10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to

Commission File Number: 000-54449

Cyclone Power Technologies, Inc.

(Exact name of registrant as specified in its charter)

Florida	26-0519058
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
601 NE 26th Ct
Pompano Beach, Florida	33064
(Address of principal executive offices)	(Zip Code)

(954) 943-8721

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☑
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 15, 2014, there were 344,215,227 shares of the registrant’s common stock issued and outstanding.

CYCLONE POWER TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013 (audited)	2
Condensed Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 (unaudited)	3
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures about Market Risk	25
Item 4. Controls and Procedures	25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	25
Item 1A. Risk Factors	25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3. Defaults upon Senior Securities	26
Item 4. Mine Safety Disclosures	26
Item 5. Other Information	26
Item 6. Exhibits	26

1

Cyclone Power Technologies, Inc.

Condensed Consolidated Balance Sheets

	March 31, 2014			December 31, 2013
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash	$	7,059		$	17,363
Inventory, net		589,184			489,420
Other current assets		42,662			55,020
Total current assets		638,905			561,803
PROPERTY AND EQUIPMENT
Furniture, fixtures, and equipment		502,562			502,562
Accumulated depreciation		(133,621	)		(125,799	)
Net property and equipment		368,941			376,763
OTHER ASSETS
Patents, trademarks and copyrights		571,178			571,178
Accumulated amortization		(205,872	)		(196,410	)
Net patents, trademarks and copyrights		365,306			374,768
Other assets		2,762			2,762
Total other assets		368,068			377,530
Total Assets	$	1,375,914		$	1,316,096
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	689,472		$	682,692
Accounts payable and accrued expenses-related parties		443,196			1,965,596
Notes and other loans payable-current portion		585,282			729,905
Derivative liabilities		619,268			484,796
Notes and other loans payable-related parties		782,746			775,120
Value of shares loaned by stockholder		-			1,496,217
Capitalized lease obligations-current portion		5,920			6,161
Deferred revenue and license deposits		416,441			416,186
Total current liabilities		3,542,325			6,556,673
NON CURRENT LIABILITIES
Capitalized lease obligations-net of current portion		19,222			20,550
Notes and other loans payable-net of current portion		64,869			30,997
Total non-current liabilities		84,091			51,547
Total Liabilities		3,626,416			6,608,220
Commitments and contingencies
STOCKHOLDERS' DEFICIT
Series B preferred stock, $.0001 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively.		-			-
Common stock, $.0001 par value, 900,000,000 shares authorized, 332,043,678 and 272,679,942 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively.		33,204			27,268
Additional paid-in capital		51,103,199			48,644,132
Treasury stock, 3,000,000 and 40,405,420 shares, at March 31, 2014 and December 31, 2013 respectively, at cost.		(210,000	)		(1,706,217	)
Prepaid expenses with common stock		(418,545	)		(595,980	)
Stock subscription receivable		(6,000	)		(6,000	)
Accumulated deficit (inclusive of non-cash derivative losses of $31,386,386 and other losses of $22,154,169 at March 31, 2014 and non-cash derivative losses of $31,033,299 and other losses of $21,440,971 at December 31, 2013)		(53,540,555	)		(52,474,270	)
Total stockholders' deficit-Cyclone Power Technologies Inc.		(3,038,697	)		(6,111,067	)
Non controlling interest in consolidated subsidiaries		788,195			818,943
Total Stockholders' Deficit		(2,250,502	)		(5,292,124	)
Total Liabilities and Stockholders' Deficit	$	1,375,914		$	1,316,096

The accompanying notes are an integral part of these condensed consolidated financial statements

2

Cyclone Power Technologies, Inc.

Condensed Consolidated Statements of Operations

 (unaudited)

	Three Months Ended March 31,
	2014			2013
REVENUES	$	-		$	251,441
COST OF GOODS SOLD		27,000			165,476
Gross margin		(27,000	)		85,965
OPERATING EXPENSES
Advertising and promotion		7,605			7,196
General and administrative		437,739			420,729
Research and development		124,180			250,550
Total operating expenses		569,524			678,475
Operating loss		(596,524	)		(592,510	)
OTHER EXPENSE
Derivative expense -notes payable		55,158			-
Interest expense		445,351			76,376
Total other expense		500,509			76,376
Loss before income taxes		(1,097,033	)		(668,886	)
Income taxes		-			-
Net loss	$	(1,097,033	)	$	(668,886	)
Net loss per common share, basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding, basic and diluted		261,282,936			239,988,736

The accompanying notes are an integral part of these condensed consolidated financial statements

3

Cyclone Power Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

 (unaudited)

	Three Months Ended March 31
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,097,033	)	$	(668,886	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		17,284			16,743
Issuance of restricted common stock, options and warrants for services		54,572			181,785
Warrants issued pursuant to repayment of debt in common stock		-			22,473
Loss from derivative liability-notes payable		55,158			-
Amortization of derivative debt discount		297,929			-
Original issue discount paid with stock		10,714			-
Amortization of prepaid expenses via common stock & warrants		177,435			-
Amortization of original issue discount		14,095			-
Changes in operating assets and liabilities:
(Increase) decrease in inventory		(99,764	)		119,631
Decrease in other current assets		12,358			13,731
Increase in accounts payable and accrued expenses		126,577			82,022
Increase in accounts payable and accrued expenses-related parties		102,674			98,958
Increase in deferred revenue and deposits		255			-
Net cash used by operating activities		(327,746	)		(133,543	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment		-			(4,625	)
Net cash used by investing activities		-			(4,625	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of capitalized lease obligations		(1,569	)		(1,075	)
Proceeds from notes and loans payable		240,000			70,000
Repayment of notes and loans payable		(38,615	)		(10,000	)
Proceeds from sale of common stock		110,000			100,000
Increase in related party notes and loans payable-net		7,626			6,874
Net cash provided by financing activities		317,442			165,799
Net (decrease) increase in cash		(10,304	)		27,631
Cash, beginning of period		17,363			14,888
Cash, end of period	$	7,059		$	42,519
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Payment of interest in cash	$	25,121		$	1,857
NON CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of 20,313,416 shares of Common stock for repayment of related party payables	$	668,312		$	-
Issuance of 1,750,000 shares of Common stock for accrued expenses	$	75,000		$	-
Issuance of 21,567,656 shares of Common stock for debt repayment	$	285,317		$	-
Issuance of 983,859 shares of Common stock for debt interest	$	12,616		$	-
Value of shares repaid to stockholder	$	1,496,217		$	-
Forgiveness of deferred officers' salaries as contributed capital	$	956,762		$	-
Issuance of 675,000 shares of Common stock for repayment of related party payables	$	-		$	54,000
Issuance of 150,000 shares of Common stock for accrued expenses	$	-		$	12,875
Issuance of 1,466,965 shares of Common stock for debt repayment	$	-		$	115,226
Issuance of 133,608 shares of Common stock for payment of debt interest	$	-		$	15,978

The accompanying notes are an integral part of these condensed consolidated financial statements

4

CYCLONE POWER TECHNOLOGIES, INC.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

NOTE 1 – ORGANIZATIONAL AND SIGNIFICANT ACCOUNTING POLICIES

A. ORGANIZATION AND OPERATIONS

Cyclone Power Technologies, Inc. (the “Company”) is the successor entity to the business of Cyclone Technologies LLLP (the “LLLP”), a limited liability limited partnership formed in Florida in June 2004. The LLLP was the original developer and intellectual property holder of the Cyclone engine technology. The Company is primarily a research and development engineering company whose main purpose is to develop, commercialize, market and license its Cyclone engine technology.

In 2010, the Company established a subsidiary, Cyclone-WHE LLC (the “WHE Subsidiary”), to market the waste heat recovery systems for all Cyclone engine models. As of March 31, 2014 the Company had a 73.72% controlling interest in the WHE Subsidiary, which in May 2014, re-domiciled to Delaware as a corporation named WHE Generation Corp. In 2012, the Company established Cyclone Performance LLC (“Cyclone Performance”) f/k/a Cyclone-TeamSteam USA, LLC. Its purpose is to build, test and run a vehicle utilizing the Company’s engine. As of March 31, 2014, the company had a 95% controlling interest in Cyclone Performance.

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of the Company, its 73.72% owned WHE Subsidiary and its 95% owned subsidiary Cyclone Performance. All material inter-company transactions and balances have been eliminated in the condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

The accounting principles utilized by the Company require the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the periods. On an on-going basis, the Company reviews and evaluates its estimates and assumptions, including, but not limited to, those that relate to the realizable value of inventory, identifiable intangible assets and other long-lived assets, contracts, income taxes, derivative liabilities, and contingencies. Actual results could differ from these estimates.

C. CASH

Cash includes cash on hand and cash in banks. The Company maintains cash balances at several financial institutions.

D. COMPUTATION OF LOSS PER SHARE

Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is not presented as the conversion of the preferred stock and exercise of outstanding stock options and warrants would have an anti-dilutive effect. As of March 31, 2014 and 2013, total anti-dilutive shares not inclusive of the potential conversion of several convertible promissory notes amounted to approximately 19.6 million and 18.6 million shares, respectively.

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E. INCOME TAXES

Income taxes are accounted for under the asset and liability method as stipulated by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management’s view it is more likely than not (50%) that such deferred tax will not be utilized.

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of March 31, 2014, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. Interest related to the unrecognized tax benefits is recognized in the consolidated financial statements as a component of income taxes. The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2010 through 2013.

F. REVENUE RECOGNITION

The Company’s revenue recognition policies are in compliance with ASC 605, “Revenue Recognition – Multiple Element Arrangements”, and Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition. Revenue is recognized at the date of shipment of engines and systems, engine prototypes, engine designs or other deliverables to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Revenue from contracts for multiple deliverables and milestone method recognition are evaluated and allocated as appropriate. The Company has determined that the milestone method of revenue recognition (ASC 605-28) is appropriate for two of the Company’s contracts which specifically enumerate approved work effort milestones required for remuneration – the Company’s contract with the U.S. Army / TARDEC and the Amended and Restated Technology Application License Agreement with Phoenix Power Group LLC. All revenue and costs of goods sold are included in the accompanying condensed consolidated statements of operations. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue on the consolidated balance sheets. The Company does not allow its customers to return prototype products. Current contracts do not require the Company to provide any warranty assistance after the “deliverable” has been accepted.

It is the Company’s intention when it has royalty revenue from its contracts to record royalty revenue periodically when earned, as reported in sales statements from customers. The Company does not have any royalty revenue to date.

G. WARRANTY PROVISIONS

Current contracts do not require warranty assistance subsequent to acceptance of the “deliverable R&D prototype” by the customer. For products that the Company will sell in the future, warranty costs are anticipated to be borne by the manufacturing vendor.

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H. INVENTORY

Inventory is recorded at the lower of cost or market. Costs include material, labor and allocated overhead to manufacture a completed engine. These costs are periodically evaluated to determine if they have a net realizable value. If the net realizable value is lower than the carrying amount, a reserve is provided.

I. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820, “Fair Value Measurements and Disclosures” requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. The carrying amounts reported in the balance sheet for cash, accounts payable and accrued expenses, and loans payable approximate their fair market value based on the short-term maturity of these instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels. The three levels of the fair value hierarchy are defined as follows:

Level 1	—	Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2	—	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date.
Level 3	—	Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting  date.

The summary of fair values and changing values of financial instruments for the three months ended March 31, 2014 is as follows:

Instrument	Beginning of Period		Change		End of Period		Level		Valuation Methodology
Derivative liabilities	$	484,796	$	134,472	$	619,268		3	Binomial Lattice Model

Please refer to Note 16 for disclosure and assumptions used to calculate the fair value of the derivative liabilities.

J. RESEARCH AND DEVELOPMENT

Research and development activities for product development are expensed as incurred. Costs for the three months ended March 31, 2014 and 2013 were $124,180 and $250,550, respectively.

K. STOCK BASED COMPENSATION

The Company applies the fair value method of ASC 718, “Share Based Payment”, in accounting for its stock based compensation. This standard states that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock based compensation at the market price for the Company’s common stock as of the date in which the obligation for payment of services is incurred.

L. COMMON STOCK OPTIONS AND PURCHASE WARRANTS

The Company accounts for common stock options and purchase warrants at fair value in accordance with ASC 815-40, “Derivatives and Hedging”. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants consistent with ASC 718, “Share Based Payment”. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.

7

The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of the equity instruments exchanged, in accordance with ASC 505-50, “Equity Based payments to Non-employees”.

M. ORIGINAL ISSUE DEBT DISCOUNT

The original issue discount (OID) related to notes payable is amortized by the effective interest method over the repayment period of the notes. The unamortized OID is represented as a reduction of the amount of the notes payable.

N. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed on the straight-line method, based on the estimated useful lives of the assets as follows:

	Years
Display equipment for trade shows			3
Leasehold improvements and furniture and fixtures		10	-	15
Shop equipment			7
Computers			3

Expenditures for maintenance and repairs are charged to operations as incurred.

O. IMPAIRMENT OF LONG LIVED ASSETS

The Company continually evaluates the carrying value of intangible assets and other long lived assets to determine whether there are any impairment losses. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified. To date, the Company has not recognized any impairment charges.

P. RECENT ACCOUNTING PRONOUNCEMENTS

In 2014, the FASB issued an Accounting Standard Update (“ASU”) 2014-05 “Service Concession Arrangements (Topic 853), ASU 2014-04 Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40), ASU 2014-03 Derivatives and Hedging (Topic 815) Accounting for Certain Receive-Variable, Pay Fixed Interest Rate Swaps-Simplified Hedge Account Approach, and ASU 2014-02 Intangibles-Goodwill and Other (Topic 350). Management believes that these standards will not materially impact our financial statements. 

Q. CONCENTRATION OF RISK

The Company does not have any off-balance sheet concentrations of credit risk. The Company expects cash and accounts receivable to be the two assets most likely to subject the Company to concentrations of credit risk. The Company’s policy is to maintain its cash with high credit quality financial institutions to limit its risk of loss exposure.

As of March 31, 2014, the Company maintained its cash in two quality financial institutions. The Company has not experienced any losses in its bank accounts through March 31, 2014. The Company purchases raw material and components from multiple sources, none of which may be considered a principal or material supplier. If necessary, the Company could replace these suppliers with minimal effect on its business operations.

8

R. DERIVATIVE FINANCIAL INSTRUMENTS

Accounting and reporting standards for derivative instruments and for hedging activities were codified by ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”). It requires that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income (loss) depending on the purpose of the derivatives and whether they qualify and have been designated for hedge accounting treatment. The Company has derivative liabilities pursuant to convertible debt and common stock warrants, and has recognized net expenses on the condensed consolidated statements of operations. The Company does not have any derivative instruments for which it has applied hedge accounting treatment.

NOTE 2 - GOING CONCERN

As shown in the accompanying condensed consolidated financial statements, the Company incurred substantial operating and other losses of approximately $1.1 million for the three months ended March 31, 2014, and $3.8 million for the year ended December 31, 2013. The cumulative deficit since inception is approximately $53.5 million, which is comprised of $22.1 million attributable to actual operating losses (which were paid in cash, stock for services and other equity instruments) and other expenses, and $31.4 million in non-cash derivative liability accounting which was a result of the conversion of the Company’s Series A Convertible Preferred Stock in 2011, the retirement of a common stock purchase warrant in 2012, and the change in fair value of derivatives associated with notes payable for the year ended December 31, 2013 and the three months ended March 31, 2014. The Company has a working capital deficit at March 31, 2014 of approximately $2.9 million. There is no guarantee whether the Company will be able to generate enough revenue and/or raise capital to support its operations. This raises substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management’s plans which include implementation of its business model to generate revenue from development contracts, licenses and product sales, and continuing to raise funds through debt or equity raises. The Company will also likely continue to rely upon related-party debt or equity financing.

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company is currently raising working capital to fund its operations via private placements of common stock and debt, advance contract payments (deferred revenue), and advances from and deferred payments to related parties.  

NOTE 3 – INVENTORY, NET

Inventory, net consists of:

	March 31, 2014			December 31, 2013
Engine material and parts	$	332,314		$	316,513
Labor		307,280			237,311
Applied overhead		49,590			35,596
Total		689,184			589,420
Inventory valuation reserve		(100,000	)		(100,000	)
Inventory, net	$	589,184		$	489,420

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NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	March 31, 2014			December 31, 2013
Display equipment for trade shows	$	9,648		$	9,648
Leasehold improvements and furniture and fixtures		94,572			94,572
Equipment and computers		398,342			398,342
Total		502,562			502,562
Accumulated depreciation		(133,621	)		(125,799	)
Net property and equipment	$	368,941		$	376,763

Depreciation expense for the three months ended March 31, 2014 and 2013 was $7,822 and $6,773, respectively.

