UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

______________

 

FORM 8-K

 

______________

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): September 30, 2014

 

______________

 

CYCLONE POWER TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

______________

  

     

Florida

000-54449

26-0519058

(State or Other Jurisdiction

(Commission

(I.R.S. Employer

of Incorporation)

File Number)

Identification No.)

 

601 NE 26th Ct. Pompano Beach, FL 33064

(Address of Principal Executive Office) (Zip Code)

 

(954) 943-8721

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 


 

 

 

 

Item 1.01.

Entry into a Material Definitive Agreement.

Item 2.01.

Completion of Acquisition or Disposition of Assets.

 

 

Cyclone Power Technologies Inc. (“The Company”, ”Cyclone”) sold most of its 73.72% investment in the WHE Generation Corp (“WHE”, “Whe Gen”) subsidiary to unrelated buyers effective September 30, 2014 under separation and stock repurchase agreements dated July 17, 2014 and September 30, 2014, respectively. Under the agreements, the Company retained a non-controlling 15.13% investment, which resulted in deconsolidation of WHE due to the loss of control over the WHE subsidiary. The transaction was recorded in accordance with ASC 810-10-40, wherein the Company recognized a gain on the sale of its investment in the amount of $2,443,506, and its remaining investment in the WHE subsidiary was recorded at the fair value of the WHE common stock held by the Company, which was $556,756 as of September 30, 2014.

 

As part of the separation agreement Whe Gen paid to the company $350,000, and is to pay $150,000 for the remainder of the company’s investment sold. Whe Gen also paid to TCA Global Master Credit Fund LP, the Company’s senior secured creditor, approximately $78,000 to fully retire that debenture and release all of the Company’s assets from its security interest. Whe Gen also paid to the Company an additional $24,000 in reimbursements, and transferred back to Cyclone 3,000,000 shares of treasury stock in Cyclone (valued at $210,000). Whe Gen also assumed a $50,000 liability, deferred revenue of approximately $10,000 and accepted the responsibility to complete an engine delivery contract (previously recorded as $290,000 deferred revenue by the Company) . The Company forgave an intercompany receivable of approximately $85,000. Additionally, the Company satisfied a liability of $17,550 via transferring 65,000 shares of its Whe Gen shares.

 

To raise funds pursuant to the separation agreement, Whe Generation Corp. in the “Seed” Round of financing commencing in July 2014, issued $ 350,000 of 6% convertible debt, maturing in 12 months, which were subsequently converted into common stock at $.12 per share as of September 30, 2014. In the common stock “A” funding WHE Generation Corp. raised $1,314,360 of common stock sales at $.27 per share as of September 30, 2014.

 

In connection with the Agreement, the Company and Whe Gen also amended its 2010 License Agreement (the “License”) to provide the Company with an initial non refundable license fee of $175,000 and on-going 5% royalties from Whe Gens sale of engines utilizing the licensed technology. This License is 20 years with two 10-year extensions. It is worldwide in territory and exclusive for the specific applications of stationary waste heat recovery (WHR) and waste-to-power (WtP).

 

The total losses of the Whe Gen subsidiary for the nine months ended September 30, 2014, for the year ended December 31, 2013 and cumulatively since inception were $696,831 and $157,266, and $ 828,531, respectively and were fully borne by the Company.  

 

 

 

 

Effective September 30, 2014, Cyclone will account for its investment in Whe Gen using the cost method of accounting.  The following unaudited pro-forma presentation reflects Cyclone’s condensed balance sheet as of June 30, 2014 as if the Whe Gen transaction and corresponding deconsolidation and cost method of accounting occurred on June 30, 2014:

 

CYCLONE POWER TECHNOLOGIES, INC.

