0001493152-17-010201.txt : 20170905 0001493152-17-010201.hdr.sgml : 20170905 20170905061936 ACCESSION NUMBER: 0001493152-17-010201 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170905 DATE AS OF CHANGE: 20170905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYCLONE POWER TECHNOLOGIES INC CENTRAL INDEX KEY: 0001442711 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 000000000 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-54449 FILM NUMBER: 171067359 BUSINESS ADDRESS: STREET 1: 601 NE 26TH COURT CITY: POMPANO BEACH STATE: FL ZIP: 33064 BUSINESS PHONE: 954-943-8721 MAIL ADDRESS: STREET 1: 601 NE 26TH COURT CITY: POMPANO BEACH STATE: FL ZIP: 33064 10-Q/A 1 form10-qa.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q/A

Amendment No. 1

 

(Mark One)

 

  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2017

 

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 [X] 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 [X] 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 [X]
             
       

(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 [X]

 

As of July 27, 2017, there were 1,753,246,329 shares of the registrant’s common stock issued and outstanding.

 

 

 

   
 

 

Explanatory Note

 

The purpose of this Amendment No.1 to our quarterly report on form 10-Q as of and for the period ended March 31, 2017, filed with the Securities and Exchange Commission on August 4, 2017 is the result of the Company correcting the number of authorized shares as stated on the balance sheet from the incorrect 8 billion to the correct 4 billion shares due to a typographical error that has been discovered subsequent to the initial filings..In addition we have attached to Amendment No.1 currently dated certification from our President and Chief Financial Officer as required by the SEC Rule 13a- 14(a)/15d-14(a) and by section 906 of the Sarbanes-Oxley ACT of 2002.

 

No other changes have been made to Form 10-Q. This Amendment No.1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q  and does not reflect events that may have occurred subsequent to the original date and does not modify or update in any way disclosures made in the original Form 10-Q.

 

   

 

 

CYCLONE POWER TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

 

INDEX

 

PART I. FINANCIAL INFORMATION  
   
Item 1. Financial Statements 3
   
Condensed Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016 3
   
Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 (unaudited) 4
   
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (unaudited) 5
   
Notes to Condensed Consolidated Financial Statements (unaudited) 6
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
   
Item 4. Controls and Procedures 20
   
PART II. OTHER INFORMATION  
   
Item 1. Legal Proceedings 21
   
Item 1A. Risk Factors 21
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
   
Item 3. Defaults upon Senior Securities 21
   
Item 4. Mine Safety Disclosures 21
   
Item 5. Other Information 21
   
Item 6. Exhibits 22

 

2
 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements 

 

CYCLONE POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2017 AND DECEMBER 31, 2016

 

   March 31, 2017   December 31, 2016 
   (Unaudited)     
ASSETS          
           
CURRENT ASSETS          
Cash  $546   $591 
Inventory, net   26,667    26,667 
Other current assets   193    193 
Total current assets   27,406    27,451 
           
PROPERTY AND EQUIPMENT          
Furniture, fixtures, and equipment   302,770    302,770 
Accumulated depreciation   (216,843)   (209,498)
Net property and equipment   85,927    93,272 
           
OTHER ASSETS          
Patents, trademarks and copyrights   394,980    394,980 
Accumulated amortization   (222,864)   (216,502)
Net patents, trademarks and copyrights   172,116    178,478 
Other assets   7,862    7,862 
Total other assets   179,978    186,340 
           
Total Assets  $293,311   $307,063 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $1,750,040   $1,472,851 
Accounts payable and accrued expenses-related parties   628,975    545,225 
Notes and other loans payable-current portion   466,642    512,642 
Derivative liabilities   1,045,001    754,000 
Notes and other loans payable-related parties   389,217    393,760 
Capitalized lease obligations-current portion    14,312    14,312 
Deferred revenue and license deposits   323,826    323,826 
Total current liabilities   4,618,013    4,016,616 
           
NON CURRENT LIABILITIES          
Capitalized lease obligations-net of current portion    25,536    25,536 
Total non-current liabilities   25,536    25,536 
           
Total Liabilities    4,643,549    4,042,152 
           
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, 2017 and December 31, 2016, respectively.   -    - 
Common stock, $.0001 par value, 4,000,000,000 shares authorized, 1,617,400,273 and 1,517,400,273 shares, issued and outstanding March 31, 2017 and December 31, 2016 respectively.   166,186    151,737 
Additional paid-in capital   57,088,983    56,915,794 
Treasury Stock, 317,000 shares at March 31, 2017 and December 31, 2016 respectively, at cost.   (3,000)   (3,000)
Accumulated deficit    (61,631,446)   (60,828,659)
Total stockholders’ deficit-Cyclone Power Technologies Inc.   (4,379,277)   (3,764,128)
Non controlling interest in consolidated subsidiary   29,039    29,039 
Total Stockholders’ Deficit   (4,350,238)   (3,735,089)
           
Total Liabilities and Stockholders’ Deficit  $293,311   $307,063 

 

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

 

3
 

 

CYCLONE POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   Three Months Ended March 31, 
   2017   2016 
         
REVENUES  $-   $- 
           
COST OF GOODS SOLD   -    - 
           
Gross profit   -    - 
           
OPERATING EXPENSES          
Advertising and promotion   180    5,291 
General and administrative   317,555    190,619 
Research and development   40,676    34,693 
           
Total operating expenses   358,411    230,603 
           
Operating loss   (358,411)   (230,603)
           
OTHER (EXPENSE) INCOME          
Other (expense)   (70,934)   500 
Derivative (expense) income   (323,467)   2,321 
Interest (expense)   (49,974)   (32,828)
           
Total other (expense)   (444,375)   (30,007)
           
Loss before income taxes   (802,786)   (260,610)
Income taxes   -    - 
           
Net loss  $(802,786)  $(260,610)
           
Net loss per common share, basic and diluted  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding   1,551,847,880    1,388,669,532 

 

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

 

4
 

 

CYCLONE POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Three Months Ended March 31, 
   2017   2016 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(802,786)  $(260,610)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation and amortization   13,707    17,653 
Issuance of restricted common stock, options and warrants for services   923    385 
Loss on debt paid with common stock   70,934    - 
Loss (gain) from derivative liability-notes payable   323,468    (2,321)
Amortization of derivative debt discount   -    8,193 
Changes in operating assets and liabilities:          
(Increase) in inventory   -    (14,451)
Increase in accounts payable and accrued expenses   289,502    94,799 
Decrease in cash overdraft   -    (153)
Increase in accounts payable and accrued expenses-related parties   83,750    83,750 
Increase in deferred revenue and deposits   -    5,700 
Net cash used by operating activities   (20,502)   (67,055)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Net cash used by investing activities   -    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payment of capitalized leases   -    (4,122)
Proceeds from notes and loans payable   25,000    7,000 
(Decrease) increase in related party notes and loans payable-net   (4,543)   64,177 
Net cash provided by financing activities   20,457    67,055 
           
Net (decrease) in cash   (45)   - 
Cash, beginning of period   591    - 
           
Cash, end of period  $546   $- 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
           
Payment of interest in cash  $-   $1,603 
NON CASH INVESTING AND FINANCING ACTIVITIES:          
           
Issuance of 100,000,000 shares of Common stock for liability settlement  $49,066   $- 
Issuance of 44,476,071 shares of Common stock for debt and interest settlement  $34,246   $- 

 

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

 

5
 

 

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”, “our,” “Cyclone”) is the successor entity to the business of Cyclone Technologies LLLP (the “LLLP”), a limited liability limited partnership formed in Florida in September 2004. The LLLP was the original developer and intellectual property holder of the Cyclone engine technology. Initialed in 2016, the Company’s current business model, is to be primarily a research and development engineering company whose main purpose is to develop, commercialize, market and license its Cyclone engine technology. Engines and related systems will be outsourced for manufacturing but the company will invoice customers. Our prior business model also included engine manufacturing.

 

In 2012, the Company established Cyclone Performance LLC (“Cyclone Performance”) f/k/a Cyclone-TeamSteam USA, LLC. The purpose of Cyclone Performance is to build, test and run a vehicle utilizing the Company’s engine. At March 31, 2017 the company had a 95% controlling interest in Cyclone Performance.

 

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

 

The condensed consolidated financial statements include the accounts of the Company 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 8 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, consisting of normal journal entries 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. Complete financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K.

 

The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31,2017.

 

The Company prepares its consolidated financial statements in conformity with account principles generally accepted in the United States (“U.S. GAAP”). 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.

 

The financial statements presented for the three months ended March 31, 2017 and 2016 are unaudited.

 

C. CASH

 

Cash includes cash on hand and cash in banks. At March 31, 2017 and December 31, 2016, the Company maintained cash balances at one financial institution.

 

6
 

 

D. COMPUTATION OF INCOME (LOSS) PER SHARE

 

Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (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, 2017 and 2016, total anti-dilutive shares amounted to approximately 14.9 and 13.8 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 December 31, 2016 and March 31, 2017, 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 2014 through 2016.

 

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 would be evaluated and allocated as appropriate. Payments received before all of the relevant criteria for revenue recognition will be satisfied are recorded as deferred revenue on the condensed 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.

 

7
 

 

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. Based on our revised R&D company business model, commencing in 2016, costs include material to develop a completed engine. In our former business model, costs include material, labor and allocated overhead to manufacture a completed engine.