NOTE 5 – PATENTS, TRADEMARKS AND COPYRIGHTS

Patents, trademarks and copyrights consist of legal fees paid to file and perfect these claims. The net balances as of March 31, 2014 and December 31, 2013 were $365,306 and $374,768, respectively. For the three months ended March 31, 2014 and for the year ended December 31, 2013, the Company capitalized $0 and $ 6,920, respectively, of expenditures related to these assets. As of March 31, 2014, the Company had 33 patents issued on its technology both in the U.S. and internationally, and three trademarks in the U.S.

Patents, trademarks and copyrights are amortized over the life of the intellectual property which is 15 years. Amortization expense for the three months ended March 31, 2014 and 2013 was $9,462 and $9,970, respectively.

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NOTE 6 – NOTES AND OTHER LOANS PAYABLE

A.   NON-RELATED PARTIES

A summary of non-related party notes and other loans payable is as follows:

	March 31, 2014		December 31, 2013
12% senior secured note payable, plus 6% redemption premium, collateralized by all assets of the Company, monthly payments commencing December 2013 through September 2014	$	237,033	$	361,767
6-12% uncollateralized demand notes payable		40,000		127,500
12% convertible notes payable, net of discount of $17,480 and $48,851 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from November 2013 through July 2014 (A)		99,864		139,769
10% convertible note payable, net of discount of $27,322 and $115,585 at March 31, 2014 and December 31, 2014, respectively, monthly payments commencing in December 2014 through July 2014 (B)		77,763		74,344
10% convertible notes payable, net of discount of $59,010 and $58,279 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from August 2014 through January 2015 (C)		36,988		15,634
10% convertible notes payable, net of discount of $57,386 and $55,109 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from December 2014 through January 2015 (D)		52,614		10,891
6% convertible notes payable, net of discount of $155,131 and $89,003 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from December 2016 through February 2017 ( E )		64,869		30,997
10% convertible note payable, net of discount of $54,646 at March 31, 2014, maturing in February 2015 ( F )		20,354		-
12% convertible notes payable, net of discount of $54,334 at March 31, 2014, maturing at various dates from July 2014 through March 2015 ( G )		20,666		-
Total current non related party notes –net of discount		650,151		760,902
Less-Current Portion		585,282		729,905
Total non-current non related party notes –net of discount (accrued interest is included in accrued expenses)	$	64,869	$	30,997

(A)	Notes issued net of 10% original discount of $31,110 ($6,104 unamortized at March 31, 2014) along with additional discount from derivative liabilities of $130,684 ($11,376 unamortized at March 31, 2014). At March 31, 2014, the Company held 7,962,267 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(B)	Note issued net of original discount of $26,250 ($5,981 unamortized at March 31, 2014) along with stock purchase warrants whose value at issuance of $34,680 has been carried as a discount against the note ($10,276 unamortized at March 31, 2014) and an additional discount from derivative liabilities of $89,370 ($11,065 unamortized at March 31, 2014). At March 31, 2014, the Company held 821,831 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(C)	Notes issued net of discount from derivative liabilities ($59,010 unamortized at March 31, 2014). At March 31, 2014 the Company held 18,582,894 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(D)	Notes issued net of discount from derivative liabilities ($57,386 unamortized at March 31, 2014). At March 31, 2014, the Company held 19,700,581 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(E)	Notes issued net of 10% original discount ($20,095 unamortized at March 31, 2014) along with additional discount from derivative liabilities ($135,036 unamortized at March 31, 2014). At March 31, 2014, the Company held 36,000,000 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(F)	Notes issued net of discount from derivative liabilities of $80,104 ($54,646 unamortized at March 31, 2014). At March 31, 2014, the Company held 18,232,759 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(G)	Notes issued net of discount from derivative liabilities of $86,258 ($54,334 unamortized at March 31, 2014). At March 31, 2014, the Company held 2,661,539 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

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B.   RELATED PARTIES

A summary of related party notes and other loans payable is as follows: 

	March 31, 2014		December 31, 2013
6% demand loans per Operations Agreement with Schoell Marine Inc., a company owned by Cyclone’s Chairman and controlling shareholder (A)	$	424,285	$	424,285
6% non-collateralized loans from officer and shareholder, payable on demand. The original principal balances were $157,101.		81,251		85,364
12% non-collateralized loans from officer and shareholder, payable on demand		11,000		11,000
Accrued interest		266,210		254,471
Total current related party notes, inclusive of accrued interest	$	782,746	$	775,120

(A) This note arose from services and salaries incurred by Schoell Marine on behalf of the Company. Schoell Marine also owns the building that is leased to the Company. The Schoell Marine note bears an interest rate of 6% and repayments occur as cash flow of the Company permits. The note was secured by a UCC-1 filing on the Company’s patents and patent applications, which expired and has not been renewed.  For the three months ended March 31, 2014 and for the year ended December 31, 2013, $0 and $500 of principal was paid on the note balance.

During the last quarter of 2013, the Company’s Chairman and co-founder loaned approximately 37.4 million shares of Company common stock, valued at approximately $1.5 million, as reserve treasury shares pursuant to various debt covenants. These shares have been presented as value of shares loaned by stockholder in the accompanying consolidated balance sheets. These shares were returned to the Chairman in March 2014.

NOTE 7 – RELATED PARTY TRANSACTIONS

A. LEASE ON FACILITIES

The Company leases a 6,000 square foot warehouse and office facility located at 601 NE 26th Court in Pompano Beach, Florida. The lease, which is part of the Company’s Operations Agreement with Schoell Marine, provides for the Company to pay rent equal to the monthly mortgage payment on the building plus property taxes, utilities and sales tax due on rent. Occupancy costs for the three months ended March 31, 2014 and 2013 were $15,741 in both periods. The Operations Agreement runs year-to-year, however, the lease portion of this agreement is month-to-month, but can only be cancelled on 180 day notice by Schoell Marine.

B. DEFERRED COMPENSATION

Included in accounts payable and accrued expenses - related parties as of March 31, 2014 and December 31, 2013 are $377,045 and $1,910,073, respectively, of accrued and deferred officers’ salaries compensation which may be paid as funds are available. These are non-interest bearing and due on demand. In January 2014, four of the Company’s executive management converted $668,312 in deferred salary into 20,313,416 shares of restricted common stock and forgave $956,762 in deferred salary as contributed capital. This forgiveness of deferred salary was recorded to additional paid in capital in the accompanying condensed consolidated balance sheet at March 31, 2014.

NOTE 8 – PREFERRED STOCK

The Series B Preferred Stock is majority voting stock and is held by the two co-founders of the Company. Ownership of the Series B Preferred Stock shares assures the holders thereof a 51% voting control over the common stock of the Company. The 1,000 Series B Preferred Stock shares are convertible on a one-for-one basis with the common stock in the instance the Company is merged, sold or otherwise dissolved.

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NOTE 9 – STOCK TRANSACTIONS

During the three months ended March 31, 2014, the Company:

● Issued 1,750,000 shares of restricted common stock valued at $75,000 for payment of liabilities, 1,450,000 shares of restricted common stock valued at $43,500 for services, and 4,722,365 shares of common stock pursuant to a cashless warrants conversion.

● Amortized (based on vesting) $9,244 of common stock options for employee services and issued 357,142 shares of restricted common stock valued at $10,714 in advance payment of debt interest.

● Sold 5,500,000 shares of restricted common stock for $110,000 and issued 2,719,298 shares of restricted common stock pursuant to a price guarantee for common stock sold in the prior year.

● Issued 983,859 shares of common stock valued at $12,616 as payment of interest on debt, and 21,567,656 shares of common stock in repayment of $285,228 of debt.

● Issued 20,313,416 shares of restricted common stock to four of the Company’s executive management as a conversion of $668,312 in deferred salary, and forgave $956,762 of deferred salary as contributed capital.

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NOTE 10 – STOCK OPTIONS AND WARRANTS

A. COMMON STOCK OPTIONS

In recognition of and compensation for services rendered by officers and employees for the year ended December 31, 2013, the Company issued 600,000 common stock options, valued at $37,000 (pursuant to the Black Scholes valuation model) that are exercisable into shares of common stock at exercise prices of $0.08 and with a maturity life of 10 years. For the three months ended March 31, 2014, the amortization of stock options was $9,244 and the unamortized balance was $0. 

To improve the common stock position of the Company and help limit dilution, effective with the second quarter of 2013, the four corporate officers unanimously agreed to waive their rights to 2.4 million common stock options (600,000 per quarter collectively) contractually due them through March 2014. In lieu of issuing additional options to these officers and all other employees through the end of the year, the Company re-priced 4,185,000 million vested options held by the officers and employees that were priced at a minimum of $0.15 per share ($0.20 average) to $0.10 per share. The result was a non-cash charge of approximately $52,000. The remaining contractual life of the options was not changed.  

A summary of the common stock options for the period from December 31, 2013 through March 31, 2014 follows:

	Number Outstanding		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (Years)
Balance, December 31, 2013		9,740,000	$	0.129		6.5
Options issued		-		-		-
Options exercised		-		-		-
Options cancelled		-		-		-
Balance, March 31, 2014		9,740,000	$	0.139		6.2

All options were vested and exercisable as of March 31, 2014.

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The fair value of new stock options, re-priced stock options, new purchase warrants and re-priced purchase warrants granted using the Black-Scholes option pricing model was calculated using the following assumptions:

	Three Months Ended March 31, 2014			Year Ended December 31, 2013
Risk free interest rate	.67%	-	1.32%	.51%	-	1.41%
Expected volatility	43%	-	63%	34%	-	107%
Expected term in years	2	-	4	1	-	5
Expected dividend yield		0%			0%
Average value per options and warrants	$ .01	-	$ .02	$ .01	-	$.06

Expected volatility is based on historical volatility of the Company’s common stock price. Short Term U.S. Treasury rates were utilized at the risk free interest rate. The expected term of the options and warrants was calculated using the alternative simplified method newly codified as ASC 718 “Accounting for Stock Based Compensation,” which defined the expected life as the average of the contractual term of the options and warrants and the weighted average vesting period for all issuances.

B. COMMON STOCK WARRANTS

During the three months ended March 31, 2014, the Company:

● Re-priced 625,000 common stock warrants to $.0114 (valued at $10,821) pursuant to a price guarantee from the 2013 sale of common stock to unaffiliated third parties.

● Issued 2,838,051 common stock warrants and re-priced 565,625 common stock warrants, both to $.0114 (valued at $43,280) pursuant to a price guarantee from a 2013 debt agreement. No other terms of these common stock warrants were revised.

● Issued 4,722,365 aggregate shares of common stock in a cashless exercise of 9,037,230 warrants.

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A summary of outstanding vested warrant activity for the period from December 31, 2012 to March 31, 2014 follows:

	Number Outstanding			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (Years)
Common Stock Warrants
Balance, December 31, 2013		16,097,798			0.057			2.85
Warrants exercised-cashless		(9,037,230	)		(0.017	)
Warrants issued		2,838,048			0.114			4.16
Warrants re-priced:
Cancelled – old		(1,190,625	)		(0.020	)
Re-Priced		1,190,625			0.114
Balance, March 31, 2014		9,898,616		$	0.113			2.16

All warrants were vested and exercisable as of the date issued.

NOTE 11 – INCOME TAXES

A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the three months ended March 31, 2014 and 2013 are as follows:

	Three months ended March 31, 2014		Amount			Three months ended March 31, 2013		Amount
Tax benefit at U.S. statutory rate		34%	$	229,566			34%	$	204,047
State taxes, net of federal benefit		4		27,008			4		24,005
Change in valuation allowance		(38)		(256,574	)		(38)		(228,052	)
		-%	$	-			-%	$	-

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for years ended March 31, 2014 and December 31, 2013 consisted of the following:

Deferred Tax Assets	March 31, 2014			December 31, 2013
Net Operating Loss Carry-forward	$	8,229,658		$	7,946,959
Deferred Tax Liabilities – Accrued Officers’ Salaries		(234,413	)		(440,135	)
Net Deferred Tax Assets		7,995,245			7,506,824
Valuation Allowance		(7,995,245	)		(7,506,824	)
Total Net Deferred Tax Assets	$	-		$	-

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As of March 31, 2014, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $17.9 million that may be offset against future taxable income through 2029. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax asset has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount.

NOTE 12 –LEASE OBLIGATIONS

A. CAPITALIZED LEASE OBLIGATIONS

In 2009 the Company acquired $27,401 of property and equipment via capitalized lease obligations at an average interest rate of 18.4%. In September 2012, the Company acquired $21,310 of equipment via capitalized lease obligations at an interest rate of 12.5%. In December 2013, the Company acquired $8,408 of equipment via capitalized lease obligations at an interest rate of 15.5%. Total lease payments made for the three months ended March 31, 2014 were $1,569. The balance of capitalized lease obligations payable at March 31, 2014 was $25,142. Future lease payments are:

2014	$	4,592
2015		5,801
2016		6,620
2017		6,079
2018		2,050
	$	25,142

B. LEASE ON ADDITIONAL FACILITIES

In July 2011, the Company signed a one-year lease (with extensions) for an additional 2,000 square feet. Effective July 2013, the Company renewed this lease for one year, at an annual rate of $ 17,304 or $8.65/s.f, terminating in June 2014. The lease expense for the three months ended March 31, 2014 and 2013 was $4,326 and $4,452, respectively.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company has employment agreements with Harry Schoell, Chairman and CTO (previously, CEO), at $150,000 per year; Frankie Fruge, COO, at $120,000 per year; and Christopher Nelson, President and General Counsel, at $130,000 per year (collectively, the “Executives”). These agreements provide for a term of three (3) years from their Effective Date (July 2007 in the case of Schoell and Fruge, and August 2011 in the case of Nelson), with automatically renewing successive one year periods starting on the end of the second anniversary of the Effective Date. If the Executive is terminated “without cause” or pursuant to a “change in control” of the Company, as both defined in the respective agreements, the Executive shall be entitled to (i) any unpaid Base Salary accrued through the effective date of termination, (ii) the Executive’s Base Salary at the rate prevailing at such termination through 12 months from the date of termination or the end of his Term then in effect, whichever is longer, and (iii) any performance bonus that would otherwise be payable to the Executive were he/she not terminated, during the 12 months following his or her termination.

NOTE 14 – CONSOLIDATED SUBSIDIARIES

In 2012, the Company established a 100% owned subsidiary (renamed) Cyclone Performance LLC. The purpose of Cyclone Performance is to build, test and run a vehicle utilizing the Company’s engine. In 2012, the Company sold a 5% equity investment to an unrelated investor for $30,000. Prior to December 31, 2012, this 5% equity investment was acquired by a corporate officer of the Company. Losses of the subsidiary are currently fully borne by the Company, as there is no guarantee of future profits or positive cash flow of the subsidiary. As of March 31, 2014, the cumulative unallocated losses to the non-controlling interests of this subsidiary of $953 are to be recovered by the parent from future subsidiary profits if they materialize. 

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In July 2013, the Company’s Chairman purchased a 5% equity stake in the WHE Subsidiary in exchange for 5 million shares of his common stock in the Company. In connection with this purchase, the executive also agreed to release the security interest held by his company, Schoell Marine, on certain of the Company’s engine patents, which was collateral on approximately $425,000 in debt owed by the Company to Schoell Marine. The executive also agreed to provide 12 months of consulting services without additional compensation to the WHE Subsidiary.

In July 2013, as part of a Joint Manufacturing Operations Agreement, Precision CNC LLC (of Ohio) received a 5% interest in the WHE Subsidiary to provide expertise and management for its production operations (vesting over the following two years). Precision CNC was also given the right, during this period, to purchase up to an additional 5% in Cyclone-WHE at the then current valuation of that company. In May 2014, the WHE Subsidiary was re-domiciled to Delaware, and converted to a corporation named WHE Generation Corp. 

The total losses of the WHE Subsidiary for the three months ended March 31, 2014 and for the year ended December 31, 2013 were $120,391 and $157,266, respectively. Losses of the subsidiary are currently fully borne by the Company in the consolidated statements of operations. There is no guarantee of future profits or positive cash flow of the subsidiary that will be realized. As of March 31, 2014, the cumulative unallocated losses to the non-controlling interests of this subsidiary of $70,914 are to be recovered by the parent from future subsidiary profits if they materialize.

NOTE 15 – RECEIVABLES, DEFERRED REVENUE AND BACKLOG

As of March 31, 2014, total backlog for prototype engines to be delivered in the following twelve months was approximately $440,000 from the Company’s Combilift license and U.S. Army contract. The Company expects the balance from these projects to be paid over the following six to nine months of the respective contracts’ development periods, as engines are delivered to the customers. 

NOTE 16 – DERIVATIVE FINANCIAL INSTRUMENTS

Pursuant to additional financing, in the three months ended March 31, 2014 and in the year ended December 31, 2013 the Company entered into convertible note agreements in the aggregate face amount of $ 460,800 and $743,250, respectively. The conversion prices into common stock ranged from a discount of 30% to 44% of the lowest closing prices in the 10 to 20 trading days prior to the conversion. Under provisions of ASC Topic 815-40, this conversion feature triggered derivative accounting treatment because the convertible note was convertible into an indeterminable number of shares of common stock. The fair value of the embedded conversion option was required to be presented as a derivative liability and adjusted to fair value at each reporting date, with changes in fair value reported in the condensed consolidated statements of operation.

