -         -           624,335

Net loss                            -          -          -         -           -        (641,287)     -          (641,287)
                               ---------------------------------------------------------------------------------------------

Balance at September 30, 1996       -      $   -     1,520,294     $1,520 $2,716,872  $(3,048,917)  $  -         $(330,525)
                               =============================================================================================

</TABLE>


See accompanying notes to condensed financial statements.



































                                        3


<PAGE>

                               T/F Purifiner, Inc.
                       Condensed Statements of Cash Flows
                  Nine Months ended September 30, 1995 and 1996
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                   1995           1996
                                                                   ----           ----
<S>                                                           <C>            <C>         
Operating activities                                          $  (329,309)   $  (641,287)
Net loss
Adjustments to reconcile net loss to net cash
 used in operating activities:
    Amortization                                                    4,145         12,021
    Issuances of Common Stock and options                            --           27,679
    Depreciation and amortization of property and equipment        21,336         24,712
    Changes in operating assets and liabilities:
      Trade accounts receivable, net                               (5,406)       (72,626)
      Inventories                                                 (36,735)      (102,763)
      Prepaid expenses and other current assets                     1,955        (33,060)
      Other assets                                                (13,097)        (5,839)
      Accounts payable - trade                                     28,707        (17,527)
      Accrued expenses                                             32,436        176,733
      Customer deposits and other                                  71,137         37,475
      Accrued interest and other payables - related parties        20,139        (58,417)
      Deferred rent                                                 2,474         (1,484)
                                                              -----------    -----------
Net cash used in operating activities                            (202,218)      (654,393)

Investing activities
Patents and trademarks                                            (72,076)      (183,302)
Purchases of property and equipment                               (15,656)       (69,644)
Increase in other assets                                             --          (33,362)
Acquisition of DB Filters                                            --           (1,275)
                                                              -----------    -----------
Net cash used in investing activities                              87,732       (287,583)

Financing activities
Increase in deferred issuance costs                                (4,273)       (92,300)
Proceeds from redeemable and other Common Stock, net                 --          976,155
Collection of subscription receivables                               --            7,000
Proceeds from notes payable                                       470,000        225,000
Payment on notes payable and capital lease obligations           (168,911)       (34,996)
Proceeds from shareholder loans                                   65,5000         16,000
Payment on shareholder loans                                      (67,500)       (51,213)
Borrowing from investee                                              --           25,000
Repayment to investee                                                --          (41,612)
                                                              -----------    -----------
Net cash provided by financing activities                         294,816      1,029,034
                                                              -----------    -----------
Increase in cash                                                    4,866         87,058
Cash at beginning of period                                           998         31,732
                                                              -----------    -----------
Cash at end of period                                         $     5,864    $   118,790
                                                              ===========    ===========

</TABLE>


During 1996, the Company  entered into a capital lease  obligation in the amount
of  approximately  $7,500.  See Notes 3, 8, and 9 for  description  of  non-cash
issuances of Common Stock.

See accompanying notes to condensed financial statements.

                                        4


<PAGE>


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

1.   BASIS OF PRESENTATION AND COMPANY

The unaudited  condensed  financial  statements as of September 30, 1996 and for
the three and nine month periods ended September 30, 1995 and 1996 are unaudited
and, in the opinion of management,  include all adjustments  (consisting only of
normal and recurring adjustments) necessary for a fair presentation of financial
position  and results of  operations  for these  interim  periods.  Such interim
financial  statements  have been prepared on the basis of  presentation  as more
fully described in the Company's annual financial  statements and should be read
in  conjunction  with the  Company's  audited  financial  statements  which  are
included in the Company's  Form 10-SB.  The results of  operations  for the nine
month period  ended  September  30, 1996 is not  necessarily  indicative  of the
results to be expected for the entire year.