 

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 as of January 1, 2017 (beginning of period) and March 31, 2017 (end of period) is as follows:

 

Instrument  Beginning of Period   Change   End of Period   Level 

Valuation

Methodology

Derivative liabilities  $754,000   $291,001   $1,045,001    3  Stochastic Process
Forecasting 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, 2017 and 2016 were $40,676 and $34,693, 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.

 

8
 

 

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 (“BSM option pricing model”) 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

 

The FASB issued the following in 2017:

 

Update 2017-03—Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update). The Company is still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows, and the effective date of application is 2018.

 

Update 2017-01—Business Combinations (Topic 805): Clarifying the Definition of a Business In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting. This addresses the accounting for share-based payment transactions and includes the recognition of the income tax effects of awards that vest or settle as income tax expense and clarification of the presentation of certain components of share-based awards in the statement of cash flows.

 

We are still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows, and the effective date of application is 2018.

 

9
 

 

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, 2017, the Company maintained its cash in one quality financial institution. The Company has not experienced any losses in its bank accounts through March 31, 2017. 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.

 

NOTE 2 - GOING CONCERN

 

As shown in the accompanying condensed consolidated financial statements, the Company incurred substantial operating and other losses and expenses of approximately $0.8 million and $0.3 million for the three months ended March 31, 2017 and 2016 respectively. The cumulative deficit since inception is approximately $61.6 million. The Company has a working capital deficit at March 31, 2017 of approximately $4.6 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 debt, advance contract payments (deferred revenue), advances from and deferred payments to related parties and the timing of payment of accrued liabilities.

 

NOTE 3 – INVENTORY, NET

 

Inventory principally consists of raw material to develop an engine and it is stated at the lower of cost or market.

 

10
 

 

Inventory, net consists of:

 

   March 31, 2017   December 31, 2016 
Raw materials  $26,667   $26,667 
Total  $26,667   $26,667 

 

We provide estimated provisions for the realization, valuation and obsolescence of our inventories, including adjustments to market, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. We look at historical inventory aging and usage reports and margin analyses in determining our provision estimate.

 

NOTE 4 – PROPERTY AND EQUIPMENT, NET

 

Property and equipment consists of the following:

 

   March 31, 2017   December 31, 2016 
Display equipment for trade shows  $6,270   $6,270 
Leasehold improvements and furniture and fixtures   93,922    93,922 
Equipment and computers   202,578    202,578 
Total   302,770    302,770 
Accumulated depreciation   (216,843)   (209,498)
Net property and equipment  $85,927   $93,272 

 

Depreciation expense for the three months ended March 31, 2017 and 2016 was $7,345 and $8,372, 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, 2017 and December 31, 2016 were $172,116 and $178,478, respectively. For the three months ended March 31, 2017 and for the year ended December 31, 2016, the Company capitalized $0 and $0, respectively, of expenditures related to these assets. As of March 31, 2017, the Company had 15 patents issued on its technology both in the U.S. and internationally, and the U.S.

 

Patents, trademarks and copyrights are amortized over the life of the intellectual property which is 15 years. Amortization expenses for the three months ended March 31, 2017 and 2016 were $6,362 and $8,921, respectively.

 

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, 2017   December 31, 2016 
         
12% convertible notes payable, maturing at various dates from November 2013 through April 2016 (A)  $42,951   $42,951 
           
10% convertible note payable, monthly payments commencing in December 2013 through July 2014 (B)   19,963    19,963 
           
10% convertible notes payable maturing at various dates from May 2015 through February 2016 (C)   76,000    76,000 
           
10% convertible notes payable, maturing at various dates from December 2015 through January 2016 (D)   29,303    29,303 

 

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10% convertible notes payable maturing at various dates from February 2015 through August 2015 (F)   116,200    116,200 
           
12% convertible notes payable, maturing at various dates from April 2015 through May 2015 (G)   60,000    85,000 
           
10% note payable, maturing Feb 3, 2018   50,000    50,000 
           
Various notes payable, maturing 2016 and 2017   38,500    13,500 
           
Note payable, maturing Oct 14 2016, (I)   27,000    27,000 
           
Demand Note, (H)   6,725    6,725 
           
Total non related party notes   466,642    512,642 

 

  (A) Notes issued net of 10% original discount (fully amortized). This note is in default.
     
  (B) Note issued net of original discount (fully amortized). Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000, plus subsequent penalty interest for non-payment of convertible debt and interest. The Company is negotiating a reduced settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
     
  (C) Notes issued net of discount from derivative liabilities (fully amortized). At December 31, 2016, the Company held approximately 97 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
     
  (D) Notes issued net of discount (fully amortized). This note is in default.
     
  (F) Notes issued net of discount from derivative liabilities (fully amortized). At March 31, 2017, the Company held 233.3 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
     
  (G) Notes issued net of discount from derivative liabilities (fully amortized). The Company is subject to litigation judgment of approximately $150,000, plus subsequent penalty interest for non–payment. Company is seeking to arrange a settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
     
  (H) Note convertible into common stock at a 40% discount to 20 day market average.
      
  (I) Interest of $3,000 to be paid in 1,500,000 shares of restricted company common stock This note is in default

 

12
 

 

B. RELATED PARTIES

 

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

 

   March 31, 2017   December 31, 2016 
         
6% demand loans per Operations Agreement with Schoell Marine Inc., a company owned by Cyclone’s Chairman and controlling shareholder (A)  $172,751   $169,751 
6% non-collateralized loans from officer and shareholder, payable on demand. The original principal balances were $157,101.   94,849    107,842 
12% non-collateralized loans from officer and shareholder, payable on demand   21,044    21,044 
Accrued Interest   100,573    95,123 
Total current related party notes, inclusive of accrued interest  $389,217   $393,760 

 

  (A) This note arose from services and salaries incurred by Schoell Marine on behalf of the Company. The Schoell Marine note bears an interest rate of 6% and repayments occur as cash flow of the Company permits.

 

NOTE 7 – RELATED PARTY TRANSACTIONS- DEFERRED COMPENSATION

 

Included in accounts payable and accrued expenses - related parties as of March 31, 2017 and December 31, 2016 are $628,975 and $545,225 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.

 

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.

 

NOTE 9 – STOCK TRANSACTIONS

 

During the three months ended March 31, 2017, the Company:

 

  a- Amortized (based on vesting) $923 of common stock options for employee services.
     
   b- Issued approximately 144.5 million shares of common stock pursuant to conversions of approximately $83,000 of notes payable, accrued liabilities and related interest.

 

NOTE 10 – STOCK OPTIONS AND WARRANTS

 

A. COMMON STOCK OPTIONS

 

Per the employment contracts with certain officers, for the three months ended March 31, 2017, the company issued 450,000 common stock options, valued at $675 (pursuant to the Black Scholes valuation model) that are exercisable into shares of common stock at an average exercise price of $.0015 and with a maturity life of 10 years. For the three months year ended March 31, 2017, the amortization of stock options was $923 and the unamortized balance was $2,149.

 

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A summary of the common stock options for the period from December 31, 2016 through March 31, 2017 follows:

 

   Number Outstanding   Weighted Avg. Exercise Price   Weighted Avg. Remaining Contractual Life (Years) 
             
Balance, December 31, 2016   14,030,000   $.096    5.3 
Options issued   450,000    .002    10 
Options exercised   -    -    - 
Expired   -    -    - 
Balance, March 31, 2017   14,480,000   $.093    5.2 

 

The vested and exercisable options at period end follows:

 

   Exercisable/ Vested Options Outstanding   Weighted  Avg. Exercise Price   Weighted Avg. Remaining Contractual Life (Years) 
Balance March 31, 2017   12,680,000   $.100    4.6 
Additional vesting by June 30, 2017   450,000    .002    9.0 

 

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

 

   Three Months Ended
March 31, 2017		   Three Months Ended
March 31, 2016		 
Risk free interest rate   1.5%   .89%
Expected volatility   134%   102%
Expected term   3    3 
Expected dividend yield   0%   0%
Average value per options and warrants  $.0015   $.0003 

 

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

 

A summary of outstanding vested warrant activity for the period from December 31, 2016 to March 31, 2017 follows:

 

   Number Outstanding   Weighted Average Exercise Price   Weighted Average Remaining Contractual Life (Years) 
Common Stock Warrants               
                
Balance, December 31, 2016   500,000   $.08    .67 
Warrants issued   -    -    - 
Warrants expired   -    -    - 
Warrants cancelled   -    -    - 
Balance, March 31, 2017   500,000   $.08    .42 

 

14
 

 

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, 2017 and 2016 are as follows:

 

   Three Months ended
March 31, 2017		   Amount   Three Months ended
March 31 2016		   Amount 
Tax benefit at U.S. statutory rate   34%  $134,493    34%  $143,606 
State taxes, net of federal benefit   4%   15,823    4%   16,895 
Change in valuation allowance   (38)%  $(150,316)   (38)%  $(160,501)

 

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 2017 and December 31, 2016 consisted of the following:

 

Deferred Tax Assets  March 31, 2017   December 31, 2016 
Net Operating Loss Carry-forward  $10,759,748   $10,577,607 
Deferred Tax Liabilities – Accrued Officers’ Salaries   (926,431)   (900,306)
Net Deferred Tax Assets   9,833,317    9,677,301 
Valuation Allowance   (9,833,317)   (9,677,301)
Total Net Deferred Tax Assets  $-   $- 

 

As of March 31, 2017, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $23.2 million that may be offset against future taxable income through 2031. 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. 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 period ended December 2016 and the current lease is monthly with a 3% rate increase. Occupancy costs for each of the three months ended March 31, 2017 and 2016 was $15,900.