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The Company recorded derivative liabilities of $371,025 and $456,681 with a discount offset against the underlying loan, during the three months ended March 31, 2014 and for the year ended December 31, 2013, respectively.

In the three months ended March 31, 2014, the Company recorded a $297,929 non-cash charge to interest expense (reflective of debt discount amortization), an increase of $291,710 in additional paid in capital pursuant to conversion of convertible notes to common stock, and $55,158 of derivative loss related to adjusting the derivative liability to fair value. At March 31, 2014, the derivative related fair value of debt and warrants were $569,100 and $50,170, respectively.

The Company calculates the estimated fair values of the liabilities for derivative instruments at each quarter-end using the BSM option pricing model and Monte Carlo simulations. Volatility, expected term and risk free interest rates used to estimate the fair value of derivative liabilities are indicated in the table below. The volatility was based on historical volatility, the expected term is equal to the remaining term of the debt and the risk free rate is based upon rates for treasury securities with the same term.

	Three Months Ended March 31, 2014			Year Ended Dec. 31, 2013
Volatility	121%	-	139%	87%	-	173%
Risk Free Rate	0.1%	-	0.89%	0.1%	-	1.75%
Expected Term (years)	1	-	3	0	-	3
Dividend Rate		0%			0%

NOTE 17 – SUBSEQUENT EVENTS

In the second quarter of 2014, the Company engaged in the following transactions:

● Four different investment funds provided aggregate net proceeds of $141,750 in the form of convertible notes to the Company, all convertible at share prices between 30% and 45% discount to market. These notes bear interest at rates between 8% and 12%, and have terms of 12 months.

● One fund purchased approximately $52,000 in uncollateralized demand notes from three separate note holders of the Company. In exchange for these demand notes, the Company issued to these holders new 12 month promissory notes with interest rates between 10% and 12%, convertible into common stock at prices between 42% and 45% discount to market. A separate fund purchased $100,000 in principal and interest from a separate note holder of the Company, pursuant to their $400,000 Senior Secured Debenture. In exchange for this debt assignment, the Company issued to this holder two separate $50,000 12 month 10% interest promissory notes, convertible into common stock at approximately a 42% discount to market.

● The Company issued approximately 29 million shares of common stock in conversion of approximately $200,000 in convertible debt.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

Forward Looking Statements 

This report contains forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things:

● the ability to successfully complete development and commercialization of our technology;

● changes in existing and potential relationships with collaborative partners;

● the ability to retain certain members of management;

● our expectations regarding general and administrative expenses;

● our expectations regarding cash availability and balances, capital requirements, anticipated revenue and expenses, including infrastructure and patent expenditures;

● other factors detailed from time to time in filings with the SEC.

In addition, in this registration, we use words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” and similar expressions to identify forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this registration. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this registration may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Overview 

The Company is engaged in the research and development of all-fuel, eco-friendly engine technologies. Several prototypes of these engines are nearing completion with one model currently expected to go into limited production in 2014. While the Company started to generate revenue from its operations as early as 2008, it has not had material or consistent revenue in each of the last two fiscal years. In order for the Company to maintain and expand its operations through the next 12 months, it will seek license and development agreements that provide up-front or progress payment revenue to the Company, and advance its plans to commence engines sales of the WHE by mid-year. We will also continue to raise capital by means of equity or debt offerings.

The Company experienced substantial growth from a business, corporate structural and technology standpoint in 2013 which continued through the first quarter of 2014. During this period, management set a solid foundation to accomplish the goal of bringing our first engine (the WHE-DR) into manufacturing in 2014, thus positioning the Company to start generating consistent revenue this year. These achievements included:  

● Partnering with The Ohio State University’s Center for Automotive Research (CAR), which has brought the expertise of several senior engineers with vast backgrounds in multiple disciplines critical for the success of this commercialization program;

● Forming a joint operating agreement with our manufacturer, Precision CNC, including moving our waste-to-power division into their facility – a new building with the equipment and growth capacity to ramp up to production of over 1,500 engines per month;

● Completing our development and testing of the WHE-DR engine at our R&D center in Florida, and transitioning that program to our team in Ohio, including moving the engine, testing equipment and other resources to both CAR and Precision CNC in January 2014;

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● Establishing a base of over 100 potential customers inquiring about the first WHE engines, and obtaining letters of interest for the initial 300 engines from our current partners, and early commitments for over 6,000 engines during the first five years of production; and

● Forging strong ties with local leaders in Ohio, and pursuing grant and loan opportunities to help fund the next phases of engine development.

As these accomplishments demonstrate, the transition into a manufacturing mode for the WHE has begun. Our budget for these operations in Ohio is approximately $60,000 per month; however, transferring these expenses to Ohio has also reduced our Florida expenses by about $30,000 per month. Based on the milestones set forth in our six and 18 month project plan, management is reasonably confident that sales for the limited first generation WHE will be approximately $2 million over the following 12 months – revenue through our subsidiary which will support the next mass manufacturing phase of product development.

The Company has also made headway in securing long-term funding to support the WHE commercialization project both in the private and public sectors. In February 2014, the Company received a commitment for the first $100,000 in project funding from a private investor. The Company is in the process of securing additional commitments for funding, which may amount to as much as $1.5 million.

As the WHE project progresses in Ohio, the Company’s core R&D team in Florida has greater resources to complete several other important projects in 2014, including the U.S. Army / TARDEC engine, designed to be used as a 10kW auxiliary power unit (APU) for combat vehicles. This Phase 1 development program provided approximately $502,882 in revenue to the Company in 2013, based on accomplished milestones. We forecast an additional $150,000 in revenue from this contract when we deliver the S-2 engine, expected to be in May 2014. Management is now seeking follow-on funding from both military and commercial groups to advance the technology into Phase 2 for durability and performance enhancement.

With additional resources, our R&D team will also move towards completion of the Mark 5 project this year. This engine is to be delivered to Combilift for clean-burning material lift equipment, and used in Cyclone’s land speed record (LSR) streamliner to attempt a run for the fastest steam car on earth. With respect to the Combilifit contract, we are forecasting an additional $300,000 in revenue from the delivery of two Mark 5 engines to this customer this year. Management is also pursuing other major R&D contracts that both support and build-off of these two engine programs. This includes marine and renewable power applications.

Financing Transactions. The Company financed its operations in 2013 through revenue generated from the U.S. Army Contract, as well as multiple debt transactions. In August 2013, the Company closed a securities purchase agreement pursuant to which the funder agreed to purchase up to $2,000,000 of senior secured redeemable debentures (the “Debentures”) over the following 12 months. In September, this party advanced $400,000 under a Debenture which bears simple interest at 12% per annum plus a 6% redemption premium, and matures in 12 months. The Company commenced interest and principal payments in December 2013, and has a current balance as of March 31, 2014 of $234,801, plus interest and other fees. The Company’s obligations under the Debentures are secured by a security agreement granting the funder an unconditional and continuing first priority security interest in the Company’s and its subsidiaries’ assets.

In late 2013 and Q1 2014, the Company also engaged in several convertible note transactions, which provided approximately $750,000 in new financing for our operations. These notes typically are convertible into common stock at anywhere between a 30% and 44% discount to closing prices of our common stock over a 10 to 20 day look back period. None of these notes were secured or contained any warrants.

Corporate Structural Actions.   From a corporate and structural stand-point, management has and will continue to take decisive steps to mature the Company to attract funding from investors with long range horizons and strategic partners who can add value from multiple directions. This type of funding is different from the convertible notes used to finance the Company over the last 18 months.

To strengthen the Company’s balance and capital structure, in Q1 2014 management converted a total of $668,312 of deferred salaries into 20,303,461 shares of common stock and forgave an additional $956,762 of their deferred salary as contributed capital. This action was meant to reduce liabilities and demonstrate management’s strong faith in the future of Cyclone.

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The Company recently increased its authorized common stock to 900 million shares. Management will seek to use these shares to build long term value for Cyclone, including getting products to market, generating strong and consistent revenue, reducing debt on our books, and possibly acquiring companies that provide a diversified income stream and technology base. Along these lines, management is seeking strategic acquisitions in the areas of manufacturing and clean energy technologies with vertical synergies.

Stock for Services and Contracts. During the quarter ended March 31, 2014, the Company issued 1,450,000 shares of restricted common stock valued at $43,500 for outside services, and 1,750,000 shares of restricted common stock in satisfaction of $75,000 liabilities. Additionally, the Company amortized (based on vesting) $9,244 of common stock options for employee services and, as stated above issued 20,303,461 shares of restricted common stock in satisfaction of $668,312 of contracted and accrued officers’ salaries.

Research & Development. The Company invests considerably in the development of its technology. Over the years, these investments have led to over 30 patents and substantial progress towards the commercialization of its engine technology. For the three months ended March 31, 2014, the Company’s R&D expenses were $124,180.

Commitments for Capital and Operational Expenditures. Should additional funding be secured, the Company could consider a significant purchase of facilities or equipment, and could increase the number of skilled and unskilled employees on payroll, including the recruitment of high level executive management and additional engineers and mechanical staff.

Critical Accounting Policies. The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which requires management to make estimates, assumptions and related expectations. Management believes that these estimates, assumptions and related expectations upon which we depend at the time are reasonable based upon information then available. These estimates, assumptions and related expectations affect the reported amounts of the balance sheet and income statement for the timeframe of the financial statements presented. To the degree that there are significant variances between these estimates and assumptions and actual results, there would be an effect on the financial statements. GAAP mandates specific accounting treatment in numerous situations and does not require management’s estimates and judgment in its application. Alternative accounting treatments, where available, based on management’s estimates and judgments would not produce a materially different result. The following should be read in conjunction with our condensed consolidated financial statements and related notes.

Intangible assets, consisting primarily of patents, are deemed to be critical for the furtherance of the business objectives of the Company and its engine products. Impairment is not currently reflective, as the Company is developing its products and obtaining new contracts based on these engine patents.

Inventory for engine manufacturing is reviewed on an ongoing basis for obsolescence as engine designs are revised, with resultant charges to R&D.

For purposes of valuing stock based compensation, the Company uses market prices of its common stock as of the time of issuance. For purposes of valuing stock based compensation from common stock options, the Company uses the Black Scholes valuation method. This method requires the Company to make estimates and assumptions regarding stock prices, stock volatility, dividend yields, expected exercise term and risk-free interest rates.

The condensed consolidated financial statements include the accounts of the Company and its 73.72% owned WHE Subsidiary and its 95% owned Cyclone Performance subsidiary. All material inter-company transactions and balances have been eliminated in the consolidated financial statements. The accompanying audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for financial information. In the opinion of management, all adjustments considered necessary for a fair presentation of financial statements have been included and such adjustments are of a normal recurring nature.

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Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Results of Operations

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

Revenue. The Company had no revenue in the quarter ended March 31 2014. The Company recognized $251,441 in revenue in the quarter ended March 31, 2013 from the successful fulfillment of the third milestone under the US Army Contract.

Gross Margin. In the quarter ended March 31, 2014, the Company had a $27,000 charge to cost of goods sold, which was reflective of estimated additional costs on the US Army contract. Gross margin for the quarter ended March 31, 2013 was $85,965, attributable to the US Army Contract.

Operating Expenses. Operating expenses incurred for the quarter ended March 31, 2014 were $569,524 as compared to $678,475 for the same period in the previous year, a reduction of $108,951 or 16%. The majority of the decrease was due to a reduction in research and development expenses of $126,370 or 50%, reflective of the testing stage of our engines in 2014 as compared to the development phase of our engines in 2013.  

Operating Loss. The operating loss for the quarters ended March 31, 2014 and 2013 was $596,524 and $592,510, respectively, an increased loss of $4,014 or 0.7%, due to the factors outlined above.

Other Expense.  Other expense for the quarter ended March 31, 2014 was $500,509, due to $147,422 of interest expense attributable to increase debt levels, derivative accounting related interest charges of $ 297,929 and derivative related expenses of $55,158 adjusting debt to fair value.

Other expense for the quarter ended March 31, 2013 was $76,376, due to interest expense (increase debt levels) and amortization of warrants issued pursuant to debt. 

Net Loss and Loss per Share.  The net loss for the quarter ended March 31, 2014 was $1,097,033, compared to a net loss of $668,886 for the same period in the previous year. The increased loss of $428,147 or 64% is primarily related to derivative expenses in the quarter ended March 31, 2014 of $445,351 and the other factors outlined above. The net loss per weighted average share was $0.00 for both the current quarter and the prior quarter.

Liquidity and Capital Resources

At March 31, 2014, the net working capital deficiency was $2,903,420 as compared to a deficiency of $5,994,870 at December 31, 2013, a decrease of $3,246,581 or 54%.

For the three months ended March 31, 2014, cash decreased by $10,304. This is reflective of funds used by the net loss of $1,097,033 and the $99,764 increase in inventory. Funds were provided by the sale of common stock of $110,000, debt proceeds of $240,000, higher accounts payable and accrued expenses of $126,577 and an increase of $102,674 in related party payables and accrued expenses. Non-cash charges for the three months were from the issuance of common stock, warrants and options for services of $54,572, amortization of prepaid expenses paid with common stock of $177,435, derivative expenses related to debt valuation of $55,158 and $297,929 of derivative debt discount amortization (charged as interest expense) 

23

During the last quarter of 2013, the Company’s Chairman and co-founder loaned approximately 37.4 million shares of Company common stock, valued at approximately $1.5 million, as reserve treasury shares pursuant to various debt covenants. These shares have been presented as value of shares loaned by stockholder in the accompanying consolidated balance sheets. These shares were returned to the Chairman in March 2014 and the liability was reversed.

For the three months ended March 31, 2013, cash increased by $27,631. This is reflective of funds provided by the sale of common stock of $100,000, reduced inventory of $119,631, higher accounts payable and accrued expenses of $82,022, increased payables and accrued expenses to related parties of $98,958, and debt proceeds of $ 70,000. Funds were used by the net loss of $668,886 and debt repayment of $10,000. Non-cash charges for the three months were from the issuance of common stock, warrants and options for services of $181,785.

Cash Flow Management Plan

As shown in the accompanying financial statements, the Company incurred substantial operating losses for the three months ended March 31, 2014 of approximately $.6 million. Cumulative operating losses since inception are approximately $20.6 million. The Company has a working capital deficit at March 31, 2014 of approximately $2.9 million. There is no guarantee whether the Company will be able to support its operations on a long term basis. This raises doubt about the Company’s ability to continue as a going concern. If additional funds cannot be raised or otherwise generated, the Company may be forced to reduce staff, minimize its research and development activities, or in a worst case scenario, shut-down operations.

Should plans to commence manufacturing of the WHE continue on schedule, we expect to generate approximately $1 million in engine sales over the following 12 months, or otherwise generate such amount from our investment in WHE. We also forecast another $450,000 in revenue from the development contracts currently in place. If we are successful in these endeavors, the resulting gross revenue could support approximately 70% of our operations this year. Additionally, we have potential contracts in various stages of negotiation that could generate another $2 million in revenue over the following 12 to 24 months. We cannot guarantee that we will be successful in closing these new contracts, but we are cautiously optimistic that these or other opportunities will materialize in the coming quarters.

We have submitted approximately $1 million in grant (or grant-type) applications and proposals with the State of Ohio and other government offices, which could provide non-dilutive funding for our development specifically through the WHE Subsidiary. With respect to our Ohio operations, our WHE Subsidiary was initially established to provide a corporate entity for our waste-to-power business, as well as another funding option for investors who prefer to invest in non-public companies. We are actively seeking strategic partners and investors for this company, and believe that this strategy could be successful over the coming year in raising additional capital for both Cyclone and the subsidiary entity.

With respect to our Land Speed Record vehicle, we believe that this asset can also generate funding for Cyclone, especially when we start testing and running of the car. We have had interest from corporations and private investors in sponsoring or outright purchasing the vehicle, either of which could provide substantial funding to the Company. The possibility of breaking the land speed record for steam power vehicles this year could also attract new strategic partners to provide development support and private investors to provide capital funding.

We expect cash flow needs to be approximately $140,000 per month during the next few months of 2014, including operations in Florida and Ohio. We believe that monthly expenses will increase to approximately $200,000 by the end of 2014, as we put the WHE into limited scale production. At such time, however, we expect to have deposits and initial sales revenue from early adaptor customers for this engine. We are preparing for the likelihood that cash expenses of approximately $2.4 million in 2014 may exceed revenue for the year. This would require additional sale of securities or debt, which we are currently pursing. No assurance can be given that we will be able to obtain this capital on acceptable terms, if at all. In such an event, this may have a materially adverse effect on the Company’s business, operating results and financial condition. Management is optimistic, however, that revenue can be generated and funding can be secured to maintain operations and development at the current pace.

24

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation as required by paragraph (b) of Rule 13a-15 and 15d-15 of the Exchange Act, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of March 31, 2014. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting.