UNAUDITED PRO FORMA BALANCE SHEET

June 30, 2014 

           

Pro Forma Adjustments

         
           

Reduction of

                 
   

June 30, 2014

   

Whe-Gen

   

Divestment and

   

June 30, 2014

 
   

(Unaudited)

   

Assets and

   

Sale of

   

(Unaudited)

 
   

As Reported

   

Liabilities

   

Whe Gen Shares

   

Pro Forma

 

ASSETS

                               

CURRENT ASSETS

                               

Cash and cash equivalents

  $ 42,937     $ 225  1   $ 24,000  12   $ 67,162  

Cash and cash equivalents

    -               350,000  3     350,000  

Accounts Receivable

    -               175,000  4     175,000  

Other receivables

    -               150,000  5     150,000  

Inventory, net

    505,028       (25,196 )1             479,832  

Other current assets

    32,851       (2 )1     (7,500 )13     25,349  

Total current assets

    580,816                       1,247,343  
                                 

PROPERTY AND EQUIPMENT

                               

Furniture, fixtures, and equipment

    502,562                       502,562  

Accumulated depreciation

    (141,444 )                     (141,444 )

Net property and equipment

    361,118                       361,118  
                                 

OTHER ASSETS

                               

Patents, trademarks and copyrights

    581,788                       581,788  

Accumulated amortization

    (215,334 )                     (215,334 )

Net patents, trademarks and copyrights

    366,454                       366,454  

Investment in Whe-Gen

    -               556,756  6     556,756  

Other assets

    2,762                       2,762  

Total other assets

    369,216                       369,216  
                                 

Total Assets

  $ 1,311,150                     $ 1,977,677  
                                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

                               
                                 

CURRENT LIABILITIES

                               

Accounts payable and accrued expenses

  $ 825,113     $ (150,116 )1   $ (128,489 )7   $ 546,508  

Accounts payable and accrued expenses-related parties

    539,754                       539,754  

Notes and other loans payable-current portion

    204,814                       204,814  

Derivative liabilities

    622,298                       622,298  

Intercompany payable

    -       85,564 1      (85,564 )11     -  

Notes and other loans payable-related parties

    785,004                       785,004  

Capitalized lease obligations-current portion

    4,947                       4,947  

Deferred revenue and license deposits

    416,441               (300,064 )8     116,377  

Total current liabilities

    3,398,371                       2,819,702  
                                 

NON CURRENT LIABILITIES

                               

Capitalized lease obligations-net of current portion

    18,282                       18,282  

Notes and other loans payable-net of current portion

    239,383                       239,383  

Total non-current liabilities

    257,665                       257,665  
                                 

Total Liabilities

    3,656,036                       3,077,367  
                                 

Commitments and contingencies

                               
                                 

STOCKHOLDERS' DEFICIT

                               

Series B preferred stock

                               

Common stock

    43,490                       43,490  

Additional paid-in capital

    52,041,414                       52,041,414  

Treasury Stock

    (210,000 )     (210,000 )1     (210,000 )9     (210,000 )

Prepaid expenses with common stock

    (271,126 )     (193,959 )1             (77,167 )

Stock subscription receivable

    (6,000 )                     (6,000 )

Accumulated deficit

    (54,670,640 )             1,751,237  10     (52,919,403 )

Total stockholders' deficit-Cyclone Power Technologies Inc.

    (3,072,862 )                     (1,127,666 )

Non controlling interest in consolidated subsidiaries

    727,976       (700,000 )2             27,976  

Total Stockholders' Deficit

    (2,344,886 )                     (1,099,690 )
Total Liabilities and Stockholders' Deficit   $ 1,311,150                     $ 1,977,677  

  

 

 

 

The following unaudited pro-forma presentations reflects Cyclone’s pro forma condensed statement of operations for the six months ended June 30, 2014 and for the year ended December 31 , 2013 as if the WHE GEN transaction and corresponding deconsolidation and cost method of accounting occurred at the beginning of each period:

 

CYCLONE POWER TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2014

 

           

Pro Forma Adjustments

         
   

Six Months Ended

                   

Six Months Ended

 
   

June 30, 2014

   

Reduction of

   

Divestment and

   

June 30, 2014

 
   

(Unaudited)

   

Whe-Gen

   

Sale of

   

(Unaudited)

 
   

As Reported

   

Expenses

   

Whe Gen Shares

   

Pro Forma

 
                                 

REVENUES

  $ 140,527     $ -     $ 175,000 4   $ 315,527  
                                 

COST OF GOODS SOLD

    85,877                       85,877  
                                 

Gross profit

    54,650       -       175,000       229,650  
                                 

OPERATING EXPENSES

                               

Advertising and promotion

    13,170       (1,000 )             12,170  

General and administrative

    980,516       (196,664 )     (85,564 )11     698,288  

Research and development

    316,817       (158,510 )             158,307  
                                 

Total operating expenses

    1,310,503       (356,174 )     (85,564 )     868,765  
                                 

Operating income (loss)