 

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B. CAPITALIZED LEASE OBLIGATIONS

 

Total lease payments made for the three months ended March 31, 2017 were $0. The balance of capitalized lease obligations payable at March 31, 2017 and December 31, 2016 was $39,847. Future lease payments are:

 

2017  $14,312 
2018   9,754 
2019   8,127 
2020   7,655 
2021   0 
   $39,848 

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

The Company has employment agreements with Harry Schoell, Chairman and CTO (previously, CEO), at $150,000 per year and Frankie Fruge, President, at $120,000 per year; (collectively, the “Executives”). These agreements provide for a term of three (3) years from their Effective Date (July 2007 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 SUBSIDIARY

 

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 the last quarter of 2012, the Company sold a 5% equity investment to an unrelated investor for $30,000. Subsequent 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, 2017, 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.

 

NOTE 15 – RECEIVABLES, DEFERRED REVENUE AND BACKLOG

 

As of March 31, 2017, total backlog for prototype engines to be delivered was $400,000 from the Combilift agreement, of which $100,000 has been paid and has been recorded as deferred revenue. In 2016, three (3) other customers advanced $175,700 as deposits towards payments on $355,000 of contracts for engines currently estimated to be delivered in 2017 and license deposits.

 

NOTE 16 – DERIVATIVE FINANCIAL INSTRUMENTS

 

Pursuant to additional financing, in the year ended December 31, 2016 and for the three months ended March 31, 2017 the Company entered into no convertible note agreements. Prior convertible notes had conversion prices into common stock that ranged from a discount of 30% to 45% 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.

 

In the three months ended March 31, 2017, the Company recorded a non cash charge of $323,467 of derivative losses related to adjusting the derivative liability to fair value. At March 31, 2017, the derivative related fair value of debt and related convertible liabilities was $1,045,001.

 

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The Company calculates the estimated fair values of the liabilities for derivative instruments at each quarter-end using the BSM option pricing model and Stochastic Process Forecasting models (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 update

 

   3 Months Ended March 31, 2017   Year Ended
December. 31, 2016		 
Volatility   121%   71% - 91%
Risk Free Rate   1.0%   .02% -.28%
Expected Term (years)   .25    0 -1.05 
Dividend Rate   0%   0%

 

NOTE 17 – LlTIGATION

 

Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000, plus subsequent penalty interest for non-payment of convertible debt and interest. Tonaquint Inc. filed and received a judgment and the Company is negotiating a reduced settlement. As at March 31 2017, outstanding interest, default interest and default judgment penalties are included in accrued liabilities.

 

In August 2015, the Company is subject to litigation of approximately $150,000, plus subsequent penalty interest for non -payment of a liability. JSJ filed and received a judgment and the Company has arranged a settlement. As at March 31, 2017, outstanding interest, default interest and default judgment penalties are included in accrued liabilities.

 

NOTE 19 – SUBSEQUENT EVENTS

 

In the second quarter of 2017, the Company engaged in the following transactions:

 

  a- The Company issued 70 million shares of common stock in settlement of a $123,000 accrued liability for services.
     
   b- The company issued approximately 6.4 million shares of common stock valued at approximately $5,000 for services.
     
  c- The company obtained net proceeds of $99,650 from issuance of indebtedness to existing debt holders.

 

17
 

 

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

 

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.

 

18
 

 

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 and parts technologies for integration and use within customers systems. The company anticipates that it will concentrate on the following engine models (power ratings) : Mark 1 (2.7 KW- 6 HP), Mark 3 (12 KW-22 HP) and the Mark 5 ( 60 KW- 100 HP). Additionally, revenue is anticipated via sales of component parts and licensing fees.

 

Corporate Structural Actions. The Company’s focus is on revenue and funding derived from sales of engines and parts for integration into customers applications and systems. With delivery of our engines and material component parts, we are transitioning from the convertible notes used to finance the Company over the last 18 months.

 

Results of Operations

 

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

 

Revenue. The Company had no revenues in the quarters ended March 31 2017 and March 31, 2016.

 

Gross Profit. In the quarters ended March 31, 2017 and 2016, the company has no gross profit.

 

Operating Expenses.

 

Operating expenses incurred for the quarter ended March 31, 2017 were $358,411 as compared to $230,603 for the same period in the previous year, an increase of $127,808 or 55%. The majority of the variance was due to a higher General and Administrative expenses of $126,936 (67%) from consulting and professional fees.

 

Operating Loss. The operating losses for the quarters ended March 31, 2017 and 2016 were $358,411 and $230,603, respectively, a variance of $127,808 or 55%, due to the factors outlined above.

 

Other Expense. Other expense for the quarter ended March 31, 2017 was $444,375 versus $30,007 for the same period in the prior year, an increase of $414,368 or 1,381%.

 

The 2017 other expenses include a $70,934 loss on debt conversion via common stock, $49,974 of interest expense and $323,467 of non cash derivative fair value accounting related charges. The 2016 other expenses included $32,828 of interest expense.

 

Net Loss and Loss per Share. The net loss for the quarter ended March 31, 2017 was $802,7869, compared to a net loss of $260,610 for the same period in the previous year. The increased loss of $542,176 or 208% is related to 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, 2017, the net working capital deficiency was $4,590,607 as compared to a deficiency of $3,989,165 at December 31, 2016, an unfavorable variance of $601,442 or 15%.

 

For the three months ended March 31, 2017, cash decreased by $45. This is reflective of funds used by the net loss of $802,786 partially offset by funds provided by debt proceeds of $25,000, higher accounts payable and accrued expenses of $289,505 and a net increase of $79,207 in related party notes payables and accrued expenses. Non cash charges were a $70,934 loss recognized by settling debt with common stock and $323,468 of non cash charges from fair value derivative accounting.

 

There was no change to the cash balance for the three months ended March 31, 2016. This is reflective of funds used by the net loss of $260,610 offset by funds provided by debt proceeds of $7,000, higher accounts payable and accrued expenses of $94,799 and an increase of $147,927 in related party payables, accrued expenses and notes payable.

 

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Cash Flow Management Plan

 

As shown in the accompanying condensed financial statements, the Company incurred substantial operating losses for the three months ended March 31, 2017 of approximately $0.8 million. The Company has a working capital deficit at March 31, 2017 of approximately $4.6 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.

 

In the latter half of 2017, the company projects $300,000 in revenue from the completion of the Combilift Mark 5 contract. The FSDS contract is projected to be complete by end of the third quarter of 2017 with additional payment due of $75,000. IBES is negotiating to purchase 5 more beta site projects with anticipated additional revenue from sales of $80,000. We anticipate delivering manufactured products thru our integrators and manufacturers by the fourth quarter of 2017. The Company has signed three contracts for deliverables and anticipates purchase orders for manufactured engines by end of third quarter of 2017.

 

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.

 

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.

 

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 President (Chief Executive Officer) and Chief Financial Officer, of the effectiveness of our financial disclosures, controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2017.

 

A material weakness can be defined as an insufficiency of internal controls that may result in a more than remote likelihood that a material misstatement will not be prevented, detected or corrected in a company’s financial statements.

 

Based upon that evaluation, our President (Chief Executive Officer) and Chief Financial Officer concluded that our disclosure controls and procedures were not effective, based on the following deficiencies:

 

  - Weaknesses in Accounting and Finance Personnel: We have a small accounting staff and we do not have the robust employee resources and expertise needed to meet complex and intricate GAAP and SEC reporting requirements of a U.S. public company. Additionally, numerous adjustments and proposed adjustments have been noted by our auditors. This is deemed by management to be a material weakness in preparing financial statements.
     
  - We have written accounting policies and control procedures, but we do not have sufficient staff to implement the related controls. Management had determined that this lack of the implantation of segregation of duties, as required by our written procedures, represents a material weakness in our internal controls.
     
  - Internal control has as its core a basic tenant of segregation of duties. Due to our limited size and economic constraints, the Company is not able to segregate for control purposes various asset control and recording duties and functions to different employees. This lack of segregation of duties had been evaluated by management, and has been deemed to be a material control deficiency.

 

The Company has determined that the above internal control weaknesses and deficiencies could result in a reasonable possibility for interim financial statements that a material misstatements will not be prevented or detected on a timely basis by the Company's internal controls.

 

Management is currently evaluating what steps can be taken in order to address these material weaknesses. As a growing small business, the Company continuously devotes resources to the improvement of our internal control over financial reporting. Due to budget constraints, the staffing size, proficiency and specific expertise in the accounting department is below requirements for the operation. The Company is anticipating correcting deficiencies as funds become available.

 

Changes in Internal Control Over Financial Reporting and Procedures.

 

There were no changes in internal control over financial reporting and procedures from the previous quarter.

 

20
 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000 plus default interest for non-payment of convertible debt and interest. The Company is seeking to negotiate a reduced settlement.