As a growing small business, the Company continuously devotes resources to the improvement of our internal control over financial reporting. For instance, with respect to the handling of complex derivative accounting issues, the Company will consult with third party professionals with expertise in these matters as necessary to insure appropriate accounting treatment for such transactions.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is not engaged in any legal proceeding or threatened proceeding at this time, and management has no knowledge of any actions or inactions taken by the Company or its management that could reasonably lead to a legal proceeding.

ITEM 1A.  RISK FACTORS

Not required.

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

In the first quarter of 2014 the Company issued:

● 5,500,000 shares of common stock for an aggregate purchase price of $110,000 to two accredited investors; plus an additional 2,719,298 to two other accredited investors in connection with a price protection provision in their Securities Purchase Agreement signed in 2013. All of these securities were offered pursuant to an exemption under Section 4(2) of the Securities Act and Regulation D thereunder. The purchasers completed an Accredited Investor Questionnaire and Subscription Agreement, and received a copy of the Company’s Annual Report in connection with the issuance.

● An aggregate of 2,200,000 shares of common stock to consultants and service providers of the Company, with an aggregate value of $88,500. The securities were offered pursuant to an exemption under Section 4(2) of the Securities Act of 1933, amended. The shareholders were either accredited or sophisticated investors who received copies of the Company’s annual report, which contained audited financial statements as well as unaudited financials for the applicable quarterly period. Each party had an opportunity to ask questions of the Company and understood the risks of investment in the Company.

● 1,000,000 shares of common stock in connection with the conversion of a warrant by an investment fund (the conversion for which occurred in 2013); and an additional 4,722,365 shares in connection with two other warrant conversions related to investment made by two funds in 2013. No cash was received by the company on any of these conversions. These securities were offered pursuant to an exemption under Section 4(2) of the Securities Act and Regulation D thereunder. The purchaser was an accredited investor, and received a copy of the Company’s Annual Report in connection with the issuance.

25

● An aggregate of 21,567,656 shares of common stock to six investment funds in connection with the conversion of $285,228 in principal and 983,859 shares with the corresponding interest of $12,616 on several separate convertible promissory notes; plus an additional 357,142 shares to another fund as an advance payment on interest under a convertible promissory note. These securities were offered pursuant to an exemption under Section 4(2) of the Securities Act and Regulation D thereunder. The debt holders had previously completed Accredited Investor Questionnaires and Subscription Agreements, and received a copy of the Company’s Annual Report in connection with the issuance.

● An aggregate of 20,313,416 shares of common stock to officers and directors of the Company, in conversion of accrued and unpaid salaries, valued at $668,312. The securities were offered pursuant to an exemption under Section 4(2) of the Securities Act of 1933, amended. The shareholders were either accredited or sophisticated investors who received copies of the Company’s annual report, which contained audited financial statements as well as unaudited financial statements for the applicable quarterly period. Each party had an opportunity to ask questions of the Company and understood the risks of investment in the Company.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

None.

ITEM 6.    EXHIBITS

Exhibit Number	Description
31.1	Certification of the Principal Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation
101.DEF*	XBRL Taxonomy Extension Definition
101.LAB*	XBRL Taxonomy Extension Labels
101.PRE*	XBRL Taxonomy Extension Presentation

26

The certification attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Cyclone Power Technologies, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

* Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

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

	Cyclone Power Technologies, Inc.
May 20, 2014	/s/ Harry Schoell
	Harry Schoell
	Chairman and Chief Technical Officer
	(Principal executive officer)
May 20, 2014	/s/ Bruce Schames.
	Bruce Schames
	Chief Financial Officer
	(Principal financial and accounting officer)

27

EX-31

EXH 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Harry Schoell, certify that:

1. I have reviewed this report on Form 10-Q of Cyclone Power Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2014	/s/ Harry Schoell
	Harry Schoell,
	Chairman and Chief Technical Officer
	(Principal Executive Officer)

EX-31

EXH 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce Schames, certify that:

1. I have reviewed this report on Form 10-Q of Cyclone Power Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2014	/s/ Bruce Schames
	Bruce Schames,
	Chief Financial Officer
	(Principal Accounting Officer)

EX-32

EXH 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cyclone Power Technologies Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harry Schoell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(a) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 20, 2014	/s/Harry Schoell
	Harry Schoell
	Chairman and Chief Technical Officer(Principal Executive Officer)

EX-32

EXH 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Cyclone Power Technologies, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bruce Schames, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(a) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 20, 2014	/s/ Bruce Schames
	Bruce Schames
	Chief Financial Officer and Secretary (Principal Accounting Officer)

XML

Note 4 - Property and Equipment (Details) - Property and Equipment (USD $)	Mar. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property and Equipment	$ 502,562	$ 502,562
Accumulated depreciation	(133,621)	(125,799)
Net property and equipment	368,941	376,763
Display Equipment for Trade Shows [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment	9,648	9,648
Leasehold Improvements and Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment	94,572	94,572
Equipment and Computers [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment	$ 398,342	$ 398,342

XML

Note 11 - Income Taxes (Details) - Reconciliation of Effective Income Tax Rates and Statutory Federal Tax Rates (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Reconciliation of Effective Income Tax Rates and Statutory Federal Tax Rates [Abstract]
Tax benefit at U.S. statutory rate	34.00%	34.00%
Tax benefit at U.S. statutory rate	$ 229,566	$ 204,047
State taxes, net of federal benefit	4.00%	4.00%
State taxes, net of federal benefit	27,008	24,005
Change in valuation allowance	(38.00%)	(38.00%)
Change in valuation allowance	(256,574)	(228,052)
	0.00%	0.00%
	$ 0	$ 0

XML

Note 9 - Stock Transactions (Details) (USD $)	3 Months Ended			1 Months Ended		3 Months Ended
	Mar. 31, 2014	Sep. 30, 2013	Mar. 31, 2013	Jan. 31, 2014 Conversion into Stock [Member] Deferred Salary [Member] Executive Officer [Member]	Jan. 31, 2014 Deferred Salary Forgiven [Member] Deferred Salary [Member] Executive Officer [Member]	Mar. 31, 2014 Employee Stock Option [Member]	Mar. 31, 2014 Payment of Liabilities [Member]	Mar. 31, 2014 Issuance for Services [Member]	Mar. 31, 2014 Issuance for Cashless Warrant Exercise [Member]	Mar. 31, 2014 Issuance for Debt Interest [Member]	Mar. 31, 2014 Issuance for Cash [Member]	Mar. 31, 2014 Prior Year Common Stock Sale Price Guarantees [Member]	Mar. 31, 2014 Payment of Debt Interest [Member]	Mar. 31, 2014 Repayment of Debt [Member]
Note 9 - Stock Transactions (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross							1,750,000	1,450,000		357,142	5,500,000	2,719,298
Stock Issued During Period, Value, Restricted Stock Award, Gross							$ 75,000	$ 43,500		$ 10,714	$ 110,000
Stock Issued During Period, Shares, New Issues									4,722,365				983,859	21,567,656
Allocated Share-based Compensation Expense						9,244
Stock Issued During Period, Value, New Issues													12,616	285,228
Number of Shares of Common Stock Donated by Officers and Senior Management		20,313,416
Increase (Decrease) in Due to Related Parties	$ 102,674		$ 98,958	$ (668,312)	$ (956,762)

XML

Note 11 - Income Taxes (Details) - Deferred Tax Assets and Liabilities (USD $)	Mar. 31, 2014	Dec. 31, 2013
Deferred Tax Assets and Liabilities [Abstract]
Net Operating Loss Carry-forward	$ 8,229,658	$ 7,946,959
Deferred Tax Liabilities – Accrued Officers’ Salaries	(234,413)	(440,135)
Net Deferred Tax Assets	7,995,245	7,506,824
Valuation Allowance	(7,995,245)	(7,506,824)
Total Net Deferred Tax Assets	$ 0	$ 0

XML

Note 7 - Related Party Transactions (Details) (USD $)	3 Months Ended			1 Months Ended
	Mar. 31, 2014 sqft	Mar. 31, 2013	Jul. 31, 2011 sqft	Jan. 31, 2014 Deferred Salary [Member] Executive Managment [Member]	Mar. 31, 2014 Deferred Salary [Member] Accounts Payable and Accrued Liabilities [Member]	Dec. 31, 2013 Deferred Salary [Member] Accounts Payable and Accrued Liabilities [Member]
Note 7 - Related Party Transactions (Details) [Line Items]
Area of Real Estate Property (in Square Feet)	6,000		2,000
Occupancy, Net	$ 15,741	$ 15,741
Due to Related Parties					377,045	1,910,073
Increase (Decrease) in Due to Related Parties	102,674	98,958		(668,312)
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in Shares)				20,313,416
Proceeds from Contributed Capital				$ 956,762

XML

Note 1 - Organizational and Significant Accounting Policies (Details) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Note 1 - Organizational and Significant Accounting Policies (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	19.6	18.6
Research and Development Expense	$ 124,180	$ 250,550
WHE Subsidiary [Member]
Note 1 - Organizational and Significant Accounting Policies (Details) [Line Items]
Equity Method Investment, Ownership Percentage	73.72%
Cyclone Performance [Member]
Note 1 - Organizational and Significant Accounting Policies (Details) [Line Items]
Equity Method Investment, Ownership Percentage	95.00%
Minimum [Member]
Note 1 - Organizational and Significant Accounting Policies (Details) [Line Items]
Open Tax Year	2010
Maximum [Member]
Note 1 - Organizational and Significant Accounting Policies (Details) [Line Items]
Open Tax Year	2013

XML

Note 12 - Lease Obligations (Details) - Future Lease Payments (USD $)	Mar. 31, 2014
Future Lease Payments [Abstract]
2014	$ 4,592
2015	5,801
2016	6,620
2017	6,079
2018	2,050
	$ 25,142

XML

Note 1 - Organizational and Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Instrument	Beginning of Period		Change		End of Period		Level		Valuation Methodology
Derivative liabilities	$	484,796	$	134,472	$	619,268		3	Binomial Lattice Model

Estimated Useful Lives of Property and Equipment [Table Text Block]

	Years
Display equipment for trade shows			3
Leasehold improvements and furniture and fixtures		10	-	15
Shop equipment			7
Computers			3

XML

Note 10 - Stock Options and Warrants (Details) - Common Stock Options (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Common Stock Options [Abstract]
Balance, December 31,	9,740,000	9,740,000
Outstanding weighted-avg. exercise price (in Dollars per share)	$ 0.139	$ 0.129
Outstanding weighted-avg. remaining contractual life	6 years 73 days	6 years 6 months
Options issued	0	600,000
Options issued (in Dollars per share)	$ 0
Options issued	0 years
Options exercised	0
Options exercised (in Dollars per share)	$ 0
Options exercised	0
Options cancelled	0
Options cancelled (in Dollars per share)	$ 0
Options cancelled	0 years

XML

Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (USD $)	Mar. 31, 2014		Dec. 31, 2013
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	$ 585,282		$ 729,905
Total non-current non related party notes –net of discount (accrued interest is included in accrued expenses)	64,869		30,997
Total current non related party notes –net of discount	650,151		760,902
12% Senior Secured Note Payable [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	237,033		361,767
6 - 12% Uncollateralized Demand Notes Payable [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	40,000		127,500
12% Convertible Notes Payable [Member] | July 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	20,666	[1]		[1]
12% Convertible Notes Payable [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	99,864	[2]	139,769	[2]
10% Convertible Note Payable [Member] | Maturing December 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	77,763	[3]	74,344	[3]
10% Convertible Note Payable [Member] | Feb 2015 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	20,354	[4]		[4]
10% Convertible Note Payable [Member] | Maturing August 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	36,988	[5]	15,634	[5]
10% Convertible Note Payable [Member] | Maturing December 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	52,614	[6]	10,891	[6]
6% Convertible Notes Payable [Member] | Dec 2016 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable [Line Items]
Current non-related party notes	$ 64,869	[7]	$ 30,997	[7]

[1] Notes issued net of discount from derivative liabilities of $86,258 ($54,334 unamortized at March 31, 2014). At March 31, 2014, the Company held 2,661,539 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

[2] Notes issued net of 10% original discount of $31,110 ($6,104 unamortized at March 31, 2014) along with additional discount from derivative liabilities of $130,684 ($11,376 unamortized at March 31, 2014). At March 31, 2014, the Company held 7,962,267 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

[3] Note issued net of original discount of $26,250 ($5,981 unamortized at March 31, 2014) along with stock purchase warrants whose value at issuance of $34,680 has been carried as a discount against the note ($10,276 unamortized at March 31, 2014) and an additional discount from derivative liabilities of $89,370 ($11,065 unamortized at March 31, 2014). At March 31, 2014, the Company held 821,831 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

[4] Notes issued net of discount from derivative liabilities of $80,104 ($54,646 unamortized at March 31, 2014). At March 31, 2014, the Company held 18,232,759 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

[5] Notes issued net of discount from derivative liabilities ($59,010 unamortized at March 31, 2014). At March 31, 2014 the Company held 18,582,894 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

[6] Notes issued net of discount from derivative liabilities ($57,386 unamortized at March 31, 2014). At March 31, 2014, the Company held 19,700,581 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

[7] Notes issued net of 10% original discount ($20,095 unamortized at March 31, 2014) along with additional discount from derivative liabilities ($135,036 unamortized at March 31, 2014). At March 31, 2014, the Company held 36,000,000 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

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Note 3 - Inventory, Net (Details) - Inventory Components (USD $)	Mar. 31, 2014	Dec. 31, 2013
Inventory [Line Items]
Inventory	$ 689,184	$ 589,420
Inventory valuation reserve	(100,000)	(100,000)
Inventory, net	589,184	489,420
Engine Material and Parts [Member]
Inventory [Line Items]
Inventory	332,314	316,513
Labor [Member]
Inventory [Line Items]
Inventory	307,280	237,311
Applied Overhead [Member]
Inventory [Line Items]
Inventory	$ 49,590	$ 35,596

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Note 10 - Stock Options and Warrants (Details) - Outstanding Vested Warrant Activity (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Common Stock Warrants
Balance, December 31,	9,898,616	16,097,798
Warrants outstanding weighted-avg. exercise price	$ 0.113	$ 0.057
Warrants weighted-avg. remaining contractual life	2 years 58 days	2 years 310 days
Warrants exercised-cashless	(9,037,230)
Warrants exercised-cashless	$ (0.017)
Warrants issued	2,838,048
Warrants issued	$ 0.114
Warrants issued	4 years 58 days
Re-Priced	1,190,625
Re-Priced	$ 0.114
Canceled Old [Member]
Common Stock Warrants
Cancelled – old	(1,190,625)
Cancelled – old	$ (0.020)

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Note 16 - Derivative Financial Instruments (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Note 16 - Derivative Financial Instruments (Details) [Line Items]
Convertible Debt	$ 460,800	$ 743,250
Derivative Liability	371,025	456,681
Amortization of Debt Discount (Premium)	297,929
Adjustments to Additional Paid in Capital, Equity Component of Convertible Debt	291,710
Loss on Derivative Instruments, Pretax	55,158
Debt [Member]
Note 16 - Derivative Financial Instruments (Details) [Line Items]
Derivative Liability	569,100
Warrant [Member]
Note 16 - Derivative Financial Instruments (Details) [Line Items]
Derivative Liability	$ 50,170
Minimum [Member]
Note 16 - Derivative Financial Instruments (Details) [Line Items]
Debt Instrument, Convertible, Threshold Percentage of Stock Price Trigger	30.00%
Maximum [Member]
Note 16 - Derivative Financial Instruments (Details) [Line Items]
Debt Instrument, Convertible, Threshold Percentage of Stock Price Trigger	44.00%

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Note 8 - Preferred Stock (Details)	Mar. 31, 2014	Dec. 31, 2013
Note 8 - Preferred Stock (Details) [Line Items]
Voting Control Percentage	51.00%
Series B Preferred Stock [Member]
Note 8 - Preferred Stock (Details) [Line Items]
Preferred Stock, Shares Outstanding	1,000	1,000

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Note 3 - Inventory, Net

3 Months Ended

Mar. 31, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

NOTE 3 – INVENTORY, NET

Inventory, net consists of:

	March 31, 2014			December 31, 2013
Engine material and parts	$	332,314		$	316,513
Labor		307,280			237,311
Applied overhead		49,590			35,596
Total		689,184			589,420
Inventory valuation reserve		(100,000	)		(100,000	)
Inventory, net	$	589,184		$	489,420

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Note 16 - Derivative Financial Instruments (Details) - Estimated Fair Values of Liabilities for Derivative Instruments	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Note 16 - Derivative Financial Instruments (Details) - Estimated Fair Values of Liabilities for Derivative Instruments [Line Items]
Dividend Rate	0.00%	0.00%
Minimum [Member]
Note 16 - Derivative Financial Instruments (Details) - Estimated Fair Values of Liabilities for Derivative Instruments [Line Items]
Volatility	121.00%	87.00%
Risk Free Rate	0.10%	0.10%
Expected Term (years)	1 year	0 years
Maximum [Member]
Note 16 - Derivative Financial Instruments (Details) - Estimated Fair Values of Liabilities for Derivative Instruments [Line Items]
Volatility	139.00%	173.00%
Risk Free Rate	0.89%	1.75%
Expected Term (years)	3 years	3 years