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

Subsequent to September 30, 1996,  the Company  received gross proceeds from the
private sale of shares of its Common Stock of approximately $562,000 and expects
to complete  additional  financings.  However,  there is no  assurance  that the
Company can  complete  its  proposed  issuances  or that it can obtain  adequate
additional  financing  from other sources or that  profitable  operations can be
sustained.  The financial  statements do not include any adjustments relating to
the recoverability of recorded asset amounts that might be necessary as a result
of the above uncertainty.

At September  30,  1996,  deferred  issuance  costs of  approximately  $109,000,
included in other assets,  represent costs incurred by the Company in connection
with the Company's planned  issuances of securities.  Such costs will be charged
directly  against the net proceeds of the related offering if it is successfully
completed or will be expensed if the offering is abandoned.

2.   INVENTORIES

At September 30, 1996, inventories consist of the following:


            Raw materials                                      $121,878
            Finished goods                                      146,512
            Supplies                                              4,000
                                                              ---------
                                                               $272,390
                                                              =========

                                        5

<PAGE>



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

3.   SHAREHOLDER LOANS

During 1994, the Company and its principal  shareholder  instituted legal action
against the estate of a former 50% owner of the  Company  ("the  Estate").  This
litigation sought a declaratory  judgment approving the dilution of the Estate's
interest  in the  Company  from  50% to  approximately  10% as a  result  of the
issuance of additional Common Stock in 1994 to the principal shareholder and his
children.  Subsequently,  the  beneficiaries  of the Estate filed  counterclaims
against the Company  and its  principal  shareholder  and his  children  seeking
declaratory  relief,  cancellation of additional stock issuances by the Company,
an injunction against further  issuances,  appointment of a receiver and damages
against Ford  individually.  In June 1995, the Estate demanded  repayment of the
non interest bearing shareholder loans due to the Estate for which there were no
stated due dates  ($502,026 at September  30,  1996).  In  September  1996,  the
Company entered into an Agreement in Partial  Settlement of T/F Purifiner,  Inc.
Issues  ("Agreement")  which  released the  Company,  with  prejudice,  from all
litigation  pending or contemplated by the Taylor Family,  the  beneficiaries of
the Estate,  and individually,  against the Company related to any actions taken
by the Company before the date of the Agreement.  In return,  the Company agreed
to repay the Estate's  loans of $502,026 as follows:  $167,342 due 90 days after
any equity  financings  which raise in excess of $5,000,000  of gross  proceeds;
$167,342 on the first and second anniversaries of such equity financings. If the
equity  financings  are less than  $5,000,000  the amount of the  periodic  debt
repayment will be reduced and the term extended proportionately.  The Estate has
agreed not to commence  any action for loan  repayment as long as the Company is
in  compliance  with  the  Agreement  and  raises  gross  proceeds  of at  least
$2,000,000 within one year of the Agreement. Since it is uncertain as to whether
the  Company  will be able to raise at least  $2,000,000,  the  loans due to the
Estate have been  classified as current in the  accompanying  September 30, 1996
balance sheet.

On July 31, 1996, a related party  noteholder  received  19,908 shares of Common
Stock in exchange for his shareholder loans and unpaid interest in the aggregate
amount of  $99,540.  On August 1,  1996,  the  Company's  principal  shareholder
received 100,405 shares of Common Stock in exchange for his shareholder loans in
the aggregate amount of $502,026.

 4.   NOTES PAYABLE

In September  1996, the Company issued  unsecured notes payable in the aggregate
amount of $200,000 to several  parties,  $100,000 of which bear  interest at 10%
per annum.  The principal and interest on these notes ($200,036 at September 30,
1996) are  repayable  upon receipt by the Company of  sufficient  funds from the
sale  of its  equity  securities  and,  accordingly,  have  been  classified  as
long-term   borrowings.   Subsequent   to  September  30,  1996,  an  additional
non-interest  note  payable was issued to one of these  parties in the amount of
$50,000. See Note 11.