 

In August 2015, the Company is subject to litigation of approximately $150,000 plus default interest for non- payment of a liability. The Company is seeking to arrange a settlement

 

ITEM 1A. RISK FACTORS

 

Not required.

 

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

 

In the first quarter of 2017 the Company issued 144,476,071 shares of common stock in settlement of debt, accrued liabilities and related interest.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

21
 

 

ITEM 6. EXHIBITS:

 

The Company filed all required exhibits for this period in the Super 10K.

 

Exhibit

Number

   Description
     
31.1   Certification of the President (Principal Executive Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of the President (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

 

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.

 

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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.
   
September 1, 2017 /s/ Frankie Fruge
  Frankie Fruge
  President
  (Principal executive officer)
   
September 1, 2017 /s/ Bruce Schames.
  Bruce Schames
  Chief Financial Officer
  (Principal financial and accounting officer)

 

23
 

 EX-31.1 2 ex31-1.htm

 

EXHIBIT 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, Frankie Fruge, 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: September 1, 2017 /s/ Frankie Fruge
  Frankie Fruge
  President
  (Principal Executive Officer)

 

   
 

 

 

 

 EX-31.2 3 ex31-2.htm

 

EXHIBIT 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: September 1, 2017 /s/ Bruce Schames
  Bruce Schames,
  Chief Financial Officer
  (Principal Accounting Officer)

 

   
 

 

 EX-32.1 4 ex32-1.htm

 

EXHIBIT 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, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frankie Fruge, president, and 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: September 1, 2017 /s/ Frankie Fruge
  Frankie Fruge
  President (Principal Executive Officer)

 

 
  

 

 

 EX-32.2 5 ex32-2.htm

 

EXHIBIT 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, 2017, 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: September 1, 2017 /s/ Bruce Schames
  Bruce Schames
 

Chief Financial Officer and Secretary

(Principal Accounting Officer)

 

   
 

 

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conversion of notes payable, accrued liabilities and related interest Share-based compensation arrangement by share-based payment award, options, grants in period, gross Share-based compensation arrangement by share-based payment award, options, grants in period value Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price (in dollars per share) Stock options issued during period, maturity life Share-based compensation Employee service share-based compensation, nonvested awards, compensation cost not yet recognized Number Outstanding, Balance Number Outstanding, Options issued Number Outstanding, Options exercised Number Outstanding, Options Expired Number Outstanding, Balance Weighted Avg Exercise Price, Balance Weighted Avg Exercise Price, Options issued Weighted Avg Exercise Price, Options exercised Weighted Avg Exercise Price, Options Expired Weighted Avg Exercise Price, Balance Weighted Avg Remaining 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carryforwards expiration date Percentage that carry forwards will expire unused Tax benefit at U.S. statutory rate Tax benefit at U.S. statutory rate, Percent State taxes, net of federal benefit State taxes, net of federal benefit, Percent Change in valuation allowance Change in valuation allowance, Percent Net Operating Loss Carry-forward Deferred Tax Liabilities - Accrued Officers' Salaries Net Deferred Tax Assets Valuation Allowance Total Net Deferred Tax Assets Area of warehouse and office Monthly current lease increasing rate, percentage Occupancy costs Repayments of long-term capital lease obligations Capital lease obligations 2017 2018 2019 2020 2021 Total Employment agreements, officer salary Employment agreements, initial term of employment Automatic renewing period of employment agreements Percentage of ownership in a consolidated subsidiary Noncontrolling interest, ownership percentage by noncontrolling owners Proceeds from issuance or sale of equity Cumulative unallocated losses to non-controlling interest of subsidiary Backlog for prototype engines purchased Deferred revenue Customer advance and deposits Payment of contracts for engines Debt instrument convertible price Debt instrument trading days Derivative losses related to adjusting the derivative liability Derivative Liability Volatility Risk Free Rate Expected Term (years) Dividend Rate Litigation settlement amount Number of shares issued for services Stock issued during period, value, issued for services Proceeds from issuance of indebtness to existing debt holders Accrued Expenses [Member] Accrued Expenses One [Member] Accrued Interest Forgiveness [Member] Accrued Interest [Member] Applied Overhead [Member] Attributable To Non Cash Derivative Liability Accounting [Member] Attributable To Operating Losses [Member] Automatic renewing period of employment agreements. Board of Chairman [Member] Chairman And Co-Founder [Member] Combilift Agreement [Member]. Computers [Member] Consulting Agreement [Member] Corporate Officer[Member] Cumulative unallocated losses to non-controlling interest of subsidiary. Cyclone Performance [Member] Debt and Interest Repayment [Member] Debt Interest Four [Member] Debt Interest [Member] Debt Interest One [Member] Debt Interest Three [Member] Debt Interest Two [Member] Debt Repayment Four [Member] Debt Repayment [Member] Debt Repayment One [Member] Debt Repayment Three [Member] Debt Repayment Two [Member] Debt and Interest Settlement [Member] Demand Note [Member] Display Equipment For Trade Shows [Member] Employment agreements, initial term of employment. Employment agreements, officer salary. Engine Contract [Member] 4% Note Payable [Member] Frankie Fruge COO [Member] Harry Schoell Chairman And CTO [Member] Decrease in cash overdraft. Issuance of Common stock for debt and interest settlement. Issuance of shares of Common stock for liability settlement. June 30, 2016 [Member] Labor [Member] Leasehold Improvements and Furniture and Fixtures [Member] Liability Settlement [Member] Liability Settlement One [Member] License Agreement [Member] Non-cash Derivative Losses [Member] Note Convertible [Member] Note Payable [Member] October 1, 2016 [Member] October 24, 2016 [Member] Officers [Member] Operating loss carryforwards expiration date. Organization and Operations [Policy Text Block] Other Losses [Member] Percentage of ownership in a consolidated subsidiary. Percentage that carry forwards will expire unused. Precision CNC LLC [Member] Preferred Stock B [Member] Preferred Stock Subscription Receivable [Member] Prepaid Expenses Via Common Stock [Member] Price Guarantees [Member] Principal Forgiveness and Accrued Interest Forgiveness [Member] Raw Material [Member] Repayment of Related Party Payables [Member] Restricted Common Stock [Member] Schedule of Estimated Useful Lives of Property and Equipment [Table Text Block] Schedule Of Related Party Notes And Other Loans Payable [Table Text Block] Schoell Marine [Member] Separation Agreement [Member] Services [Member] Shop Equipment [Member] Six Percent Demand Loans Per Operations Agreement With Schoell Marine Inc [Member] Six Percent Demand Loans Per Operations Agreement With Schoell Marine Inc [Member] Six Percent Non-collateralized Loans from Officer and Shareholder [Member] Stock Options And Purchase Warrants [Member] Stock Options For Employee Services [Member] Stockholders' (Deficit) Cyclone Power Tech. Inc. [Member] TCA Global Master Credit Fund LP [Member] 10% Convertible Notes Payable [Member] 10% Note Payable [Member] 10% Note Payable One [Member] 10% Note Payable Two [Member] 10% One Convertible Notes Payable [Member] 10% Three Convertible Notes Payable [Member] 10% Two Convertible Notes Payable [Member] Tonaquint Inc [Member] 12% Convertible Notes Payable [Member] Twelve Percent Non-collateralized Loans from Officer and Shareholder [Member] 12% One Convertible Notes Payable [Member] Unrelated Investor [Member] Whe Generation Corp [Member] WHE Subsidiary [Member] Working capital deficit. Amount of patents, trademarks and copyrights capitalized during the period. Number of patents. Various Note Payable [Member] Officer and Shareholder [Member] Voting Control Percentage. Weighted Avg Remaining Contractual Life (Years), Options issued. Weighted average remaining contractual term for option awards cancelled during period, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Average value per options and warrants. Number outstanding, warrants expired. Weighted average exercise price, warrants expired. Weighted average remaining contractual life (years), balance. Assets, Current Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Property, Plant and Equipment, Net Finite-Lived Intangible Assets, Accumulated Amortization Assets, Noncurrent Assets Liabilities, Current Liabilities, Noncurrent Liabilities Treasury Stock, Value Stockholders' Equity Attributable to Parent Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest Liabilities and Equity Gross Profit Operating Expenses Operating Income (Loss) Interest Expense Nonoperating Income (Expense) Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest Income Tax Expense (Benefit) Gain (Loss) on Extinguishment of Debt Increase (Decrease) in Inventories IncreaseDecreaseInCashOverdraft Net Cash Provided by (Used in) Operating Activities Repayments of Long-term Capital Lease Obligations Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Cash and Cash Equivalents, Policy [Policy Text Block] Income Tax, Policy [Policy Text Block] Derivatives, Policy [Policy Text Block] Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value Deferred Tax Liabilities, Other Deferred Tax Assets, Net Deferred Tax Assets, Valuation Allowance Deferred Tax Assets, Net of Valuation Allowance Capital Leases, Future Minimum Payments Due EX-101.PRE 11 cypw-20170331_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.7.0.1
Document and Entity Information - shares
 3 Months Ended
Mar. 31, 2017
Jul. 27, 2017
Document And Entity Information    
Entity Registrant Name CYCLONE POWER TECHNOLOGIES INC  
Entity Central Index Key 0001442711  
Document Type 10-Q/A  
Document Period End Date Mar. 31, 2017  
Amendment Flag true  
Amendment Description The purpose of this Amendment No.1 to our quarterly report on form 10-Q as of and for the period ended March 31, 2017, filed with the Securities and Exchange Commission on August 4, 2017 is the result of the Company correcting the number of authorized shares as stated on the balance sheet from the incorrect 8 billion to the correct 4 billion shares due to a typographical error that has been discovered subsequent to the initial filings..In addition we have attached to Amendment No.1 currently dated certification from our President and Chief Financial Officer as required by the SEC Rule 13a- 14(a)/15d-14(a) and by section 906 of the Sarbanes-Oxley ACT of 2002.No other changes have been made to Form 10-Q. This Amendment No.1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q and does not reflect events that may have occurred subsequent to the original date and does not modify or update in any way disclosures made in the original Form 10-Q.  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   1,753,246,329
Trading Symbol CYPW  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2017
Dec. 31, 2016
CURRENT ASSETS    
Cash $ 546 $ 591
Inventory, net 26,667 26,667
Other current assets 193 193
Total current assets 27,406 27,451
PROPERTY AND EQUIPMENT    
Furniture, fixtures, and equipment 302,770 302,770
Accumulated depreciation (216,843) (209,498)
Net property and equipment 85,927 93,272
OTHER ASSETS    
Patents, trademarks and copyrights 394,980 394,980
Accumulated amortization (222,864) (216,502)
Net patents, trademarks and copyrights 172,116 178,478
Other assets 7,862 7,862
Total other assets 179,978 186,340
Total Assets 293,311 307,063
CURRENT LIABILITIES    
Accounts payable and accrued expenses 1,750,040 1,472,851
Accounts payable and accrued expenses-related parties 628,975 545,225
Notes and other loans payable-current portion 466,642 512,642
Derivative liabilities 1,045,001 754,000
Notes and other loans payable-related parties 389,217 393,760
Capitalized lease obligations-current portion 14,312 14,312
Deferred revenue and license deposits 323,826 323,826
Total current liabilities 4,618,013 4,016,616
NON CURRENT LIABILITIES    
Capitalized lease obligations-net of current portion 25,536 25,536
Total non-current liabilities 25,536 25,536
Total Liabilities 4,643,549 4,042,152
STOCKHOLDERS’ DEFICIT    
Series B preferred stock, $.0001 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively.
Common stock, $.0001 par value, 4,000,000,000 shares authorized, 1,617,400,273 and 1,517,400,273 shares, issued and outstanding March 31, 2017 and December 31, 2016 respectively. 166,186 151,737
Additional paid-in capital 57,088,983 56,915,794
Treasury Stock, 317,000 shares, at March 31, 2017 and December 31, 2016 respectively, at cost. (3,000) (3,000)
Accumulated deficit (61,631,446) (60,828,659)
Total stockholders’ deficit-Cyclone Power Technologies Inc. (4,379,277) (3,764,128)
Non controlling interest in consolidated subsidiary 29,039 29,039
Total Stockholders’ Deficit (4,350,238) (3,735,089)
Total Liabilities and Stockholders’ Deficit $ 293,311 $ 307,063
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 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
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 4,000,000,000 4,000,000,000
Common stock, shares issued 1,617,400,273 1,517,400,273
Common stock, shares outstanding 1,617,400,273 1,517,400,273
Treasury stock, shares 317,000 317,000
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]    
REVENUES
COST OF GOODS SOLD
Gross profit
OPERATING EXPENSES    
Advertising and promotion 180 5,291
General and administrative 317,555 190,619
Research and development 40,676 34,693
Total operating expenses 358,411 230,603
Operating loss (358,411) (230,603)
OTHER (EXPENSE) INCOME    
Other (expense) (70,934) 500
Derivative (expense) income (323,467) 2,321
Interest (expense) (49,974) (32,828)
Total other (expense) (444,375) (30,007)
Loss before income taxes (802,786) (260,610)
Income taxes
Net loss $ (802,786) $ (260,610)
Net loss per common share, basic and diluted $ (0.00) $ (0.00)
Weighted average number of common shares outstanding 1,551,847,880 1,388,669,532
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (802,786) $ (260,610)
Adjustments to reconcile net loss to net cash used by operating activities:    
Depreciation and amortization 13,707 17,653
Issuance of restricted common stock, options and warrants for services 923 385
Loss on debt paid with common stock 70,934
Loss (gain) from derivative liability-notes payable 323,467 (2,321)
Amortization of derivative debt discount 8,193
Changes in operating assets and liabilities:    
(Increase) in inventory (14,451)
Increase in accounts payable and accrued expenses 289,502 94,799
Decrease in cash overdraft (153)
Increase in accounts payable and accrued expenses-related parties 83,750 83,750
Increase in deferred revenue and deposits 5,700
Net cash used by operating activities (20,502) (67,055)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Net cash used by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payment of capitalized leases (4,122)
Proceeds from notes and loans payable 25,000 7,000
(Decrease) increase in related party notes and loans payable-net (4,543) 64,177
Net cash provided by financing activities 20,457 67,055
Net (decrease) in cash (45)
Cash, beginning of period 591
Cash, end of period 546
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Payment of interest in cash 1,603
NON CASH INVESTING AND FINANCING ACTIVITIES:    
Issuance of 100,000,000 shares of Common stock for liability settlement 49,066
Issuance of 44,476,071 shares of Common stock for debt and interest settlement $ 34,246
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical)
 3 Months Ended
Mar. 31, 2017
shares
Liability Settlement [Member]  
Common stock issued, shares 100,000,000
Debt and Interest Settlement [Member]  
Common stock issued, shares 44,476,071
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
Organizational and Significant Accounting Policies
 3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organizational and Significant Accounting Policies