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Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) (USD $)	Mar. 31, 2014	Dec. 31, 2013
12% Senior Secured Note Payable [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	12.00%	12.00%
Redemption premium, percent	6.00%	6.00%
6 - 12% Uncollateralized Demand Notes Payable [Member] | Minimum [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	6.00%	6.00%
6 - 12% Uncollateralized Demand Notes Payable [Member] | Maximum [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	12.00%	12.00%
12% Convertible Notes Payable [Member] | July 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	12.00%	12.00%
Original issue discount (in Dollars)	$ 54,334
12% Convertible Notes Payable [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	12.00%	12.00%
Original issue discount (in Dollars)	17,480	48,851
10% Convertible Note Payable [Member] | Maturing December 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	10.00%	10.00%
Original issue discount (in Dollars)	27,322	115,585
10% Convertible Note Payable [Member] | Feb 2015 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	10.00%	10.00%
Original issue discount (in Dollars)	54,646
10% Convertible Note Payable [Member] | Maturing August 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	10.00%	10.00%
Original issue discount (in Dollars)	59,010	58,279
10% Convertible Note Payable [Member] | Maturing December 2014 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	10.00%	10.00%
Original issue discount (in Dollars)	57,386	55,109
6% Convertible Notes Payable [Member] | Dec 2016 [Member]
Note 6 - Notes and Other Loans Payable (Details) - Non-Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Interest rate	6.00%	6.00%
Original issue discount (in Dollars)	$ 155,131	$ 89,003

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Note 10 - Stock Options and Warrants (Tables)

3 Months Ended

Mar. 31, 2014

Stock Options And Warrants [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number Outstanding		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (Years)
Balance, December 31, 2013		9,740,000	$	0.129		6.5
Options issued		-		-		-
Options exercised		-		-		-
Options cancelled		-		-		-
Balance, March 31, 2014		9,740,000	$	0.139		6.2

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended March 31, 2014			Year Ended December 31, 2013
Risk free interest rate	.67%	-	1.32%	.51%	-	1.41%
Expected volatility	43%	-	63%	34%	-	107%
Expected term in years	2	-	4	1	-	5
Expected dividend yield		0%			0%
Average value per options and warrants	$ .01	-	$ .02	$ .01	-	$.06

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Number Outstanding			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (Years)
Common Stock Warrants
Balance, December 31, 2013		16,097,798			0.057			2.85
Warrants exercised-cashless		(9,037,230	)		(0.017	)
Warrants issued		2,838,048			0.114			4.16
Warrants re-priced:
Cancelled – old		(1,190,625	)		(0.020	)
Re-Priced		1,190,625			0.114
Balance, March 31, 2014		9,898,616		$	0.113			2.16

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Note 6 - Notes and Other Loans Payable (Tables)

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

	March 31, 2014		December 31, 2013
12% senior secured note payable, plus 6% redemption premium, collateralized by all assets of the Company, monthly payments commencing December 2013 through September 2014	$	237,033	$	361,767
6-12% uncollateralized demand notes payable		40,000		127,500
12% convertible notes payable, net of discount of $17,480 and $48,851 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from November 2013 through July 2014 (A)		99,864		139,769
10% convertible note payable, net of discount of $27,322 and $115,585 at March 31, 2014 and December 31, 2014, respectively, monthly payments commencing in December 2014 through July 2014 (B)		77,763		74,344
10% convertible notes payable, net of discount of $59,010 and $58,279 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from August 2014 through January 2015 (C)		36,988		15,634
10% convertible notes payable, net of discount of $57,386 and $55,109 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from December 2014 through January 2015 (D)		52,614		10,891
6% convertible notes payable, net of discount of $155,131 and $89,003 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from December 2016 through February 2017 ( E )		64,869		30,997
10% convertible note payable, net of discount of $54,646 at March 31, 2014, maturing in February 2015 ( F )		20,354		-
12% convertible notes payable, net of discount of $54,334 at March 31, 2014, maturing at various dates from July 2014 through March 2015 ( G )		20,666		-
Total current non related party notes –net of discount		650,151		760,902
Less-Current Portion		585,282		729,905
Total non-current non related party notes –net of discount (accrued interest is included in accrued expenses)	$	64,869	$	30,997

Related Party Notes and Other Loans Payable [Table Text Block]

	March 31, 2014		December 31, 2013
6% demand loans per Operations Agreement with Schoell Marine Inc., a company owned by Cyclone’s Chairman and controlling shareholder (A)	$	424,285	$	424,285
6% non-collateralized loans from officer and shareholder, payable on demand. The original principal balances were $157,101.		81,251		85,364
12% non-collateralized loans from officer and shareholder, payable on demand		11,000		11,000
Accrued interest		266,210		254,471
Total current related party notes, inclusive of accrued interest	$	782,746	$	775,120

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Note 12 - Lease Obligations (Details) (USD $)	1 Months Ended				3 Months Ended		12 Months Ended
	Dec. 31, 2013	Jul. 31, 2013	Sep. 30, 2012	Jul. 31, 2011 sqft	Mar. 31, 2014 sqft	Mar. 31, 2013	Dec. 31, 2009
Leases, Capital [Abstract]
Property and Equipment, Amount Acquired Via Capitalized Lease Obligations	$ 8,408		$ 21,310				$ 27,401
Capitalized Lease Obligations, Average Interest Rate	15.50%		12.50%				18.40%
Repayments of Long-term Capital Lease Obligations					1,569	1,075
Capital Lease Obligations					25,142
Lease Term		1 year		1 year
Area of Real Estate Property (in Square Feet)				2,000	6,000
Contracted Annual Lease Rate		17,304
Lease Rate (in Dollars per Square Foot)		8.65
Operating Leases, Rent Expense					$ 4,326	$ 4,452

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Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable (USD $)	Mar. 31, 2014		Dec. 31, 2013
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable [Line Items]
Current due to related parties	$ 782,746		$ 775,120
6% Demand Loans per Operations Agreement with Schoell Marine Inc. [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable [Line Items]
Current due to related parties	424,285	[1]	424,285	[1]
6% Demand Non-Collateralized Loan from Officer and Shareholder [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable [Line Items]
Current due to related parties	81,251		85,364
12% Non-Collateralized Loan from Officer and Shareholder [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable [Line Items]
Current due to related parties	11,000		11,000
Accrued Interest [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable [Line Items]
Current due to related parties	$ 266,210		$ 254,471

[1] This note arose from services and salaries incurred by Schoell Marine on behalf of the Company. Schoell Marine also owns the building that is leased to the Company. The Schoell Marine note bears an interest rate of 6% and repayments occur as cash flow of the Company permits. The note was secured by a UCC-1 filing on the Company's patents and patent applications, which expired and has not been renewed. For the three months ended March 31, 2014 and for the year ended December 31, 2013, $0 and $500 of principal was paid on the note balance.

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Note 11 - Income Taxes (Tables)

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three months ended March 31, 2014		Amount			Three months ended March 31, 2013		Amount
Tax benefit at U.S. statutory rate		34%	$	229,566			34%	$	204,047
State taxes, net of federal benefit		4		27,008			4		24,005
Change in valuation allowance		(38)		(256,574	)		(38)		(228,052	)
		-%	$	-			-%	$	-

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Deferred Tax Assets	March 31, 2014			December 31, 2013
Net Operating Loss Carry-forward	$	8,229,658		$	7,946,959
Deferred Tax Liabilities – Accrued Officers’ Salaries		(234,413	)		(440,135	)
Net Deferred Tax Assets		7,995,245			7,506,824
Valuation Allowance		(7,995,245	)		(7,506,824	)
Total Net Deferred Tax Assets	$	-		$	-

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Note 12 - Lease Obligations (Tables)

3 Months Ended

Mar. 31, 2014

Leases, Capital [Abstract]

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

2014	$	4,592
2015		5,801
2016		6,620
2017		6,079
2018		2,050
	$	25,142

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Note 2 - Going Concern

3 Months Ended

Mar. 31, 2014

Going Concern [Abstract]

Going Concern [Text Block]

NOTE 2 - GOING CONCERN

As shown in the accompanying condensed consolidated financial statements, the Company incurred substantial operating and other losses of approximately $1.1 million for the three months ended March 31, 2014, and $3.8 million for the year ended December 31, 2013. The cumulative deficit since inception is approximately $53.5 million, which is comprised of $22.1 million attributable to actual operating losses (which were paid in cash, stock for services and other equity instruments) and other expenses, and $31.4 million in non-cash derivative liability accounting which was a result of the conversion of the Company’s Series A Convertible Preferred Stock in 2011, the retirement of a common stock purchase warrant in 2012, and the change in fair value of derivatives associated with notes payable for the year ended December 31, 2013 and the three months ended March 31, 2014. The Company has a working capital deficit at March 31, 2014 of approximately $2.9 million. There is no guarantee whether the Company will be able to generate enough revenue and/or raise capital to support its operations. This raises substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management’s plans which include implementation of its business model to generate revenue from development contracts, licenses and product sales, and continuing to raise funds through debt or equity raises. The Company will also likely continue to rely upon related-party debt or equity financing.

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company is currently raising working capital to fund its operations via private placements of common stock and debt, advance contract payments (deferred revenue), and advances from and deferred payments to related parties.  

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Note 16 - Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure Text Block [Abstract]

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

	Three Months Ended March 31, 2014			Year Ended Dec. 31, 2013
Volatility	121%	-	139%	87%	-	173%
Risk Free Rate	0.1%	-	0.89%	0.1%	-	1.75%
Expected Term (years)	1	-	3	0	-	3
Dividend Rate		0%			0%

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Note 5 - Patents, Trademarks and Copyrights (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Disclosure Text Block [Abstract]
Finite-Lived Intangible Assets, Net	$ 365,306		$ 374,768
Patents, Trademarks and Copyrights Capitalized	0		6,920
Number of Patents	33
Number of Trademarks	3
Finite-Lived Intangible Asset, Useful Life	15 years
Amortization of Intangible Assets	$ 9,462	$ 9,970

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Note 11 - Income Taxes (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2014
Note 11 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	$ 17.9
Minimum [Member]
Note 11 - Income Taxes (Details) [Line Items]
Percentage that Carry Forwards Will Expire Unused	50.00%

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Mar. 31, 2014	Dec. 31, 2013
CURRENT ASSETS
Cash	$ 7,059	$ 17,363
Inventory, net	589,184	489,420
Other current assets	42,662	55,020
Total current assets	638,905	561,803
PROPERTY AND EQUIPMENT
Furniture, fixtures, and equipment	502,562	502,562
Accumulated depreciation	(133,621)	(125,799)
Net property and equipment	368,941	376,763
OTHER ASSETS
Patents, trademarks and copyrights	571,178	571,178
Accumulated amortization	(205,872)	(196,410)
Net patents, trademarks and copyrights	365,306	374,768
Other assets	2,762	2,762
Total other assets	368,068	377,530
Total Assets	1,375,914	1,316,096
CURRENT LIABILITIES
Accounts payable and accrued expenses	689,472	682,692
Accounts payable and accrued expenses-related parties	443,196	1,965,596
Notes and other loans payable-current portion	585,282	729,905
Derivative liabilities	619,268	484,796
Notes and other loans payable-related parties	782,746	775,120
Value of shares loaned by stockholder		1,496,217
Capitalized lease obligations-current portion	5,920	6,161
Deferred revenue and license deposits	416,441	416,186
Total current liabilities	3,542,325	6,556,673
NON CURRENT LIABILITIES
Capitalized lease obligations-net of current portion	19,222	20,550
Notes and other loans payable-net of current portion	64,869	30,997
Total non-current liabilities	84,091	51,547
Total Liabilities	3,626,416	6,608,220
Commitments and contingencies
STOCKHOLDERS' DEFICIT
Common stock, $.0001 par value, 900,000,000 shares authorized, 332,043,678 and 272,679,942 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively.	33,204	27,268
Additional paid-in capital	51,103,199	48,644,132
Treasury stock, 3,000,000 and 40,405,420 shares, at March 31, 2014 and December 31, 2013 respectively, at cost.	(210,000)	(1,706,217)
Prepaid expenses with common stock	(418,545)	(595,980)
Stock subscription receivable	(6,000)	(6,000)
Accumulated deficit (inclusive of non-cash derivative losses of $31,386,386 and other losses of $22,154,169 at March 31, 2014 and non-cash derivative losses of $31,033,299 and other losses of $21,440,971 at December 31, 2013)	(53,540,555)	(52,474,270)
Total stockholders' deficit-Cyclone Power Technologies Inc.	(3,038,697)	(6,111,067)
Non controlling interest in consolidated subsidiaries	788,195	818,943
Total Stockholders' Deficit	(2,250,502)	(5,292,124)
Total Liabilities and Stockholders' Deficit	1,375,914	1,316,096
Series B Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Series B preferred stock, $.0001 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively.	0	0
Attributable to Non-Cash Derivative Liability Accounting [Member]
STOCKHOLDERS' DEFICIT
Accumulated deficit (inclusive of non-cash derivative losses of $31,386,386 and other losses of $22,154,169 at March 31, 2014 and non-cash derivative losses of $31,033,299 and other losses of $21,440,971 at December 31, 2013)	(31,386,386)	(31,033,299)
Attributable to Operating Losses [Member]
STOCKHOLDERS' DEFICIT
Accumulated deficit (inclusive of non-cash derivative losses of $31,386,386 and other losses of $22,154,169 at March 31, 2014 and non-cash derivative losses of $31,033,299 and other losses of $21,440,971 at December 31, 2013)	$ (22,154,169)	$ (21,440,971)

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Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable (Parentheticals) (USD $)	Mar. 31, 2014	Dec. 31, 2013
6% Demand Loans per Operations Agreement with Schoell Marine Inc. [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Intеrеst ratе, rеlatеd party loan	6.00%	6.00%
6% Demand Non-Collateralized Loan from Officer and Shareholder [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Intеrеst ratе, rеlatеd party loan	6.00%	6.00%
Original loan amount, rеlatеd party loan (in Dollars)	$ 157,101	$ 157,101
12% Non-Collateralized Loan from Officer and Shareholder [Member]
Note 6 - Notes and Other Loans Payable (Details) - Related Party Notes and Other Loans Payable (Parentheticals) [Line Items]
Intеrеst ratе, rеlatеd party loan	12.00%	12.00%

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parentheticals)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Issuance for Deferred Officers' Salaries [Member]
Common stock issued, shares	20,313,416
Issuance for Accrued Expenses [Member]
Common stock issued, shares	1,750,000	150,000
Issuance for Debt Repayment [Member]
Common stock issued, shares	21,567,656
Issuance for Debt Interest [Member]
Common stock issued, shares	983,859
Repayment of Related Party Payables [Member]
Common stock issued, shares		675,000
Repayment of Debt [Member]
Common stock issued, shares		1,466,965
Payment of Debt Interest [Member]
Common stock issued, shares		133,608

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Note 14 - Consolidated Subsidiaries (Details) (USD $) Share data in Millions, unless otherwise specified	1 Months Ended	0 Months Ended	1 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended
	Jul. 31, 2013 WHE Subsidiary [Member] Precision CNC LLC [Member]	Jul. 13, 2013 WHE Subsidiary [Member] Board of Directors Chairman [Member]	Jul. 31, 2013 WHE Subsidiary [Member] Board of Directors Chairman [Member]	Mar. 31, 2014 WHE Subsidiary [Member]	Dec. 31, 2013 WHE Subsidiary [Member]	Dec. 31, 2012 An Unrelated Investor [Member] Cyclone Performance [Member]	Sep. 30, 2012 Corporate Officers of the Company [Member] Cyclone Performance [Member]	Mar. 31, 2014 Cyclone Performance [Member]	Dec. 31, 2012 Cyclone Performance [Member]
Note 14 - Consolidated Subsidiaries (Details) [Line Items]
Percentage of Ownership in a Consolidated Susidiary									100.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	5.00%		5.00%			5.00%	5.00%
Proceeds from Issuance or Sale of Equity						$ 30,000
Cumulative Unallocated Losses to Non-Controlling Interest of Subsidiary								953
Number of Shares of Common Stock Exchanged for Equity in Subsidiary		5
Debt Instrument, Collateral Amount		425,000
Period of Consulting Services Without Additional Compensation by an Executive			12 months
Vesting Period of Interest in Subsidiary Acquired by Noncontrolling Owners	2 years
Noncontrolling Interest, Additional Ownership Percentage Could Be Acquired by Noncontrolling Owners	5.00%
Equity Method Investment, Summarized Financial Information, Net Income (Loss)				(120,391)	(157,266)
Equity Method Investment Summarized Financial Information, Equity				$ 70,914

XML

Note 1 - Organizational and Significant Accounting Policies (Details) - Estimated Useful Lives of Property and Equipment	3 Months Ended
	Mar. 31, 2014
Display Equipment for Trade Shows [Member]
Years
Estimated useful lives	3 years
Leasehold Improvements and Furniture and Fixtures [Member] | Minimum [Member]
Years
Estimated useful lives	10 years
Leasehold Improvements and Furniture and Fixtures [Member] | Maximum [Member]
Years
Estimated useful lives	15 years
Shop Equipment [Member]
Years
Estimated useful lives	7 years
Computer Equipment [Member]
Years
Estimated useful lives	3 years

XML

Note 16 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2014

Disclosure Text Block [Abstract]

Derivatives and Fair Value [Text Block]

NOTE 16 – DERIVATIVE FINANCIAL INSTRUMENTS

Pursuant to additional financing, in the three months ended March 31, 2014 and in the year ended December 31, 2013 the Company entered into convertible note agreements in the aggregate face amount of $ 460,800 and $743,250, respectively. The conversion prices into common stock ranged from a discount of 30% to 44% of the lowest closing prices in the 10 to 20 trading days prior to the conversion. Under provisions of ASC Topic 815-40, this conversion feature triggered derivative accounting treatment because the convertible note was convertible into an indeterminable number of shares of common stock. The fair value of the embedded conversion option was required to be presented as a derivative liability and adjusted to fair value at each reporting date, with changes in fair value reported in the condensed consolidated statements of operation.

