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 |