                                        6

<PAGE>

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

5.   CONTINGENCIES

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

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

6.   JOINT VENTURE

Effective  January 1, 1996, the Company  entered into a joint venture  agreement
whereby such venture,  TF Purifiner Ltd.  ("Ltd"),  will sell and distribute the
Company's product in Europe, the Middle East and certain African countries.  The
Company  has an  approximate  45%  interest  in  Ltd's  operations  (50%  voting
interest) and is accounting for Ltd using the equity method.  The Company is not
required to fund Ltd and will sell product to Ltd until such time as Ltd decides
to  exercise  its  rights  under the  agreement  to  manufacture  the  Company's
products.  Ltd was initially  capitalized with approximately $88,000 provided by
one of its  shareholders.  In  December  1995 and July 1996,  Ltd  advanced  the
Company  approximately  $51,000 and  $25,000,  respectively,  to be used to fund
certain patent and trademark filings for the venture's exclusive  territory.  At
September 30, 1996,  approximately  $16,500  remained  unexpended.  For the nine
months ended September 30, 1996, the Company had sales of approximately $248,000
to Ltd, at negotiated prices. At September 30, 1996,  approximately  $12,300 has
been recorded as unrealized intercompany profit related to the inventory sold to
Ltd which is included in Ltd's inventory at September 30, 1996.

At September 30, 1996, summarized financial information of Ltd is as follows:

      Total assets                            $363,000
      Total liabilities (1)                    630,000
      Total revenues                           218,000
      Gross profit                              81,000
      Net loss                                (267,000)

(1) Includes $559,000 of loans due to one of Ltd's foreign shareholders.








                                        7

<PAGE>

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

7.   REDEEMABLE COMMON STOCK

During the nine months ended September 30, 1996, the Company sold 157,377 shares
of its Common Stock for gross proceeds of $594,000. The subscription  agreements
provided  that if the  Company  had not  registered  any  amount of class of its
Common Stock under the Securities Act of 1933 or the Securities and Exchange Act
of 1934, as amended,  within two years, the shareholders would have an option to
put the shares back to the Company at their original purchase price plus 10% per
annum  from the date of  issuance.  Accordingly,  such  Common  Stock  was being
treated as Redeemable  Common Stock until the  expiration of the put options and
the  redemption  price  was being  accreted  at the rate of 10% and  charged  to
additional paid in capital. On September 28, 1996, the Company registered Common
Stock under the  Securities  Act of 1934, as amended,  and,  therefore,  the put
option  expired  and such  Common  Stock was no longer  redeemable  and has been
classified accordingly in the accompanying September 30, 1996 balance sheet.

8.   ACQUISITION OF DB FILTERS

On May 20, 1996, the Company acquired all the common stock of DB Filters,  Inc.,
an inactive company which has been  subsequently  dissolved ("DB Filters"),  for
$1,275 in cash and 36,309  shares of its Common  Stock  with an  estimated  fair
value of  approximately  $137,000.  DB Filters was owned by two employees of the
Company,  one of which was a Director.  DB Filter's only assets,  at the time of
the acquisition,  were the future royalties related to the Company's then patent
pending filter  technology and certain  restricted,  as defined,  North American
filter  manufacturing  rights.  The Company accounted for this acquisition using
the purchase method of accounting and assigned all of its purchase price to cost
in excess of net assets acquired and is amortizing such costs using the straight
line method over 15 years.  DB Filters had no material  assets or liabilities at
December  31, 1994 and 1995 and no material  operations  in 1994,  1995 and from
January 1, 1996 to May 20, 1996.

9.   COMMON STOCK

On July 1, 1996,  the Board of Directors of the Company  approved an increase in
authorized Common Stock from 100,000 to 20,000,000, approved a change in the par
value of Common  Stock from $.01 par value to $.001 par value and  approved a 57
to 1 stock split distribution for common shareholders of record on such date. In
July 1996, the Board of Directors of the Company  approved the  authorization of
up to 500,000 shares of preferred stock (none issued or outstanding at September
30, 1996). All share and per share data presented in the accompanying  financial
statements have been restated to reflect the above actions.