The Company recorded derivative liabilities of $371,025 and $456,681 with a discount offset against the underlying loan, during the three months ended March 31, 2014 and for the year ended December 31, 2013, respectively.

In the three months ended March 31, 2014, the Company recorded a $297,929 non-cash charge to interest expense (reflective of debt discount amortization), an increase of $291,710 in additional paid in capital pursuant to conversion of convertible notes to common stock, and $55,158 of derivative loss related to adjusting the derivative liability to fair value. At March 31, 2014, the derivative related fair value of debt and warrants were $569,100 and $50,170, respectively.

The Company calculates the estimated fair values of the liabilities for derivative instruments at each quarter-end using the BSM option pricing model and Monte Carlo simulations. Volatility, expected term and risk free interest rates used to estimate the fair value of derivative liabilities are indicated in the table below. The volatility was based on historical volatility, the expected term is equal to the remaining term of the debt and the risk free rate is based upon rates for treasury securities with the same term.

	Three Months Ended March 31, 2014			Year Ended Dec. 31, 2013
Volatility	121%	-	139%	87%	-	173%
Risk Free Rate	0.1%	-	0.89%	0.1%	-	1.75%
Expected Term (years)	1	-	3	0	-	3
Dividend Rate		0%			0%

XML

Note 2 - Going Concern (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Note 2 - Going Concern (Details) [Line Items]
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	$ (1,100,000)	$ (3,800,000)
Retained Earnings (Accumulated Deficit)	(53,540,555)	(52,474,270)
Working Capital Deficit	2,900,000
Attributable to Operating Losses [Member]
Note 2 - Going Concern (Details) [Line Items]
Retained Earnings (Accumulated Deficit)	(22,154,169)	(21,440,971)
Attributable to Non-Cash Derivative Liability Accounting [Member]
Note 2 - Going Concern (Details) [Line Items]
Retained Earnings (Accumulated Deficit)	$ (31,386,386)	$ (31,033,299)

XML

Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of the Company, its 73.72% owned WHE Subsidiary and its 95% owned subsidiary Cyclone Performance. All material inter-company transactions and balances have been eliminated in the condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

The accounting principles utilized by the Company require the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the periods. On an on-going basis, the Company reviews and evaluates its estimates and assumptions, including, but not limited to, those that relate to the realizable value of inventory, identifiable intangible assets and other long-lived assets, contracts, income taxes, derivative liabilities, and contingencies. Actual results could differ from these estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

C. CASH

Cash includes cash on hand and cash in banks. The Company maintains cash balances at several financial institutions.

Earnings Per Share, Policy [Policy Text Block]

D. COMPUTATION OF LOSS PER SHARE

Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is not presented as the conversion of the preferred stock and exercise of outstanding stock options and warrants would have an anti-dilutive effect. As of March 31, 2014 and 2013, total anti-dilutive shares not inclusive of the potential conversion of several convertible promissory notes amounted to approximately 19.6 million and 18.6 million shares, respectively.

Income Tax, Policy [Policy Text Block]

E. INCOME TAXES

Income taxes are accounted for under the asset and liability method as stipulated by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management’s view it is more likely than not (50%) that such deferred tax will not be utilized.

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of March 31, 2014, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. Interest related to the unrecognized tax benefits is recognized in the consolidated financial statements as a component of income taxes. The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2010 through 2013.

Revenue Recognition, Policy [Policy Text Block]

F. REVENUE RECOGNITION

The Company’s revenue recognition policies are in compliance with ASC 605, “Revenue Recognition – Multiple Element Arrangements”, and Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition. Revenue is recognized at the date of shipment of engines and systems, engine prototypes, engine designs or other deliverables to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Revenue from contracts for multiple deliverables and milestone method recognition are evaluated and allocated as appropriate. The Company has determined that the milestone method of revenue recognition (ASC 605-28) is appropriate for two of the Company’s contracts which specifically enumerate approved work effort milestones required for remuneration – the Company’s contract with the U.S. Army / TARDEC and the Amended and Restated Technology Application License Agreement with Phoenix Power Group LLC. All revenue and costs of goods sold are included in the accompanying condensed consolidated statements of operations. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue on the consolidated balance sheets. The Company does not allow its customers to return prototype products. Current contracts do not require the Company to provide any warranty assistance after the “deliverable” has been accepted.

It is the Company’s intention when it has royalty revenue from its contracts to record royalty revenue periodically when earned, as reported in sales statements from customers. The Company does not have any royalty revenue to date.

Standard Product Warranty, Policy [Policy Text Block]

G. WARRANTY PROVISIONS

Current contracts do not require warranty assistance subsequent to acceptance of the “deliverable R&D prototype” by the customer. For products that the Company will sell in the future, warranty costs are anticipated to be borne by the manufacturing vendor.

Inventory, Policy [Policy Text Block]

H. INVENTORY

Inventory is recorded at the lower of cost or market. Costs include material, labor and allocated overhead to manufacture a completed engine. These costs are periodically evaluated to determine if they have a net realizable value. If the net realizable value is lower than the carrying amount, a reserve is provided.

Fair Value of Financial Instruments, Policy [Policy Text Block]

I. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820, “Fair Value Measurements and Disclosures” requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. The carrying amounts reported in the balance sheet for cash, accounts payable and accrued expenses, and loans payable approximate their fair market value based on the short-term maturity of these instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels. The three levels of the fair value hierarchy are defined as follows:

Level 1	—	Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2	—	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date.
Level 3	—	Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting  date.

The summary of fair values and changing values of financial instruments for the three months ended March 31, 2014 is as follows:

Instrument	Beginning of Period		Change		End of Period		Level		Valuation Methodology
Derivative liabilities	$	484,796	$	134,472	$	619,268		3	Binomial Lattice Model

Please refer to Note 16 for disclosure and assumptions used to calculate the fair value of the derivative liabilities.

Research and Development Expense, Policy [Policy Text Block]

J. RESEARCH AND DEVELOPMENT

Research and development activities for product development are expensed as incurred. Costs for the three months ended March 31, 2014 and 2013 were $124,180 and $250,550, respectively.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

K. STOCK BASED COMPENSATION

The Company applies the fair value method of ASC 718, “Share Based Payment”, in accounting for its stock based compensation. This standard states that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock based compensation at the market price for the Company’s common stock as of the date in which the obligation for payment of services is incurred.

Stockholders' Equity, Policy [Policy Text Block]

L. COMMON STOCK OPTIONS AND PURCHASE WARRANTS

The Company accounts for common stock options and purchase warrants at fair value in accordance with ASC 815-40, “Derivatives and Hedging”. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants consistent with ASC 718, “Share Based Payment”. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.

The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of the equity instruments exchanged, in accordance with ASC 505-50, “Equity Based payments to Non-employees”.

Debt, Policy [Policy Text Block]

M. ORIGINAL ISSUE DEBT DISCOUNT

The original issue discount (OID) related to notes payable is amortized by the effective interest method over the repayment period of the notes. The unamortized OID is represented as a reduction of the amount of the notes payable.

Property, Plant and Equipment, Policy [Policy Text Block]

N. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed on the straight-line method, based on the estimated useful lives of the assets as follows:

	Years
Display equipment for trade shows			3
Leasehold improvements and furniture and fixtures		10	-	15
Shop equipment			7
Computers			3

Expenditures for maintenance and repairs are charged to operations as incurred.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

O. IMPAIRMENT OF LONG LIVED ASSETS

The Company continually evaluates the carrying value of intangible assets and other long lived assets to determine whether there are any impairment losses. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified. To date, the Company has not recognized any impairment charges.

New Accounting Pronouncements, Policy [Policy Text Block]

P. RECENT ACCOUNTING PRONOUNCEMENTS

In 2014, the FASB issued an Accounting Standard Update (“ASU”) 2014-05 “Service Concession Arrangements (Topic 853), ASU 2014-04 Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40), ASU 2014-03 Derivatives and Hedging (Topic 815) Accounting for Certain Receive-Variable, Pay Fixed Interest Rate Swaps-Simplified Hedge Account Approach, and ASU 2014-02 Intangibles-Goodwill and Other (Topic 350). Management believes that these standards will not materially impact our financial statements.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Q. CONCENTRATION OF RISK

The Company does not have any off-balance sheet concentrations of credit risk. The Company expects cash and accounts receivable to be the two assets most likely to subject the Company to concentrations of credit risk. The Company’s policy is to maintain its cash with high credit quality financial institutions to limit its risk of loss exposure.

As of March 31, 2014, the Company maintained its cash in two quality financial institutions. The Company has not experienced any losses in its bank accounts through March 31, 2014. The Company purchases raw material and components from multiple sources, none of which may be considered a principal or material supplier. If necessary, the Company could replace these suppliers with minimal effect on its business operations.

Derivatives, Policy [Policy Text Block]

R. DERIVATIVE FINANCIAL INSTRUMENTS

Accounting and reporting standards for derivative instruments and for hedging activities were codified by ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”). It requires that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income (loss) depending on the purpose of the derivatives and whether they qualify and have been designated for hedge accounting treatment. The Company has derivative liabilities pursuant to convertible debt and common stock warrants, and has recognized net expenses on the condensed consolidated statements of operations. The Company does not have any derivative instruments for which it has applied hedge accounting treatment.

XML

Note 1 - Organizational and Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

NOTE 1 – ORGANIZATIONAL AND SIGNIFICANT ACCOUNTING POLICIES

A. ORGANIZATION AND OPERATIONS

Cyclone Power Technologies, Inc. (the “Company”) is the successor entity to the business of Cyclone Technologies LLLP (the “LLLP”), a limited liability limited partnership formed in Florida in June 2004. The LLLP was the original developer and intellectual property holder of the Cyclone engine technology. The Company is primarily a research and development engineering company whose main purpose is to develop, commercialize, market and license its Cyclone engine technology.

In 2010, the Company established a subsidiary, Cyclone-WHE LLC (the “WHE Subsidiary”), to market the waste heat recovery systems for all Cyclone engine models. As of March 31, 2014 the Company had a 73.72% controlling interest in the WHE Subsidiary, which in May 2014, re-domiciled to Delaware as a corporation named WHE Generation Corp. In 2012, the Company established Cyclone Performance LLC (“Cyclone Performance”) f/k/a Cyclone-TeamSteam USA, LLC. Its purpose is to build, test and run a vehicle utilizing the Company’s engine. As of March 31, 2014, the company had a 95% controlling interest in Cyclone Performance.

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of the Company, its 73.72% owned WHE Subsidiary and its 95% owned subsidiary Cyclone Performance. All material inter-company transactions and balances have been eliminated in the condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

The accounting principles utilized by the Company require the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the periods. On an on-going basis, the Company reviews and evaluates its estimates and assumptions, including, but not limited to, those that relate to the realizable value of inventory, identifiable intangible assets and other long-lived assets, contracts, income taxes, derivative liabilities, and contingencies. Actual results could differ from these estimates.

C. CASH

Cash includes cash on hand and cash in banks. The Company maintains cash balances at several financial institutions.

D. COMPUTATION OF LOSS PER SHARE

Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is not presented as the conversion of the preferred stock and exercise of outstanding stock options and warrants would have an anti-dilutive effect. As of March 31, 2014 and 2013, total anti-dilutive shares not inclusive of the potential conversion of several convertible promissory notes amounted to approximately 19.6 million and 18.6 million shares, respectively.

E. INCOME TAXES

Income taxes are accounted for under the asset and liability method as stipulated by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management’s view it is more likely than not (50%) that such deferred tax will not be utilized.

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of March 31, 2014, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. Interest related to the unrecognized tax benefits is recognized in the consolidated financial statements as a component of income taxes. The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2010 through 2013.

F. REVENUE RECOGNITION

The Company’s revenue recognition policies are in compliance with ASC 605, “Revenue Recognition – Multiple Element Arrangements”, and Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition. Revenue is recognized at the date of shipment of engines and systems, engine prototypes, engine designs or other deliverables to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Revenue from contracts for multiple deliverables and milestone method recognition are evaluated and allocated as appropriate. The Company has determined that the milestone method of revenue recognition (ASC 605-28) is appropriate for two of the Company’s contracts which specifically enumerate approved work effort milestones required for remuneration – the Company’s contract with the U.S. Army / TARDEC and the Amended and Restated Technology Application License Agreement with Phoenix Power Group LLC. All revenue and costs of goods sold are included in the accompanying condensed consolidated statements of operations. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as deferred revenue on the consolidated balance sheets. The Company does not allow its customers to return prototype products. Current contracts do not require the Company to provide any warranty assistance after the “deliverable” has been accepted.

It is the Company’s intention when it has royalty revenue from its contracts to record royalty revenue periodically when earned, as reported in sales statements from customers. The Company does not have any royalty revenue to date.

G. WARRANTY PROVISIONS

Current contracts do not require warranty assistance subsequent to acceptance of the “deliverable R&D prototype” by the customer. For products that the Company will sell in the future, warranty costs are anticipated to be borne by the manufacturing vendor.

H. INVENTORY

Inventory is recorded at the lower of cost or market. Costs include material, labor and allocated overhead to manufacture a completed engine. These costs are periodically evaluated to determine if they have a net realizable value. If the net realizable value is lower than the carrying amount, a reserve is provided.

I. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820, “Fair Value Measurements and Disclosures” requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. The carrying amounts reported in the balance sheet for cash, accounts payable and accrued expenses, and loans payable approximate their fair market value based on the short-term maturity of these instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels. The three levels of the fair value hierarchy are defined as follows:

Level 1	—	Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2	—	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date.
Level 3	—	Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting  date.

The summary of fair values and changing values of financial instruments for the three months ended March 31, 2014 is as follows:

Instrument	Beginning of Period		Change		End of Period		Level		Valuation Methodology
Derivative liabilities	$	484,796	$	134,472	$	619,268		3	Binomial Lattice Model

Please refer to Note 16 for disclosure and assumptions used to calculate the fair value of the derivative liabilities.

J. RESEARCH AND DEVELOPMENT

Research and development activities for product development are expensed as incurred. Costs for the three months ended March 31, 2014 and 2013 were $124,180 and $250,550, respectively.

K. STOCK BASED COMPENSATION

The Company applies the fair value method of ASC 718, “Share Based Payment”, in accounting for its stock based compensation. This standard states that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock based compensation at the market price for the Company’s common stock as of the date in which the obligation for payment of services is incurred.

L. COMMON STOCK OPTIONS AND PURCHASE WARRANTS

The Company accounts for common stock options and purchase warrants at fair value in accordance with ASC 815-40, “Derivatives and Hedging”. The Black-Scholes option pricing valuation method is used to determine fair value of these warrants consistent with ASC 718, “Share Based Payment”. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.

The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of the equity instruments exchanged, in accordance with ASC 505-50, “Equity Based payments to Non-employees”.

M. ORIGINAL ISSUE DEBT DISCOUNT

The original issue discount (OID) related to notes payable is amortized by the effective interest method over the repayment period of the notes. The unamortized OID is represented as a reduction of the amount of the notes payable.

N. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed on the straight-line method, based on the estimated useful lives of the assets as follows:

	Years
Display equipment for trade shows			3
Leasehold improvements and furniture and fixtures		10	-	15
Shop equipment			7
Computers			3

Expenditures for maintenance and repairs are charged to operations as incurred.

O. IMPAIRMENT OF LONG LIVED ASSETS

The Company continually evaluates the carrying value of intangible assets and other long lived assets to determine whether there are any impairment losses. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified. To date, the Company has not recognized any impairment charges.

P. RECENT ACCOUNTING PRONOUNCEMENTS

In 2014, the FASB issued an Accounting Standard Update (“ASU”) 2014-05 “Service Concession Arrangements (Topic 853), ASU 2014-04 Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40), ASU 2014-03 Derivatives and Hedging (Topic 815) Accounting for Certain Receive-Variable, Pay Fixed Interest Rate Swaps-Simplified Hedge Account Approach, and ASU 2014-02 Intangibles-Goodwill and Other (Topic 350). Management believes that these standards will not materially impact our financial statements. 