NOTE 1 – ORGANIZATIONAL AND SIGNIFICANT ACCOUNTING POLICIES

 

A. ORGANIZATION AND OPERATIONS

 

Cyclone Power Technologies, Inc. (the “Company”, “our,” “Cyclone”) is the successor entity to the business of Cyclone Technologies LLLP (the “LLLP”), a limited liability limited partnership formed in Florida in September 2004. The LLLP was the original developer and intellectual property holder of the Cyclone engine technology. Initialed in 2016, the Company’s current business model, is to be primarily a research and development engineering company whose main purpose is to develop, commercialize, market and license its Cyclone engine technology. Engines and related systems will be outsourced for manufacturing but the company will invoice customers. Our prior business model also included engine manufacturing.

 

In 2012, the Company established Cyclone Performance LLC (“Cyclone Performance”) f/k/a Cyclone-TeamSteam USA, LLC. The purpose of Cyclone Performance is to build, test and run a vehicle utilizing the Company’s engine. At March 31, 2017 the company had a 95% controlling interest in Cyclone Performance.

 

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

 

The condensed consolidated financial statements include the accounts of the Company 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 8 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, consisting of normal journal entries 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. Complete financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K.

 

The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31,2017.

 

The Company prepares its consolidated financial statements in conformity with account principles generally accepted in the United States (“U.S. GAAP”). 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.

 

The financial statements presented for the three months ended March 31, 2017 and 2016 are unaudited.

 

C. CASH

 

Cash includes cash on hand and cash in banks. At March 31, 2017 and December 31, 2016, the Company maintained cash balances at one financial institution.

 

D. COMPUTATION OF INCOME (LOSS) PER SHARE

 

Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (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, 2017 and 2016, total anti-dilutive shares amounted to approximately 14.9 and 13.8 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 December 31, 2016 and March 31, 2017, 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 2014 through 2016.

 

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 would be evaluated and allocated as appropriate. Payments received before all of the relevant criteria for revenue recognition will be satisfied are recorded as deferred revenue on the condensed 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. Based on our revised R&D company business model, commencing in 2016, costs include material to develop a completed engine. In our former business model, costs include material, labor and allocated overhead to manufacture a completed engine.

 

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 as of January 1, 2017 (beginning of period) and March 31, 2017 (end of period) is as follows:

 

Instrument   Beginning of Period     Change     End of Period     Level  

Valuation

Methodology

Derivative liabilities   $ 754,000     $ 291,001     $ 1,045,001       3   Stochastic Process
Forecasting 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, 2017 and 2016 were $40,676 and $34,693, 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 (“BSM option pricing model”) 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

 

The FASB issued the following in 2017:

 

Update 2017-03—Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update). The Company is still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows, and the effective date of application is 2018.

 

Update 2017-01—Business Combinations (Topic 805): Clarifying the Definition of a Business In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting. This addresses the accounting for share-based payment transactions and includes the recognition of the income tax effects of awards that vest or settle as income tax expense and clarification of the presentation of certain components of share-based awards in the statement of cash flows.

 

We are still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows, and the effective date of application is 2018.

 

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, 2017, the Company maintained its cash in one quality financial institution. The Company has not experienced any losses in its bank accounts through March 31, 2017. 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 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Going Concern
 3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern

NOTE 2 - GOING CONCERN

 

As shown in the accompanying condensed consolidated financial statements, the Company incurred substantial operating and other losses and expenses of approximately $0.8 million and $0.3 million for the three months ended March 31, 2017 and 2016 respectively. The cumulative deficit since inception is approximately $61.6 million. The Company has a working capital deficit at March 31, 2017 of approximately $4.6 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 debt, advance contract payments (deferred revenue), advances from and deferred payments to related parties and the timing of payment of accrued liabilities.
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Inventory, Net
 3 Months Ended
Mar. 31, 2017
Inventory Disclosure [Abstract]  
Inventory, Net

NOTE 3 – INVENTORY, NET

 

Inventory principally consists of raw material to develop an engine and it is stated at the lower of cost or market.