On July 31, 1996,  the Company issued 5,000 shares of its Common Stock to one of
its law firms in payment for professional services rendered.








                                        8

<PAGE>

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

 9.  COMMON STOCK (CONTINUED)

On August 3, 1996,  the  Company  issued  2,895  shares of its Common  Stock for
nominal  consideration  to certain  employees,  distributors,  a  not-for-profit
environmental  group,  and other  parties for past services and support given to
the Company which has been recorded  based upon the estimated fair value of such
Common Stock as determined  by the Board of Directors  ($5 per share).  See Note
11.

10.  STOCK OPTION PLAN

On July 31, 1996,  the Company's  Board of Directors  approved the adoption of a
stock option plan (the "1996 Option  Plan"),  which provides for the granting of
both  incentive  and  non-qualified  stock options to key  personnel,  including
officers,  directors,  consultants  and advisors to the Company,  based upon the
determination of the Board of Directors. As of September 30, 1996, stock options
were  granted  under the 1996  Option  Plan to  purchase  650,000  shares of the
Company's  Common  Stock at an exercise  price equal to $5 (the  estimated  fair
value as  determined by the Board of  Directors)  and $15 per share,  or 110% of
such fair value ($5.50 per share) for certain shareholders.  These stock options
expire from 1997 to 2006.  At September 30, 1996,  283,210  shares are currently
exercisable  and 366,790 shares will become  excercisable  from 1996 to 2000. At
September  30,  1996,  650,000  shares of Common  Stock have been  reserved  for
issuance  under the 1996 Option Plan.  The effect of these options have not been
included in the  Company's  computation  of loss per share  since the  Company's
Common Stock has not had a fair market value in excess of their exercise  prices
for three consecutive months.

During the three months ended September 30, 1996, the Company  expensed  $13,205
related to the issuance of stock options to various consultants and the Board of
Advisors based upon the estimated fair value of such stock options.  The Company
uses the intrinsic  method to account for stock options  issued to employees and
Directors.

 11.  SUBSEQUENT EVENTS

On October 4, 1996,  a  noteholder  received  15,156  shares of Common  Stock in
exchange for his outstanding loan and unpaid interest in the aggregate amount of
$227,340. Accordingly, such note has been classified as a long-term liability at
September 30, 1996.









                                        9

<PAGE>

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

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

GENERAL

The Company was formed in 1988, and commenced limited operations in 1991 when it
obtained  worldwide  manufacturing  and  marketing  rights  to the  Purifiner(R)
products.  From 1993 to 1995,  the Company's  revenues  grew from  approximately
$583,000 to $1,480,000.

     The growth in the  Company's  revenues is primarily  due to the  increasing
acceptance of the Company's products by the marketplace.  This acceptance is the
result of various factors, including the increased credibility of the product as
a result of its commercial relationship with well-known entities and the growing
desire of users to reduce maintenance costs, extend engine life and preserve the
environment.

RESULTS OF OPERATIONS

The  following  table sets forth for the periods  indicated  the  percentage  of
revenues  represented by certain items reflected in the Company's  statements of
operations.
                                                 Percentage of Revenues
                                                 ----------------------
                                                    Nine Months
                                                  Ended September 30,
                                                  -------------------
                                                  1995         1996
                                                  ----         ----
Net sales                                         100%          100%
Operating costs and expenses:
  Cost of sales                                    48           57
  Selling expenses                                 45           51
  General and administrative expenses              36           41
  Other                                             -            1
                                                -----        -----
Total operating costs and expenses                129          150
                                                -----        -----

Operating loss                                   (29)%        (50)%
                                                =====        =====

NINE MONTHS ENDED  SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED  SEPTEMBER
30, 1995

Net Sales.  Net sales  increased by 13% from $1,083,733 in the first nine months
of 1995 to  $1,219,825  in the first  nine  months of 1996.  This  increase  was
primarily attributable to increasing sales made to existing and new domestic and
international  customers in 1996 in comparison to the comparable period of 1995,
including  approximately  $248,000 of sales to Ltd., the Company's  newly formed
joint venture in 1996.  Approximately,  $12,300 of intercompany  profit on these
sales have been deferred at September 30, 1996.