Q. CONCENTRATION OF RISK

The Company does not have any off-balance sheet concentrations of credit risk. The Company expects cash and accounts receivable to be the two assets most likely to subject the Company to concentrations of credit risk. The Company’s policy is to maintain its cash with high credit quality financial institutions to limit its risk of loss exposure.

As of March 31, 2014, the Company maintained its cash in two quality financial institutions. The Company has not experienced any losses in its bank accounts through March 31, 2014. The Company purchases raw material and components from multiple sources, none of which may be considered a principal or material supplier. If necessary, the Company could replace these suppliers with minimal effect on its business operations.

R. DERIVATIVE FINANCIAL INSTRUMENTS

Accounting and reporting standards for derivative instruments and for hedging activities were codified by ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”). It requires that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income (loss) depending on the purpose of the derivatives and whether they qualify and have been designated for hedge accounting treatment. The Company has derivative liabilities pursuant to convertible debt and common stock warrants, and has recognized net expenses on the condensed consolidated statements of operations. The Company does not have any derivative instruments for which it has applied hedge accounting treatment.

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Common Stock, Par Value (in Dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	900,000,000	900,000,000
Common Stock, Shares Issued	332,043,678	272,679,942
Common Stock, Shares Oustanding	332,043,678	272,679,942
Treasury Stock, Shares	3,000,000	40,405,420
Non-cash Derivative Losses and Other Losses (in Dollars)	$ (53,540,555)	$ (52,474,270)
Series B Preferred Stock [Member]
Preferred Stock, Par Value (in Dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	1,000	1,000
Preferred Stock, Shares Issued	1,000	1,000
Preferred Stock, Shares Outstanding	1,000	1,000
Attributable to Non-Cash Derivative Liability Accounting [Member]
Non-cash Derivative Losses and Other Losses (in Dollars)	(31,386,386)	(31,033,299)
Attributable to Operating Losses [Member]
Non-cash Derivative Losses and Other Losses (in Dollars)	$ (22,154,169)	$ (21,440,971)

XML

Note 11 - Income Taxes

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11 – INCOME TAXES

A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the three months ended March 31, 2014 and 2013 are as follows:

	Three months ended March 31, 2014		Amount			Three months ended March 31, 2013		Amount
Tax benefit at U.S. statutory rate		34%	$	229,566			34%	$	204,047
State taxes, net of federal benefit		4		27,008			4		24,005
Change in valuation allowance		(38)		(256,574	)		(38)		(228,052	)
		-%	$	-			-%	$	-

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for years ended March 31, 2014 and December 31, 2013 consisted of the following:

Deferred Tax Assets	March 31, 2014			December 31, 2013
Net Operating Loss Carry-forward	$	8,229,658		$	7,946,959
Deferred Tax Liabilities – Accrued Officers’ Salaries		(234,413	)		(440,135	)
Net Deferred Tax Assets		7,995,245			7,506,824
Valuation Allowance		(7,995,245	)		(7,506,824	)
Total Net Deferred Tax Assets	$	-		$	-

As of March 31, 2014, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $17.9 million that may be offset against future taxable income through 2029. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax asset has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount.

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Document And Entity Information	3 Months Ended
	Mar. 31, 2014	May 15, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	CYCLONE POWER TECHNOLOGIES INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		344,215,227
Amendment Flag	false
Entity Central Index Key	0001442711
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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Note 12 - Lease Obligations

3 Months Ended

Mar. 31, 2014

Leases, Capital [Abstract]

Capital Leases in Financial Statements of Lessee Disclosure [Text Block]

NOTE 12 –LEASE OBLIGATIONS

A. CAPITALIZED LEASE OBLIGATIONS

In 2009 the Company acquired $27,401 of property and equipment via capitalized lease obligations at an average interest rate of 18.4%. In September 2012, the Company acquired $21,310 of equipment via capitalized lease obligations at an interest rate of 12.5%. In December 2013, the Company acquired $8,408 of equipment via capitalized lease obligations at an interest rate of 15.5%. Total lease payments made for the three months ended March 31, 2014 were $1,569. The balance of capitalized lease obligations payable at March 31, 2014 was $25,142. Future lease payments are:

2014	$	4,592
2015		5,801
2016		6,620
2017		6,079
2018		2,050
	$	25,142

B. LEASE ON ADDITIONAL FACILITIES

In July 2011, the Company signed a one-year lease (with extensions) for an additional 2,000 square feet. Effective July 2013, the Company renewed this lease for one year, at an annual rate of $ 17,304 or $8.65/s.f, terminating in June 2014. The lease expense for the three months ended March 31, 2014 and 2013 was $4,326 and $4,452, respectively.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
REVENUES		$ 251,441
COST OF GOODS SOLD	27,000	165,476
Gross margin	(27,000)	85,965
OPERATING EXPENSES
Advertising and promotion	7,605	7,196
General and administrative	437,739	420,729
Research and development	124,180	250,550
Total operating expenses	569,524	678,475
Operating loss	(596,524)	(592,510)
OTHER EXPENSE
Derivative expense -notes payable	55,158
Interest expense	445,351	76,376
Total other expense	500,509	76,376
Loss before income taxes	(1,097,033)	(668,886)
Income taxes	0	0
Net loss	$ (1,097,033)	$ (668,886)
Net loss per common share, basic and diluted (in Dollars per share)	$ 0.00	$ 0.00
Weighted average number of common shares outstanding, basic and diluted (in Shares)	261,282,936	239,988,736

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Note 6 - Notes and Other Loans Payable

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 6 – NOTES AND OTHER LOANS PAYABLE

A.   NON-RELATED PARTIES

A summary of non-related party notes and other loans payable is as follows:

	March 31, 2014		December 31, 2013
12% senior secured note payable, plus 6% redemption premium, collateralized by all assets of the Company, monthly payments commencing December 2013 through September 2014	$	237,033	$	361,767
6-12% uncollateralized demand notes payable		40,000		127,500
12% convertible notes payable, net of discount of $17,480 and $48,851 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from November 2013 through July 2014 (A)		99,864		139,769
10% convertible note payable, net of discount of $27,322 and $115,585 at March 31, 2014 and December 31, 2014, respectively, monthly payments commencing in December 2014 through July 2014 (B)		77,763		74,344
10% convertible notes payable, net of discount of $59,010 and $58,279 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from August 2014 through January 2015 (C)		36,988		15,634
10% convertible notes payable, net of discount of $57,386 and $55,109 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from December 2014 through January 2015 (D)		52,614		10,891
6% convertible notes payable, net of discount of $155,131 and $89,003 at March 31, 2014 and December 31, 2013, respectively, maturing at various dates from December 2016 through February 2017 ( E )		64,869		30,997
10% convertible note payable, net of discount of $54,646 at March 31, 2014, maturing in February 2015 ( F )		20,354		-
12% convertible notes payable, net of discount of $54,334 at March 31, 2014, maturing at various dates from July 2014 through March 2015 ( G )		20,666		-
Total current non related party notes –net of discount		650,151		760,902
Less-Current Portion		585,282		729,905
Total non-current non related party notes –net of discount (accrued interest is included in accrued expenses)	$	64,869	$	30,997

(A)	Notes issued net of 10% original discount of $31,110 ($6,104 unamortized at March 31, 2014) along with additional discount from derivative liabilities of $130,684 ($11,376 unamortized at March 31, 2014). At March 31, 2014, the Company held 7,962,267 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(B)	Note issued net of original discount of $26,250 ($5,981 unamortized at March 31, 2014) along with stock purchase warrants whose value at issuance of $34,680 has been carried as a discount against the note ($10,276 unamortized at March 31, 2014) and an additional discount from derivative liabilities of $89,370 ($11,065 unamortized at March 31, 2014). At March 31, 2014, the Company held 821,831 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(C)	Notes issued net of discount from derivative liabilities ($59,010 unamortized at March 31, 2014). At March 31, 2014 the Company held 18,582,894 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(D)	Notes issued net of discount from derivative liabilities ($57,386 unamortized at March 31, 2014). At March 31, 2014, the Company held 19,700,581 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(E)	Notes issued net of 10% original discount ($20,095 unamortized at March 31, 2014) along with additional discount from derivative liabilities ($135,036 unamortized at March 31, 2014). At March 31, 2014, the Company held 36,000,000 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(F)	Notes issued net of discount from derivative liabilities of $80,104 ($54,646 unamortized at March 31, 2014). At March 31, 2014, the Company held 18,232,759 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.
(G)	Notes issued net of discount from derivative liabilities of $86,258 ($54,334 unamortized at March 31, 2014). At March 31, 2014, the Company held 2,661,539 shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants.

B.   RELATED PARTIES

A summary of related party notes and other loans payable is as follows: 

	March 31, 2014		December 31, 2013
6% demand loans per Operations Agreement with Schoell Marine Inc., a company owned by Cyclone’s Chairman and controlling shareholder (A)	$	424,285	$	424,285
6% non-collateralized loans from officer and shareholder, payable on demand. The original principal balances were $157,101.		81,251		85,364
12% non-collateralized loans from officer and shareholder, payable on demand		11,000		11,000
Accrued interest		266,210		254,471
Total current related party notes, inclusive of accrued interest	$	782,746	$	775,120

(A) This note arose from services and salaries incurred by Schoell Marine on behalf of the Company. Schoell Marine also owns the building that is leased to the Company. The Schoell Marine note bears an interest rate of 6% and repayments occur as cash flow of the Company permits. The note was secured by a UCC-1 filing on the Company’s patents and patent applications, which expired and has not been renewed.  For the three months ended March 31, 2014 and for the year ended December 31, 2013, $0 and $500 of principal was paid on the note balance.

During the last quarter of 2013, the Company’s Chairman and co-founder loaned approximately 37.4 million shares of Company common stock, valued at approximately $1.5 million, as reserve treasury shares pursuant to various debt covenants. These shares have been presented as value of shares loaned by stockholder in the accompanying consolidated balance sheets. These shares were returned to the Chairman in March 2014.

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Note 5 - Patents, Trademarks and Copyrights

3 Months Ended

Mar. 31, 2014

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

NOTE 5 – PATENTS, TRADEMARKS AND COPYRIGHTS

Patents, trademarks and copyrights consist of legal fees paid to file and perfect these claims. The net balances as of March 31, 2014 and December 31, 2013 were $365,306 and $374,768, respectively. For the three months ended March 31, 2014 and for the year ended December 31, 2013, the Company capitalized $0 and $ 6,920, respectively, of expenditures related to these assets. As of March 31, 2014, the Company had 33 patents issued on its technology both in the U.S. and internationally, and three trademarks in the U.S.

Patents, trademarks and copyrights are amortized over the life of the intellectual property which is 15 years. Amortization expense for the three months ended March 31, 2014 and 2013 was $9,462 and $9,970, respectively.

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Note 17 - Subsequent Events

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 17 – SUBSEQUENT EVENTS

In the second quarter of 2014, the Company engaged in the following transactions:

● Four different investment funds provided aggregate net proceeds of $141,750 in the form of convertible notes to the Company, all convertible at share prices between 30% and 45% discount to market. These notes bear interest at rates between 8% and 12%, and have terms of 12 months.

● One fund purchased approximately $52,000 in uncollateralized demand notes from three separate note holders of the Company. In exchange for these demand notes, the Company issued to these holders new 12 month promissory notes with interest rates between 10% and 12%, convertible into common stock at prices between 42% and 45% discount to market. A separate fund purchased $100,000 in principal and interest from a separate note holder of the Company, pursuant to their $400,000 Senior Secured Debenture. In exchange for this debt assignment, the Company issued to this holder two separate $50,000 12 month 10% interest promissory notes, convertible into common stock at approximately a 42% discount to market.

● The Company issued approximately 29 million shares of common stock in conversion of approximately $200,000 in convertible debt.

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Note 13 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company has employment agreements with Harry Schoell, Chairman and CTO (previously, CEO), at $150,000 per year; Frankie Fruge, COO, at $120,000 per year; and Christopher Nelson, President and General Counsel, at $130,000 per year (collectively, the “Executives”). These agreements provide for a term of three (3) years from their Effective Date (July 2007 in the case of Schoell and Fruge, and August 2011 in the case of Nelson), with automatically renewing successive one year periods starting on the end of the second anniversary of the Effective Date. If the Executive is terminated “without cause” or pursuant to a “change in control” of the Company, as both defined in the respective agreements, the Executive shall be entitled to (i) any unpaid Base Salary accrued through the effective date of termination, (ii) the Executive’s Base Salary at the rate prevailing at such termination through 12 months from the date of termination or the end of his Term then in effect, whichever is longer, and (iii) any performance bonus that would otherwise be payable to the Executive were he/she not terminated, during the 12 months following his or her termination.

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Note 9 - Stock Transactions

3 Months Ended

Mar. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 9 – STOCK TRANSACTIONS

During the three months ended March 31, 2014, the Company:

● Issued 1,750,000 shares of restricted common stock valued at $75,000 for payment of liabilities, 1,450,000 shares of restricted common stock valued at $43,500 for services, and 4,722,365 shares of common stock pursuant to a cashless warrants conversion.

● Amortized (based on vesting) $9,244 of common stock options for employee services and issued 357,142 shares of restricted common stock valued at $10,714 in advance payment of debt interest.

● Sold 5,500,000 shares of restricted common stock for $110,000 and issued 2,719,298 shares of restricted common stock pursuant to a price guarantee for common stock sold in the prior year.

● Issued 983,859 shares of common stock valued at $12,616 as payment of interest on debt, and 21,567,656 shares of common stock in repayment of $285,228 of debt.

● Issued 20,313,416 shares of restricted common stock to four of the Company’s executive management as a conversion of $668,312 in deferred salary, and forgave $956,762 of deferred salary as contributed capital.

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Note 15 - Receivables, Deferred Revenue and Backlog (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Note 15 - Receivables, Deferred Revenue and Backlog (Details) [Line Items]
Total Backlog for Prototype Engines (in Dollars)	$ 440,000
Minimum [Member]
Note 15 - Receivables, Deferred Revenue and Backlog (Details) [Line Items]
Backlog Orders, Payment Period	6 months
Maximum [Member]
Note 15 - Receivables, Deferred Revenue and Backlog (Details) [Line Items]
Backlog Orders, Payment Period	9 months

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Note 7 - Related Party Transactions

3 Months Ended

Mar. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 7 – RELATED PARTY TRANSACTIONS

A. LEASE ON FACILITIES

The Company leases a 6,000 square foot warehouse and office facility located at 601 NE 26th Court in Pompano Beach, Florida. The lease, which is part of the Company’s Operations Agreement with Schoell Marine, provides for the Company to pay rent equal to the monthly mortgage payment on the building plus property taxes, utilities and sales tax due on rent. Occupancy costs for the three months ended March 31, 2014 and 2013 were $15,741 in both periods. The Operations Agreement runs year-to-year, however, the lease portion of this agreement is month-to-month, but can only be cancelled on 180 day notice by Schoell Marine.

B. DEFERRED COMPENSATION

Included in accounts payable and accrued expenses - related parties as of March 31, 2014 and December 31, 2013 are $377,045 and $1,910,073, respectively, of accrued and deferred officers’ salaries compensation which may be paid as funds are available. These are non-interest bearing and due on demand. In January 2014, four of the Company’s executive management converted $668,312 in deferred salary into 20,313,416 shares of restricted common stock and forgave $956,762 in deferred salary as contributed capital. This forgiveness of deferred salary was recorded to additional paid in capital in the accompanying condensed consolidated balance sheet at March 31, 2014.

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Note 8 - Preferred Stock

3 Months Ended

Mar. 31, 2014

Disclosure Text Block Supplement [Abstract]

Preferred Stock [Text Block]

NOTE 8 – PREFERRED STOCK

The Series B Preferred Stock is majority voting stock and is held by the two co-founders of the Company. Ownership of the Series B Preferred Stock shares assures the holders thereof a 51% voting control over the common stock of the Company. The 1,000 Series B Preferred Stock shares are convertible on a one-for-one basis with the common stock in the instance the Company is merged, sold or otherwise dissolved.

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Note 10 - Stock Options and Warrants

3 Months Ended

Mar. 31, 2014

Stock Options And Warrants [Abstract]

Stock Options And Warrants [Text Block]

NOTE 10 – STOCK OPTIONS AND WARRANTS

A. COMMON STOCK OPTIONS

In recognition of and compensation for services rendered by officers and employees for the year ended December 31, 2013, the Company issued 600,000 common stock options, valued at $37,000 (pursuant to the Black Scholes valuation model) that are exercisable into shares of common stock at exercise prices of $0.08 and with a maturity life of 10 years. For the three months ended March 31, 2014, the amortization of stock options was $9,244 and the unamortized balance was $0. 