    (1,255,853 )     356,174       260,564 10     (639,115 )
                                 

OTHER INCOME (EXPENSE)

                               

Other income (expense)

    -       -       1,745,237       1,745,237  

Derivative (expense) -notes payable

    (179,509 )     -       -       (179,509 )

Interest (expense)

    (851,975 )     -       -       (851,975 )
                                 

Total other income (expense)

    (1,031,484 )     -       1,745,237       713,753  
                                 

Income (loss) before income taxes

    (2,287,337 )     356,174       2,005,801       74,638  

Income taxes

    -       -       -       -  
                                 

Net income ( loss )

  $ (2,287,337 )   $ 356,174     $ 2,005,801     $ 74,638  
                                 

Net income ( loss) per common share, basic and diluted

  $ (0.01 )                   $ 0.00  
                                 

Weighted average number of common shares outstanding

    291,288,247                       291,288,247  

 

 

1 Represents reduction of assets and liabilities of Whe Gen on June 30, 2014.

2 Removal of non-controlling interest as of June 30, 2014.

3 Represents cash paid to Cyclone for sale of investment in Whe Gen.

4 WheGen is to pay the company an initial $175,000 non refundable license fee.

5 Whe Gen is to pay the company $150,000 for the balance of the investment sold.

6 Represents the fair value of the Company's 15.13% investment in Whe Gen.

7 Represents $78,489 liability paid and $ 50,000 liabilities assumed by Whe Gen.

8 Deferred liabilities assumed by Whe Gen

9 Treasury stock valued at $210,000 (3 million shares ) transferred back to the Company.

10 Pro forma gain on deconsolidation as of June 30, 2014, adjusted for balance sheet presentation.

11 Forgiveness of intercompany receivable from Whe Gen.

12 Reimbursement of Company expenses by Whe Gen.

13 Prepaid expense transferred to Whe Gen.

 

 

 

 

 

CYCLONE POWER TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

 

                 

Pro Forma Adjustments

         
         

Year Ended

                   

Year Ended

 
         

December 31, 2013

   

Reduction of

   

Divestment and

   

December 31, 2013

 
         

(Unaudited)

   

Whe-Gen

   

Sale of

   

(Unaudited)

 
         

As Reported

   

Expenses

   

Whe Gen Shares

   

Pro Forma

 
                                       

REVENUES

  $ 715,382     $ -     $ -     $ 715,382  
                                       

COST OF GOODS SOLD

    564,886                       564,886  
                                       

Gross profit

    150,496       -       -       150,496  
                                       

OPERATING EXPENSES

                                   

Advertising and promotion

    11,401       -       -       11,401  

General and administrative

    2,100,104       (157,266 )     (1,225 )1     1,941,613  

Research and development

    772,795       -       -       772,795  
                                     

Total operating expenses

    2,884,300       (157,266 )     (1,225 )     2,725,809  
                                       

Operating loss

    (2,733,804 )     157,266       1,225       (2,575,313 )
                                       

OTHER INCOME (EXPENSE)

                                   

Other income (expense)

    (11,268 )     -       -       (11,268 )

Derivative (expense) -notes payable

    (122,532 )     -       -       (122,532 )

Interest (expense)

    (923,939 )     -       -       (923,939 )
                                       
Total other income (expense)     (1,057,739 )     -       -       (1,057,739 )
                                       

Income (loss) before income taxes

    (3,791,543 )     157,266       1,225       (3,633,052 )

Income taxes

    -       -       -       -  
                                       

Net ( loss ) income

  $ (3,791,543 )   $ 157,266     $ 1,225     $ (3,633,052 )
                                       

Net loss per common share, basic and diluted

  $ (0.02 )                   $ (0.01 )
                                       

Weighted average number of common shares outstanding

    244,175,319                       244,175,319  

 

1 Forgiveness of intercompany receivable from Whe Gen.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

     

 

CYCLONE POWER TECHNOLOGIES INC.

 

 

 

 

By:  

/s/ Frankie Fruge

Date: January 26, 2015,

 

Frankie Fruge

President 

 

 

Date: January 26, 2015

 

/s/ Bruce Schames

Bruce Schames

CFO