                                       10

<PAGE>

Effective  October 15,  1996,  the  Company  implemented  a new product  pricing
strategy to reduce the Company's  selling prices to enable end users to obtain a
significantly  improved  return on  investment.  The Company  believes  this new
strategy will promote the sale of the Company's products and result in increased
long-term  revenues  from unit and  replacement  filter  sales and  provide  the
Company with the ability to reduce its product costs,  primarily  through volume
purchase  discounts,  utilization  of excess  fixed  manufacturing  capacity and
improved  production  processes.  If the  Company  does not  realize  these cost
savings,  its gross  margin  will be  adversely  effected.  Various  merchandise
credits  will be issued by the  Company,  if certain  conditions  are met by its
distributors, in the fourth quarter of 1996 as a result of this price reduction.
These  merchandise  credits will have an adverse effect on the Company's results
of  operations  in such  period.  The Company  has not  completed  the  detailed
analysis to determine the exact amount of these  merchandise  credits,  however,
mangement believes such amounts will not be in excess of $100,000.

Cost of Sales.  Cost of sales  increased by 33% from  $522,096 in the first nine
months of 1995 to $694,966 in the first nine  months of 1996.  This  increase is
primarily  attributable  in  part to the  13%  increase  in  sales  between  the
comparable  periods as well as 20% of the first  nine month  sales of 1996 being
made to Ltd. at substantially lower prices than the Company's existing exclusive
international   distributor  pricing  and  a  9%  increase  in  sales  to  other
international  distributors  at prices less than sales to domestic  and Canadian
distributors.  Finally,  the Company's gross margin decreased from 51.8% to 43%,
substantially all due to the sales made to Ltd. in the first nine months of 1996
at  these  lower  sales  prices  and the  increase  in  sales  to  international
distributors. To the extent additional sales are made by the Company to Ltd., or
if its international  distributors account for an increasing proportion of sales
the Company's  aggregate gross margin will be adversely  affected as compared to
prior periods.

Selling Expenses.  Selling expenses  increased by 29% from $484,557 in the first
nine months of 1995 to $625,777 in the first three  months of 1996.  The primary
reason for this increase was due to increases in other selling  expenses such as
salaries for new  personnel,  commissions,  brochures and catalogs,  consulting,
travel  and trade show  expenses  in the first  nine  months of 1996  versus the
comparable  period  of 1995.  As a  percentage  of  revenues,  selling  expenses
increased from 44.7% in 1995 to 51.3% in 1996.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by 29.9% from $387,840 in the first nine months of 1995 to $503,629 in
the first nine months of 1996 and as a percent of revenues  increased from 35.8%
to 41.2%.  This dollar  increase was  generally  due to the  increased  level of
business  activity,   specifically  including  increases  in  personnel,  legal,
accounting and auditing expenses.

Operating  Loss.  As a result of the  foregoing,  the Company's  operating  loss
increased  from  $310,760  in the first nine  months of 1995 to  $616,870 in the
first nine months of 1996.

Interest Expense. Interest expense increased by 30.1% from $18,549 for the first
nine months of 1995 to $24,147  for the first nine  months of 1996.  This change
resulted from an increase in average short and long term borrowings  outstanding
in the first nine  months of 1996  versus the  comparable  period for 1995.  The
increase in loans was used to finance a portion of the  Company's  activities in
1995 and 1996.

                                       11

<PAGE>

Net Loss. As a result of the  foregoing,  the Company's net loss  increased from
$329,309 for the first nine months of 1995 to $641,287 for the first nine months
of 1996.