 

Inventory, net consists of:

 

    March 31, 2017     December 31, 2016  
Raw materials   $ 26,667     $ 26,667  
Total   $ 26,667     $ 26,667  

 

We provide estimated provisions for the realization, valuation and obsolescence of our inventories, including adjustments to market, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. We look at historical inventory aging and usage reports and margin analyses in determining our provision estimate.
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment, Net
 3 Months Ended
Mar. 31, 2017
PROPERTY AND EQUIPMENT  
Property and Equipment, Net

NOTE 4 – PROPERTY AND EQUIPMENT, NET

 

Property and equipment consists of the following:

 

    March 31, 2017     December 31, 2016  
Display equipment for trade shows   $ 6,270     $ 6,270  
Leasehold improvements and furniture and fixtures     93,922       93,922  
Equipment and computers     202,578       202,578  
Total     302,770       302,770  
Accumulated depreciation     (216,843 )     (209,498 )
Net property and equipment   $ 85,927     $ 93,272  

 

Depreciation expense for the three months ended March 31, 2017 and 2016 was $7,345 and $8,372, respectively.
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Patents, Trademarks and Copyrights
 3 Months Ended
Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Patents, Trademarks and Copyrights

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, 2017 and December 31, 2016 were $172,116 and $178,478, respectively. For the three months ended March 31, 2017 and for the year ended December 31, 2016, the Company capitalized $0 and $0, respectively, of expenditures related to these assets. As of March 31, 2017, the Company had 15 patents issued on its technology both in the U.S. and internationally, and the U.S.

 

Patents, trademarks and copyrights are amortized over the life of the intellectual property which is 15 years. Amortization expenses for the three months ended March 31, 2017 and 2016 were $6,362 and $8,921, respectively.
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
Notes and Other Loans Payable
 3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Notes and Other Loans Payable

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, 2017     December 31, 2016  
             
12% convertible notes payable, maturing at various dates from November 2013 through April 2016 (A)   $ 42,951     $ 42,951  
                 
10% convertible note payable, monthly payments commencing in December 2013 through July 2014 (B)     19,963       19,963  
                 
10% convertible notes payable maturing at various dates from May 2015 through February 2016 (C)     76,000       76,000  
                 
10% convertible notes payable, maturing at various dates from December 2015 through January 2016 (D)     29,303       29,303  

 

10% convertible notes payable maturing at various dates from February 2015 through August 2015 (F)     116,200       116,200  
                 
12% convertible notes payable, maturing at various dates from April 2015 through May 2015 (G)     60,000       85,000  
                 
10% note payable, maturing Feb 3, 2018     50,000       50,000  
                 
Various notes payable, maturing 2016 and 2017     38,500       13,500  
                 
Note payable, maturing Oct 14 2016, (I)     27,000       27,000  
                 
Demand Note, (H)     6,725       6,725  
                 
Total non related party notes     466,642       512,642  

 

  (A) Notes issued net of 10% original discount (fully amortized). This note is in default.
     
  (B) Note issued net of original discount (fully amortized). Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000, plus subsequent penalty interest for non-payment of convertible debt and interest. The Company is negotiating a reduced settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
     
  (C) Notes issued net of discount from derivative liabilities (fully amortized). At December 31, 2016, the Company held approximately 97 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
     
  (D) Notes issued net of discount (fully amortized). This note is in default.
     
  (F) Notes issued net of discount from derivative liabilities (fully amortized). At March 31, 2017, the Company held 233.3 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
     
  (G) Notes issued net of discount from derivative liabilities (fully amortized). The Company is subject to litigation judgment of approximately $150,000, plus subsequent penalty interest for non–payment. Company is seeking to arrange a settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
     
  (H) Note convertible into common stock at a 40% discount to 20 day market average.
     
  (I) Interest of $3,000 to be paid in 1,500,000 shares of restricted company common stock This note is in default

 

B. RELATED PARTIES

 

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

 

    March 31, 2017     December 31, 2016  
             
6% demand loans per Operations Agreement with Schoell Marine Inc., a company owned by Cyclone’s Chairman and controlling shareholder (A)   $ 172,751     $ 169,751  
6% non-collateralized loans from officer and shareholder, payable on demand. The original principal balances were $157,101.     94,849       107,842  
12% non-collateralized loans from officer and shareholder, payable on demand     21,044       21,044  
Accrued Interest     100,573       95,123  
Total current related party notes, inclusive of accrued interest   $ 389,217     $ 393,760  

 

  (A) This note arose from services and salaries incurred by Schoell Marine on behalf of the Company. The Schoell Marine note bears an interest rate of 6% and repayments occur as cash flow of the Company permits.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Transactions- Deferred Compensation
 3 Months Ended
Mar. 31, 2017
Related Party Transactions [Abstract]  
Related Party Transactions- Deferred Compensation

NOTE 7 – RELATED PARTY TRANSACTIONS- DEFERRED COMPENSATION

 

Included in accounts payable and accrued expenses - related parties as of March 31, 2017 and December 31, 2016 are $628,975 and $545,225 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.
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Preferred Stock
 3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Preferred Stock

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.
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Transactions
 3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Stock Transactions

NOTE 9 – STOCK TRANSACTIONS

 

During the three months ended March 31, 2017, the Company:

 

  a- Amortized (based on vesting) $923 of common stock options for employee services.
     
  b- Issued approximately 144.5 million shares of common stock pursuant to conversions of approximately $83,000 of notes payable, accrued liabilities and related interest.
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants
 3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options and Warrants

NOTE 10 – STOCK OPTIONS AND WARRANTS

 

A. COMMON STOCK OPTIONS

 

Per the employment contracts with certain officers, for the three months ended March 31, 2017, the company issued 450,000 common stock options, valued at $675 (pursuant to the Black Scholes valuation model) that are exercisable into shares of common stock at an average exercise price of $.0015 and with a maturity life of 10 years. For the three months year ended March 31, 2017, the amortization of stock options was $923 and the unamortized balance was $2,149.

 

A summary of the common stock options for the period from December 31, 2016 through March 31, 2017 follows:

 

    Number Outstanding     Weighted Avg. Exercise Price     Weighted Avg. Remaining Contractual Life (Years)  
                   
Balance, December 31, 2016     14,030,000     $ .096       5.3  
Options issued     450,000       .002       10  
Options exercised     -       -       -  
Expired     -       -       -  
Balance, March 31, 2017     14,480,000     $ .093       5.2  

 

The vested and exercisable options at period end follows:

 

    Exercisable/ Vested Options Outstanding     Weighted  Avg. Exercise Price     Weighted Avg. Remaining Contractual Life (Years)  
Balance March 31, 2017     12,680,000     $ .100       4.6  
Additional vesting by June 30, 2017     450,000       .002       9.0  

 

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

 

    Three Months Ended
March 31, 2017		     Three Months Ended
March 31, 2016		  
Risk free interest rate     1.5 %     .89 %
Expected volatility     134 %     102 %
Expected term     3       3  
Expected dividend yield     0 %     0 %
Average value per options and warrants   $ .0015     $ .0003  

 

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

 

A summary of outstanding vested warrant activity for the period from December 31, 2016 to March 31, 2017 follows:

 

    Number Outstanding     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Years)  
Common Stock Warrants                        
                         
Balance, December 31, 2016     500,000     $ .08       .67  
Warrants issued     -       -       -  
Warrants expired     -       -       -  
Warrants cancelled     -       -       -  
Balance, March 31, 2017     500,000     $ .08       .42  
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes
 3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

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, 2017 and 2016 are as follows:

 

    Three Months ended
March 31, 2017		     Amount     Three Months ended
March 31 2016		     Amount  
Tax benefit at U.S. statutory rate     34 %   $ 134,493       34 %   $ 143,606  
State taxes, net of federal benefit     4 %     15,823       4 %     16,895  
Change in valuation allowance     (38 )%   $ (150,316 )     (38 )%   $ (160,501 )

 

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 2017 and December 31, 2016 consisted of the following:

 

Deferred Tax Assets   March 31, 2017     December 31, 2016  
Net Operating Loss Carry-forward   $ 10,759,748     $ 10,577,607  
Deferred Tax Liabilities – Accrued Officers’ Salaries     (926,431 )     (900,306 )
Net Deferred Tax Assets     9,833,317       9,677,301  
Valuation Allowance     (9,833,317 )     (9,677,301 )
Total Net Deferred Tax Assets   $ -     $ -  

 

As of March 31, 2017, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $23.2 million that may be offset against future taxable income through 2031. 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.
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Lease Obligations
 3 Months Ended
Mar. 31, 2017
Leases [Abstract]  
Lease Obligations

NOTE 12- LEASE OBLIGATIONS

 

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 period ended December 2016 and the current lease is monthly with a 3% rate increase. Occupancy costs for each of the three months ended March 31, 2017 and 2016 was $15,900.