To improve the common stock position of the Company and help limit dilution, effective with the second quarter of 2013, the four corporate officers unanimously agreed to waive their rights to 2.4 million common stock options (600,000 per quarter collectively) contractually due them through March 2014. In lieu of issuing additional options to these officers and all other employees through the end of the year, the Company re-priced 4,185,000 million vested options held by the officers and employees that were priced at a minimum of $0.15 per share ($0.20 average) to $0.10 per share. The result was a non-cash charge of approximately $52,000. The remaining contractual life of the options was not changed.  

A summary of the common stock options for the period from December 31, 2013 through March 31, 2014 follows:

	Number Outstanding		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (Years)
Balance, December 31, 2013		9,740,000	$	0.129		6.5
Options issued		-		-		-
Options exercised		-		-		-
Options cancelled		-		-		-
Balance, March 31, 2014		9,740,000	$	0.139		6.2

All options were vested and exercisable as of March 31, 2014.

The fair value of new stock options, re-priced stock options, new purchase warrants and re-priced purchase warrants granted using the Black-Scholes option pricing model was calculated using the following assumptions:

	Three Months Ended March 31, 2014			Year Ended December 31, 2013
Risk free interest rate	.67%	-	1.32%	.51%	-	1.41%
Expected volatility	43%	-	63%	34%	-	107%
Expected term in years	2	-	4	1	-	5
Expected dividend yield		0%			0%
Average value per options and warrants	$ .01	-	$ .02	$ .01	-	$.06

Expected volatility is based on historical volatility of the Company’s common stock price. Short Term U.S. Treasury rates were utilized at the risk free interest rate. The expected term of the options and warrants was calculated using the alternative simplified method newly codified as ASC 718 “Accounting for Stock Based Compensation,” which defined the expected life as the average of the contractual term of the options and warrants and the weighted average vesting period for all issuances.

B. COMMON STOCK WARRANTS

During the three months ended March 31, 2014, the Company:

● Re-priced 625,000 common stock warrants to $.0114 (valued at $10,821) pursuant to a price guarantee from the 2013 sale of common stock to unaffiliated third parties.

● Issued 2,838,051 common stock warrants and re-priced 565,625 common stock warrants, both to $.0114 (valued at $43,280) pursuant to a price guarantee from a 2013 debt agreement. No other terms of these common stock warrants were revised.

● Issued 4,722,365 aggregate shares of common stock in a cashless exercise of 9,037,230 warrants.

A summary of outstanding vested warrant activity for the period from December 31, 2012 to March 31, 2014 follows:

	Number Outstanding			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (Years)
Common Stock Warrants
Balance, December 31, 2013		16,097,798			0.057			2.85
Warrants exercised-cashless		(9,037,230	)		(0.017	)
Warrants issued		2,838,048			0.114			4.16
Warrants re-priced:
Cancelled – old		(1,190,625	)		(0.020	)
Re-Priced		1,190,625			0.114
Balance, March 31, 2014		9,898,616		$	0.113			2.16

All warrants were vested and exercisable as of the date issued.

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Note 17 - Subsequent Events (Details) (Subsequent Event [Member], USD $) Share data in Millions, unless otherwise specified	1 Months Ended
	May 15, 2014
Common Stock [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, Conversion of Convertible Securities (in Shares)	29
Stock Issued During Period, Value, Conversion of Convertible Securities (in Dollars)	$ 200,000
Four Investment Funds [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Convertible Notes Payable (in Dollars)	141,750
One Investment Fund [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Notes Payable (in Dollars)	52,000
A Fund [Member] | Promissory Notes [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Convertible Notes Payable (in Dollars)	50,000
A Fund [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price Discount to Average Market Price	42.00%
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Debt Instrument, Term	12 months
Notes Payable (in Dollars)	100,000
Senior Notes (in Dollars)	$ 400,000
Promissory Notes [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Term	12 months
Minimum [Member] | Four Investment Funds [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price Discount to Average Market Price	30.00%
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Debt Instrument, Term	12 months
Minimum [Member] | Promissory Notes [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price Discount to Average Market Price	42.00%
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Maximum [Member] | Four Investment Funds [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price Discount to Average Market Price	45.00%
Debt Instrument, Interest Rate, Stated Percentage	12.00%
Maximum [Member] | Promissory Notes [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price Discount to Average Market Price	45.00%
Debt Instrument, Interest Rate, Stated Percentage	12.00%

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Note 1 - Organizational and Significant Accounting Policies (Details) - Summary of Fair Values and Changing Values of Financial Instruments (USD $)	3 Months Ended
	Mar. 31, 2014
Summary of Fair Values and Changing Values of Financial Instruments [Abstract]
Derivative liabilities	$ 484,796
Derivative liabilities	134,472
Derivative liabilities	$ 619,268

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Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Stock Options and Purchase Warrants [Member]
Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Minimum [Member] | Stock Options and Purchase Warrants [Member]
Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions [Line Items]
Risk free interest rate	0.67%	0.51%
Expected volatility	43.00%	34.00%
Expected term in years	2 years	1 year
Average value per options and warrants (in Dollars per share)	$ 0.01	$ 0.01
Minimum [Member]
Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions [Line Items]
Risk free interest rate	0.10%	0.10%
Expected volatility	121.00%	87.00%
Expected term in years	1 year	0 years
Maximum [Member] | Stock Options and Purchase Warrants [Member]
Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions [Line Items]
Risk free interest rate	1.32%	1.41%
Expected volatility	63.00%	107.00%
Expected term in years	4 years	5 years
Average value per options and warrants (in Dollars per share)	$ 0.02	$ 0.06
Maximum [Member]
Note 10 - Stock Options and Warrants (Details) - Fair Value of Stock Options and Purchase Warrants Assumptions [Line Items]
Risk free interest rate	0.89%	1.75%
Expected volatility	139.00%	173.00%
Expected term in years	3 years	3 years

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Note 15 - Receivables, Deferred Revenue and Backlog

3 Months Ended

Mar. 31, 2014

Deferred Revenue Disclosure [Abstract]

Deferred Revenue Disclosure [Text Block]

NOTE 15 – RECEIVABLES, DEFERRED REVENUE AND BACKLOG

As of March 31, 2014, total backlog for prototype engines to be delivered in the following twelve months was approximately $440,000 from the Company’s Combilift license and U.S. Army contract. The Company expects the balance from these projects to be paid over the following six to nine months of the respective contracts’ development periods, as engines are delivered to the customers. 

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Note 3 - Inventory, Net (Tables)

3 Months Ended

Mar. 31, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	March 31, 2014			December 31, 2013
Engine material and parts	$	332,314		$	316,513
Labor		307,280			237,311
Applied overhead		49,590			35,596
Total		689,184			589,420
Inventory valuation reserve		(100,000	)		(100,000	)
Inventory, net	$	589,184		$	489,420

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Note 10 - Stock Options and Warrants (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Jun. 30, 2013	Dec. 31, 2013
Note 10 - Stock Options and Warrants (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0		600,000
Stock Options Issued During Period, Value (in Dollars)			$ 37,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)			$ 0.08
Stock Options Issued During Period, Maturity Life			10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	0
Stock Options Repriced During Period, Number		4,185,000,000,000
Stock Options Repriced During Period, Exercise Price (in Dollars per share)		$ 0.10
Other Noncash Expense (in Dollars)		52,000
Warrants Repriced During Period, Number	1,190,625
Warrants Issued During Period, Number	2,838,048
	4,722,365
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised	9,037,230
Scenario, Forecast [Member] | Per Quarter [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period		600,000
Scenario, Forecast [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period		2,400,000
Previous Exercise Price [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Stock Options Repriced During Period, Exercise Price (in Dollars per share)		$ 0.15
Employee Stock Option [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	9,244
Share-based Compensation (in Dollars)	0
Prior Year Common Stock Sale Price Guarantees [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Warrants Repriced During Period, Number	625,000
Warrants Repriced During Period, Value Assigned (in Dollars)	10,821
The 2013 Debt Agreement [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Warrants Repriced During Period, Number	565,625
Warrants Repriced During Period, Value Assigned (in Dollars)	$ 43,280
Warrants Issued During Period, Number	2,838,051
Weighted Average [Member]
Note 10 - Stock Options and Warrants (Details) [Line Items]
Stock Options Repriced During Period, Exercise Price (in Dollars per share)		$ 0.20

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Note 6 - Notes and Other Loans Payable (Details) (USD $)	3 Months Ended																						3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Note 1 [Member] 6% Convertible Notes Payable [Member]	Mar. 31, 2014 Aug 2014 [Member] Original Issue Discount [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 Aug 2014 [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 Dec 2014 [Member] Original Issue Discount [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 Dec 2014 [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 Feb 2015 [Member] Original Issue Discount [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 Feb 2015 [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 July 2014 [Member] Original Issue Discount [Member] 12% Convertible Notes Payable [Member]	Mar. 31, 2014 July 2014 [Member] 12% Convertible Notes Payable [Member]	Mar. 31, 2014 Original Issue Discount [Member] 12% Convertible Notes Payable [Member] Notes Payable [Member]	Mar. 31, 2014 Original Issue Discount [Member] 12% Convertible Notes Payable [Member]	Mar. 31, 2014 Original Issue Discount [Member] 10% Convertible Note Payable [Member] Additional Discount from Derivative Liabilities [Member]	Mar. 31, 2014 Original Issue Discount [Member] 10% Convertible Note Payable [Member]	Mar. 31, 2014 Original Issue Discount [Member] 6% Convertible Notes Payable [Member]	Mar. 31, 2014 12% Convertible Notes Payable [Member] Notes Payable [Member]	Mar. 31, 2014 12% Convertible Notes Payable [Member]	Mar. 31, 2014 10% Convertible Note Payable [Member] Carrying Value of Stock Purchase Warrants [Member]	Mar. 31, 2014 10% Convertible Note Payable [Member] Additional Discount from Derivative Liabilities [Member]	Mar. 31, 2014 10% Convertible Note Payable [Member]	Mar. 31, 2014 6% Convertible Notes Payable [Member]	Mar. 31, 2014 6% Demand Loans per Operations Agreement with Schoell Marine Inc. [Member]	Dec. 31, 2013 6% Demand Loans per Operations Agreement with Schoell Marine Inc. [Member]
Note 6 - Notes and Other Loans Payable (Details) [Line Items]
Notes Payable Original Discount, Percent			10.00%						80104.00%		86258.00%							10.00%
Debt Instrument, Unamortized Discount				$ 59,010		$ 57,386		$ 54,646		$ 54,334		$ 130,684	$ 31,110	$ 89,370	$ 26,250	$ 20,095	$ 11,376	$ 6,104	$ 10,276	$ 11,065	$ 5,981	$ 135,036
Common Stock, Capital Shares Reserved for Future Issuance (in Shares)					18,582,894		19,700,581		18,232,759		2,661,539							7,962,267			821,831	36,000,000
Warrants Issued During Period, Value	34,680
Debt Instrument, Interest Rate, Stated Percentage																							6.00%
Repayments of Notes Payable																							0	500
Related Party Transaction, Loan by Chairman of Company Common Stock (in Shares)		37,400,000
Related Party Transaction, Loan by Chairman of Company Common Stock Value		$ 1,500,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (1,097,033)	$ (668,886)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	17,284	16,743
Issuance of restricted common stock, options and warrants for services	54,572	181,785
Loss from derivative liability-notes payable	55,158
Amortization of debt discount	297,929
Original issue discount paid with stock	10,714
Changes in operating assets and liabilities:
(Increase) decrease in inventory	(99,764)	119,631
Decrease in other current assets	12,358	13,731
Increase in accounts payable and accrued expenses	126,577	82,022
Increase in accounts payable and accrued expenses-related parties	102,674	98,958
Increase in deferred revenue and deposits	255
Net cash used by operating activities	(327,746)	(133,543)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment		(4,625)
Net cash used by investing activities		(4,625)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of capitalized lease obligations	(1,569)	(1,075)
Proceeds from notes and loans payable	240,000	70,000
Repayment of notes and loans payable	(38,615)	(10,000)
Proceeds from sale of common stock	110,000	100,000
Increase in related party notes and loans payable-net	7,626	6,874
Net cash provided by financing activities	317,442	165,799
Net (decrease) increase in cash	(10,304)	27,631
Cash, beginning of period	17,363	14,888
Cash, end of period	7,059	42,519
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Payment of interest in cash	25,121	1,857
NON CASH INVESTING AND FINANCING ACTIVITIES:
Value of shares repaid to stockholder	1,496,217
Forgiveness of deferred officers' salaries as contributed capital	956,762
Warrant [Member]
Adjustments to reconcile net loss to net cash used by operating activities:
Warrants issued pursuant to repayment of debt in common stock		22,473
Derivative Debt Discount [Member]
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount	297,929
Prepaid Expense [Member]
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of prepaid expenses via common stock & warrants	177,435
Original Issue Discount [Member]
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount	14,095
Issuance for Deferred Officers' Salaries [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued	668,312
Issuance for Accrued Expenses [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued	75,000	12,875
Issuance for Debt Repayment [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued	285,317
Issuance for Debt Interest [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued	12,616
Repayment of Related Party Payables [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued		54,000
Repayment of Debt [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued		115,226
Payment of Debt Interest [Member]
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued		$ 15,978

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Note 4 - Property and Equipment

3 Months Ended

Mar. 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	March 31, 2014			December 31, 2013
Display equipment for trade shows	$	9,648		$	9,648
Leasehold improvements and furniture and fixtures		94,572			94,572
Equipment and computers		398,342			398,342
Total		502,562			502,562
Accumulated depreciation		(133,621	)		(125,799	)
Net property and equipment	$	368,941		$	376,763

Depreciation expense for the three months ended March 31, 2014 and 2013 was $7,822 and $6,773, respectively.

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Note 13 - Commitments and Contingencies (Details) (USD $)	3 Months Ended
	Mar. 31, 2014
Note 13 - Commitments and Contingencies (Details) [Line Items]
Employment Agreements, Initial Term of Employment	3 years
Automatic Renewing Period of Employment Agreements	1 year
Harry Schoell, Chairman and CTO [Member]
Note 13 - Commitments and Contingencies (Details) [Line Items]
Employment Agreements, Officer Salary	$ 150,000
Frankie Fruge, COO [Member]
Note 13 - Commitments and Contingencies (Details) [Line Items]
Employment Agreements, Officer Salary	120,000
Christopher Nelson, President and General Counsel [Member]
Note 13 - Commitments and Contingencies (Details) [Line Items]
Employment Agreements, Officer Salary	$ 130,000

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Note 4 - Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	March 31, 2014			December 31, 2013
Display equipment for trade shows	$	9,648		$	9,648
Leasehold improvements and furniture and fixtures		94,572			94,572
Equipment and computers		398,342			398,342
Total		502,562			502,562
Accumulated depreciation		(133,621	)		(125,799	)
Net property and equipment	$	368,941		$	376,763

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Note 4 - Property and Equipment (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Property, Plant and Equipment [Abstract]
Depreciation	$ 7,822	$ 6,773

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Note 14 - Consolidated Subsidiaries

3 Months Ended

Mar. 31, 2014

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

NOTE 14 – CONSOLIDATED SUBSIDIARIES

In 2012, the Company established a 100% owned subsidiary (renamed) Cyclone Performance LLC. The purpose of Cyclone Performance is to build, test and run a vehicle utilizing the Company’s engine. In 2012, the Company sold a 5% equity investment to an unrelated investor for $30,000. Prior to December 31, 2012, this 5% equity investment was acquired by a corporate officer of the Company. Losses of the subsidiary are currently fully borne by the Company, as there is no guarantee of future profits or positive cash flow of the subsidiary. As of March 31, 2014, the cumulative unallocated losses to the non-controlling interests of this subsidiary of $953 are to be recovered by the parent from future subsidiary profits if they materialize. 

In July 2013, the Company’s Chairman purchased a 5% equity stake in the WHE Subsidiary in exchange for 5 million shares of his common stock in the Company. In connection with this purchase, the executive also agreed to release the security interest held by his company, Schoell Marine, on certain of the Company’s engine patents, which was collateral on approximately $425,000 in debt owed by the Company to Schoell Marine. The executive also agreed to provide 12 months of consulting services without additional compensation to the WHE Subsidiary.

In July 2013, as part of a Joint Manufacturing Operations Agreement, Precision CNC LLC (of Ohio) received a 5% interest in the WHE Subsidiary to provide expertise and management for its production operations (vesting over the following two years). Precision CNC was also given the right, during this period, to purchase up to an additional 5% in Cyclone-WHE at the then current valuation of that company. In May 2014, the WHE Subsidiary was re-domiciled to Delaware, and converted to a corporation named WHE Generation Corp. 

The total losses of the WHE Subsidiary for the three months ended March 31, 2014 and for the year ended December 31, 2013 were $120,391 and $157,266, respectively. Losses of the subsidiary are currently fully borne by the Company in the consolidated statements of operations. There is no guarantee of future profits or positive cash flow of the subsidiary that will be realized. As of March 31, 2014, the cumulative unallocated losses to the non-controlling interests of this subsidiary of $70,914 are to be recovered by the parent from future subsidiary profits if they materialize.