LIQUIDITY AND CAPITAL RESOURCES

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

At September 30, 1996, the Company had a working capital  deficiency of $583,743
and its  current  ratio  (current  assets to current  liabilities)  was .50,  as
compared  with a working  capital  deficiency of $894,117 and a current ratio of
 .25 at December 31, 1995.  At  September  30, 1996,  the Company had $118,790 of
cash.  Outstanding short-term debt from lenders and shareholders was $509,580 at
September 30, 1996 and included a shareholder loan of $502,026 due to the Estate
of Willard Taylor (See Note 3 to the Notes to Financial  Statements and "Part II
- Item 1.  Stockholder  Litigation"  relating to repayment terms to the Estate).
The balance of long term debt was $441,617 at September 30, 1996. See Note 10 to
the Notes to Financial  Statements  related to the repayment of $227,340 of long
term debt through the issuance of Common Stock subsequent to September 30, 1996.

Subsequent  to  September  30,  1996,  the Company  received  gross  proceeds of
approximately $562,000 from the sale of shares of its Common Stock, and obtained
an additional $50,000 loan (See Note 4 to the Notes to Financial Statements).

At  September  30,  1996,  the Company  owed  approximately  $528,000 in current
liabilities  to various  trade and other  unrelated  creditors.  Of this  amount
approximately  $324,000 was owed to various legal and other  professional  firms
for services provided to the Company.  These  professionals and vendors continue
to provide services to the Company; however, there can be no assurance that they
will  continue  to do so in the future  while all or a portion  of such  amounts
remains  outstanding.  The  Company  has and  intends  to use a  portion  of the
proceeds  described  above and future  financings  to repay the  amounts  due to
creditors.

Consistent  with industry  practices,  the Company may accept product returns or
provide other credits in the event that a distributor  holds excess inventory of
the Company's products.  The Company's sales are made on credit terms which vary
significantly depending on the nature of the sale. In addition, the Company does
not hold  collateral  to secure  payment  from its United  States  and  Canadian
distributors.  Therefore,  a default in payment by one or more of the  Company's
United States and Canadian  distributors or customers could adversely affect the
Company's business,  results of operations and financial condition.  The Company
believes it has established sufficient reserves to accurately reflect the amount



                                       12

<PAGE>

or  likelihood  of product  returns or credits  and  uncollectible  receivables.
However,  there  can be no  assurance  that  actual  returns  and  uncollectible
receivables will not exceed the Company's reserves.  Any significant increase in
product returns or uncollected  accounts receivable beyond reserves could have a
material  adverse  effect on the Company's  business,  results of operations and
financial condition. The Company has not experienced material product returns or
uncollectible receivables in the past.

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

The Company is not currently generating sufficient revenues to fund its existing
and planned expansion of its operations.  Accordingly,  the Company has embarked
and is implementing plans to raise additional capital, including its most recent
offerings.  The Company intends to use such additional financing to increase its
marketing and sales efforts,  such as the hiring of additional  sales  personnel
and related costs,  implementation  of  advertising,  promotional  and marketing
programs, and fleet testing programs.  Additionally, the Company intends to hire
additional  manufacturing,  operating,  and administrative personnel and acquire
additional  capital  equipment  and  leasehold  improvements  to  meet  expected
production  increases,  as  well  as to  assist  in  the  implementation  of the
Company's planned Indian manufacturing joint venture.

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

IMPACT OF INFLATION

     Inflation  has not had a significant  impact on the  Company's  operations.
However, any significant  decrease in the price for oil or labor,  environmental
compliance  costs,  and engine  replacement  costs  could  adversely  impact the
Company's  end  users  cost/benefit  analysis  as to the  use  of the  Company's
products.