 

B. CAPITALIZED LEASE OBLIGATIONS

 

Total lease payments made for the three months ended March 31, 2017 were $0. The balance of capitalized lease obligations payable at March 31, 2017 and December 31, 2016 was $39,847. Future lease payments are:

 

2017   $ 14,312  
2018     9,754  
2019     8,127  
2020     7,655  
2021     0  
    $ 39,848  
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

The Company has employment agreements with Harry Schoell, Chairman and CTO (previously, CEO), at $150,000 per year and Frankie Fruge, President, at $120,000 per year; (collectively, the “Executives”). These agreements provide for a term of three (3) years from their Effective Date (July 2007 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.
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Subsidiary
 3 Months Ended
Mar. 31, 2017
Equity Method Investments and Joint Ventures [Abstract]  
Consolidated Subsidiary

NOTE 14 –CONSOLIDATED SUBSIDIARY

 

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 the last quarter of 2012, the Company sold a 5% equity investment to an unrelated investor for $30,000. Subsequent 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, 2017, 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.
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Receivables, Deferred Revenue and Backlog
 3 Months Ended
Mar. 31, 2017
Deferred Revenue Disclosure [Abstract]  
Receivables, Deferred Revenue and Backlog

NOTE 15 – RECEIVABLES, DEFERRED REVENUE AND BACKLOG

 

As of March 31, 2017, total backlog for prototype engines to be delivered was $400,000 from the Combilift agreement, of which $100,000 has been paid and has been recorded as deferred revenue. In 2016, three (3) other customers advanced $175,700 as deposits towards payments on $355,000 of contracts for engines currently estimated to be delivered in 2017 and license deposits.
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

NOTE 16 – DERIVATIVE FINANCIAL INSTRUMENTS

 

Pursuant to additional financing, in the year ended December 31, 2016 and for the three months ended March 31, 2017 the Company entered into no convertible note agreements. Prior convertible notes had conversion prices into common stock that ranged from a discount of 30% to 45% 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.

 

In the three months ended March 31, 2017, the Company recorded a non cash charge of $323,467 of derivative losses related to adjusting the derivative liability to fair value. At March 31, 2017, the derivative related fair value of debt and related convertible liabilities was $1,045,001.

 

The Company calculates the estimated fair values of the liabilities for derivative instruments at each quarter-end using the BSM option pricing model and Stochastic Process Forecasting models (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 update

 

    3 Months Ended March 31, 2017     Year Ended
December. 31, 2016		  
Volatility     121 %     71% - 91 %
Risk Free Rate     1.0 %     .02% -.28 %
Expected Term (years)     .25       0 -1.05  
Dividend Rate     0 %     0 %
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Litigation
 3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Litigation

NOTE 17 – LlTIGATION

 

Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000, plus subsequent penalty interest for non-payment of convertible debt and interest. Tonaquint Inc. filed and received a judgment and the Company is negotiating a reduced settlement. As at March 31 2017, outstanding interest, default interest and default judgment penalties are included in accrued liabilities.

 

In August 2015, the Company is subject to litigation of approximately $150,000, plus subsequent penalty interest for non -payment of a liability. JSJ filed and received a judgment and the Company has arranged a settlement. As at March 31, 2017, outstanding interest, default interest and default judgment penalties are included in accrued liabilities.
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events
 3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
Subsequent Events

NOTE 18 – SUBSEQUENT EVENTS

 

In the second quarter of 2017, the Company engaged in the following transactions:

 

  a- The Company issued 70 million shares of common stock in settlement of a $123,000 accrued liability for services.
     
  b- The company issued approximately 6.4 million shares of common stock valued at approximately $5,000 for services.
     
  c- The company obtained net proceeds of $99,650 from issuance of indebtedness to existing debt holders.
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Organizational and Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Operations

A. ORGANIZATION AND OPERATIONS

 

Cyclone Power Technologies, Inc. (the “Company”, “our,” “Cyclone”) is the successor entity to the business of Cyclone Technologies LLLP (the “LLLP”), a limited liability limited partnership formed in Florida in September 2004. The LLLP was the original developer and intellectual property holder of the Cyclone engine technology. Initialed in 2016, the Company’s current business model, is to be primarily a research and development engineering company whose main purpose is to develop, commercialize, market and license its Cyclone engine technology. Engines and related systems will be outsourced for manufacturing but the company will invoice customers. Our prior business model also included engine manufacturing.

 

In 2012, the Company established Cyclone Performance LLC (“Cyclone Performance”) f/k/a Cyclone-TeamSteam USA, LLC. The purpose of Cyclone Performance is to build, test and run a vehicle utilizing the Company’s engine. At March 31, 2017 the company had a 95% controlling interest in Cyclone Performance.
Principles of Consolidation and Basis of Presentation

B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

 

The condensed consolidated financial statements include the accounts of the Company 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 8 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, consisting of normal journal entries 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. Complete financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K.

 

The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31,2017.

 

The Company prepares its consolidated financial statements in conformity with account principles generally accepted in the United States (“U.S. GAAP”). 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.

 

The financial statements presented for the three months ended March 31, 2017 and 2016 are unaudited.
Cash

C. CASH

 

Cash includes cash on hand and cash in banks. At March 31, 2017 and December 31, 2016, the Company maintained cash balances at one financial institution.
Computation of Income (Loss) Per Share

D. COMPUTATION OF INCOME (LOSS) PER SHARE

 

Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (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, 2017 and 2016, total anti-dilutive shares amounted to approximately 14.9 and 13.8 million shares, respectively.
Income Taxes

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 December 31, 2016 and March 31, 2017, 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 2014 through 2016.
Revenue Recognition

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 would be evaluated and allocated as appropriate. Payments received before all of the relevant criteria for revenue recognition will be satisfied are recorded as deferred revenue on the condensed 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.
Warranty Provisions

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

H. INVENTORY

 

Inventory is recorded at the lower of cost or market. Based on our revised R&D company business model, commencing in 2016, costs include material to develop a completed engine. In our former business model, costs include material, labor and allocated overhead to manufacture a completed engine.

 

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

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 as of January 1, 2017 (beginning of period) and March 31, 2017 (end of period) is as follows:

 

Instrument   Beginning of Period     Change     End of Period     Level  

Valuation

Methodology

Derivative liabilities   $ 754,000     $ 291,001     $ 1,045,001       3   Stochastic Process
Forecasting Model
                                   

 

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

J. RESEARCH AND DEVELOPMENT

 

Research and development activities for product development are expensed as incurred. Costs for the three months ended March 31, 2017 and 2016 were $40,676 and $34,693, respectively.
Stock Based Compensation

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.
Common Stock Options and Purchase Warrants

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 (“BSM option pricing model”) 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”.
Original Issue Debt Discount

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 and Equipment

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 of Long Lived Assets

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.
Recent Accounting Pronouncements

P. RECENT ACCOUNTING PRONOUNCEMENTS

 

The FASB issued the following in 2017:

 

Update 2017-03—Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update). The Company is still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows, and the effective date of application is 2018.

 

Update 2017-01—Business Combinations (Topic 805): Clarifying the Definition of a Business In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting. This addresses the accounting for share-based payment transactions and includes the recognition of the income tax effects of awards that vest or settle as income tax expense and clarification of the presentation of certain components of share-based awards in the statement of cash flows.

 

We are still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows, and the effective date of application is 2018.
Concentration of Risk

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, 2017, the Company maintained its cash in one quality financial institution. The Company has not experienced any losses in its bank accounts through March 31, 2017. 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.
Derivative Financial Instruments

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 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Organizational and Significant Accounting Policies (Tables)
 3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Fair Value of Financial Instrument

The summary of fair values and changing values of financial instruments as of January 1, 2017 (beginning of period) and March 31, 2017 (end of period) is as follows:

 

Instrument   Beginning of Period     Change     End of Period     Level  

Valuation

Methodology

Derivative liabilities   $ 754,000     $ 291,001     $ 1,045,001       3   Stochastic Process
Forecasting Model
Schedule of Estimated Useful Lives of Property and Equipment

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
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Inventory, Net (Tables)
 3 Months Ended
Mar. 31, 2017
Inventory Disclosure [Abstract]  
Schedule of Inventory, Net

Inventory, net consists of:

 

    March 31, 2017     December 31, 2016  
Raw materials   $ 26,667     $ 26,667  
Total   $ 26,667     $ 26,667  
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment, Net (Tables)
 3 Months Ended
Mar. 31, 2017
PROPERTY AND EQUIPMENT  
Schedule of Property and Equipment, Net

Property and equipment consists of the following:

 

    March 31, 2017     December 31, 2016  
Display equipment for trade shows   $ 6,270     $ 6,270  
Leasehold improvements and furniture and fixtures     93,922       93,922  
Equipment and computers     202,578       202,578  
Total     302,770       302,770  
Accumulated depreciation     (216,843 )     (209,498 )
Net property and equipment   $ 85,927     $ 93,272  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Notes and Other Loans Payable (Tables)
 3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Schedule of Non-related Party Notes and Other Loans Payable

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

 

    March 31, 2017     December 31, 2016  
             
12% convertible notes payable, maturing at various dates from November 2013 through April 2016 (A)   $ 42,951     $ 42,951  
                 
10% convertible note payable, monthly payments commencing in December 2013 through July 2014 (B)     19,963       19,963  
                 
10% convertible notes payable maturing at various dates from May 2015 through February 2016 (C)     76,000       76,000  
                 
10% convertible notes payable, maturing at various dates from December 2015 through January 2016 (D)     29,303       29,303  

 

10% convertible notes payable maturing at various dates from February 2015 through August 2015 (F)     116,200       116,200  
                 
12% convertible notes payable, maturing at various dates from April 2015 through May 2015 (G)     60,000       85,000  
                 
10% note payable, maturing Feb 3, 2018     50,000       50,000  
                 
Various notes payable, maturing 2016 and 2017     38,500       13,500  
                 
Note payable, maturing Oct 14 2016, (I)     27,000       27,000  
                 
Demand Note, (H)     6,725       6,725  
                 
Total non related party notes     466,642       512,642  

 

  (A) Notes issued net of 10% original discount (fully amortized). This note is in default.
     