QUARTERLY FLUCTUATIONS

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


                                       13

<PAGE>

                            PART II - OTHER INFORMATION

ITEM  1.  LEGAL PROCEEDINGS

Stockholder Litigation
----------------------

On August 26, 1994, the Company and its principal  stockholder,  Richard C. Ford
("Ford"),  filed an action against the  representatives of the Estate of Willard
Taylor in the  Circuit  Court for the  Seventeenth  Judicial  Circuit in Broward
County,  Florida.  The suit sought a declaratory judgment essentially to confirm
the  validity of various  issuance's  of Common Stock to Ford and members of his
family by the Company in 1994. Prior to the Common Stock issuances,  the Company
obtained an  independent  appraisal  of the value of its Common  Stock,  and the
Fords paid a purchase price consistent with that valuation.  The representatives
of the Estate of Willard  Taylor have contested the validity of the Common Stock
issuances  and  the  constitution  of  the  Board  of  Directors,  and  filed  a
counterclaim  seeking to invalidate  the issuances and the  constitution  of the
Board of  Directors,  claiming a breach of  fiduciary  duty and  requesting  the
appointment of a receiver.

Additionally, in June 1995, the Estate demanded repayment of its advances to the
Company in the amount of $502,026 (and $268,742 of advances made to T/F Systems,
Inc.  which have not been  assumed by the Company  pursuant  to the  purchase of
assets of T/F Systems,  Inc.), although no litigation related to this demand has
been filed to date.  Management  of the Company  believes that such advances are
not  currently due to the Estate and will contest the required time of repayment
of such  advances if any suit related  thereto is commenced by the Estate.  In a
separate related action,  the Estate is also seeking  repayment of certain loans
made to Richard C. Ford by Willard  Taylor  prior to Mr.  Taylor's  death in the
principal  amount of $508,250  which, in turn, were also advanced to the Company
by Ford. On September 19, 1996,  Mr. Ford and the Estate reached an agreement as
to the repayment of such  personal  loans and unpaid  accrued  interest and such
legal action was dismissed with prejudice.

In September 1996, the Company  entered into an Agreement in Partial  Settlement
of T/F Purifiner,  Inc. Issues  ("Agreement")  which released the Company,  with
prejudice, from all litigation pending or contemplated by the Taylor Family, the
beneficiaries of the Estate, against the Company related to any actions taken by
the Company before the date of the Agreement.  In return,  the Company agreed to
repay the Estate's loans of $502,026 as follows:  $167,342 due 90 days after any
equity  financings  which  raise in  excess  of  $5,000,000  of gross  proceeds;
$167,342 on the first and second anniversaries of such equity financings. If the
equity  financings  are less than  $5,000,000  the amount of the  periodic  debt
repayment will be reduced and the term extended proportionately.  The Estate has
agreed not to commence  any action for loan  repayment as long as the Company is
in  compliance  with  the  Agreement  and  raises  gross  proceeds  of at  least
$2,000,000 within one year of the Agreement.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of  Shareholders  of the Company was held on August 28, 1996.
At the meeting:

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<PAGE>

 1)  The  following  persons  were  elected as Directors of the Company to serve
     until the next Annual  Meeting and until their  successors are duly elected
     and qualified.


      Name                          Votes For               Abstentions
      ----                          ---------               -----------

      Richard C. Ford               1,052,334                  258,552
      Richard J. Ford               1,052,334                  258,552
      Byron Lefebvre                1,052,334                  258,552


 2)  The Company's 1996 Stock Option Plan ("Plan"),  which reserves an aggregate
     of 650,000 shares of Common Stock for issuance  pursuant to options granted
     under the Plan, was ratified.

            Votes For               1,052,334
            Abstentions                258,552



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

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

   b)   Reports on Form 8-K.
        None

                                   SIGNATURES

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

                                                           T/F PURIFINER, INC.
                                                                  (Registrant)



Date:  November 8, 1996                                By  /s/ Richard C. Ford
                                                       ------------------------
                                                               Richard C. Ford
                                                                     President


Date:  November 8, 1996                                By /s/ Stephen J. Hauser
                                                       ------------------------
                                                            Stephen J. Hauser,
                                               Vice President, Chief Operating
                                           Officer and Chief Financial Officer


                                       15