  (B) Note issued net of original discount (fully amortized). Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000, plus subsequent penalty interest for non-payment of convertible debt and interest. The Company is negotiating a reduced settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
     
  (C) Notes issued net of discount from derivative liabilities (fully amortized). At December 31, 2016, the Company held approximately 97 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
     
  (D) Notes issued net of discount (fully amortized). This note is in default.
     
  (F) Notes issued net of discount from derivative liabilities (fully amortized). At March 31, 2017, the Company held 233.3 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
     
  (G) Notes issued net of discount from derivative liabilities (fully amortized). The Company is subject to litigation judgment of approximately $150,000, plus subsequent penalty interest for non–payment. Company is seeking to arrange a settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
     
  (H) Note convertible into common stock at a 40% discount to 20 day market average.
     
  (I) Interest of $3,000 to be paid in 1,500,000 shares of restricted company common stock This note is in default
Schedule of Related Party Notes and Other Loans Payable

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

 

    March 31, 2017     December 31, 2016  
             
6% demand loans per Operations Agreement with Schoell Marine Inc., a company owned by Cyclone’s Chairman and controlling shareholder (A)   $ 172,751     $ 169,751  
6% non-collateralized loans from officer and shareholder, payable on demand. The original principal balances were $157,101.     94,849       107,842  
12% non-collateralized loans from officer and shareholder, payable on demand     21,044       21,044  
Accrued Interest     100,573       95,123  
Total current related party notes, inclusive of accrued interest   $ 389,217     $ 393,760  

 

  (A) This note arose from services and salaries incurred by Schoell Marine on behalf of the Company. The Schoell Marine note bears an interest rate of 6% and repayments occur as cash flow of the Company permits.

XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants (Tables)
 3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Common Stock Option

A summary of the common stock options for the period from December 31, 2016 through March 31, 2017 follows:

 

    Number Outstanding     Weighted Avg. Exercise Price     Weighted Avg. Remaining Contractual Life (Years)  
                   
Balance, December 31, 2016     14,030,000     $ .096       5.3  
Options issued     450,000       .002       10  
Options exercised     -       -       -  
Expired     -       -       -  
Balance, March 31, 2017     14,480,000     $ .093       5.2  
Schedule of Vested and Exercisable Options

The vested and exercisable options at period end follows:

 

    Exercisable/ Vested Options Outstanding     Weighted  Avg. Exercise Price     Weighted Avg. Remaining Contractual Life (Years)  
Balance March 31, 2017     12,680,000     $ .100       4.6  
Additional vesting by June 30, 2017     450,000       .002       9.0  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

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

 

    Three Months Ended
March 31, 2017		     Three Months Ended
March 31, 2016		  
Risk free interest rate     1.5 %     .89 %
Expected volatility     134 %     102 %
Expected term     3       3  
Expected dividend yield     0 %     0 %
Average value per options and warrants   $ .0015     $ .0003  
Schedule of Outstanding Vested Warrant Activity

A summary of outstanding vested warrant activity for the period from December 31, 2016 to March 31, 2017 follows:

 

    Number Outstanding     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Years)  
Common Stock Warrants                        
                         
Balance, December 31, 2016     500,000     $ .08       .67  
Warrants issued     -       -       -  
Warrants expired     -       -       -  
Warrants cancelled     -       -       -  
Balance, March 31, 2017     500,000     $ .08       .42  
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes (Tables)
 3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the three months ended March 31, 2017 and 2016 are as follows:

 

    Three Months ended
March 31, 2017		     Amount     Three Months ended
March 31 2016		     Amount  
Tax benefit at U.S. statutory rate     34 %   $ 134,493       34 %   $ 143,606  
State taxes, net of federal benefit     4 %     15,823       4 %     16,895  
Change in valuation allowance     (38 )%   $ (150,316 )     (38 )%   $ (160,501 )
Schedule of Deferred Tax Assets and Liabilities

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 2017 and December 31, 2016 consisted of the following:

 

Deferred Tax Assets   March 31, 2017     December 31, 2016  
Net Operating Loss Carry-forward   $ 10,759,748     $ 10,577,607  
Deferred Tax Liabilities – Accrued Officers’ Salaries     (926,431 )     (900,306 )
Net Deferred Tax Assets     9,833,317       9,677,301  
Valuation Allowance     (9,833,317 )     (9,677,301 )
Total Net Deferred Tax Assets   $ -     $ -  
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Lease Obligations (Tables)
 3 Months Ended
Mar. 31, 2017
Leases [Abstract]  
Schedule of Future Minimum Lease Payments for Capital Leases

Future lease payments are:

 

2017   $ 14,312  
2018     9,754  
2019     8,127  
2020     7,655  
2021     0  
    $ 39,848  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Financial Instruments (Tables)
 3 Months Ended
Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Liabilities at Fair Value

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 update

 

    3 Months Ended March 31, 2017     Year Ended
December. 31, 2016		  
Volatility     121 %     71% - 91 %
Risk Free Rate     1.0 %     .02% -.28 %
Expected Term (years)     .25       0 -1.05  
Dividend Rate     0 %     0 %
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
Organizational and Significant Accounting Policies (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Antidilutive securities excluded from computation of earnings per share 14,900,000 13,800,000
Research and development expense $ 40,676 $ 34,693
Cyclone Performance LLC [Member]    
Equity method investment, ownership percentage 95.00%  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
Organizational and Significant Accounting Policies - Schedule of Fair Value of Financial Instrument (Details)
 3 Months Ended
Mar. 31, 2017
USD ($)
Derivative liabilities, Beginning of Period $ 754,000
Derivative liabilities, End of Period 1,045,001
Fair Value, Inputs, Level 3 [Member]  
Derivative liabilities, Beginning of Period 754,000
Derivative liabilities, Change 291,001
Derivative liabilities, End of Period $ 1,045,001
Derivative liabilities, Valuation Methodology Stochastic Process
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
Organizational and Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment (Details)
 3 Months Ended
Mar. 31, 2017
Display Equipment For Trade Shows [Member]  
Property and equipment estimated useful lives 3 years
Leasehold Improvements and Furniture and Fixtures [Member] | Minimum [Member]  
Property and equipment estimated useful lives 10 years
Leasehold Improvements and Furniture and Fixtures [Member] | Maximum [Member]  
Property and equipment estimated useful lives 15 years
Shop Equipment [Member]  
Property and equipment estimated useful lives 7 years
Computers [Member]  
Property and equipment estimated useful lives 3 years
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
Going Concern (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Income (loss) from operating and other losses and expenses $ 800,000 $ 30,000  
Accumulated deficit 61,631,446   $ 60,828,659
Working capital deficit $ 4,600,000    
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
Inventory, Net - Schedule of Inventory, Net (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Inventory Disclosure [Abstract]    
Raw material $ 26,667 $ 26,667
Total $ 26,667 $ 26,667
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment, Net (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
PROPERTY AND EQUIPMENT    
Depreciation expense $ 7,345 $ 8,372
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Property and equipment gross $ 302,770 $ 302,770
Accumulated depreciation (216,843) (209,498)
Net property and equipment 85,927 93,272
Display Equipment For Trade Shows [Member]    
Property and equipment gross 6,270 6,270
Leasehold Improvements and Furniture and Fixtures [Member]    
Property and equipment gross 93,922 93,922
Equipment and Computers [Member]    
Property and equipment gross $ 202,578 $ 202,578
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.7.0.1
Patents, Trademarks and Copyrights (Details Narrative)
 3 Months Ended 12 Months Ended
Mar. 31, 2017
USD ($)
Patents
Mar. 31, 2016
USD ($)
Dec. 31, 2016
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]      
Net patents, trademarks and copyrights $ 172,116   $ 178,478
Patents, trademarks and copyrights capitalized $ 0   $ 0
Number of patents | Patents 15    
Finite-lived intangible asset, useful life 15 years    
Amortization expenses $ 6,362 $ 8,921  
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.7.0.1
Notes and Other Loans Payable - Schedule of Non-related Party Notes and Other Loans Payable (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Total non related party notes $ 466,642 $ 512,642
12% Convertible Notes Payable [Member]    
Total non related party notes [1] 42,951 42,951
10% Convertible Notes Payable [Member]    
Total non related party notes [2] 19,963 19,963
10% One Convertible Notes Payable [Member]    
Total non related party notes [3] 76,000 76,000
10% Two Convertible Notes Payable [Member]    
Total non related party notes [4] 29,303 29,303
10% Three Convertible Notes Payable [Member]    
Total non related party notes [5] 116,200 116,200
12% One Convertible Notes Payable [Member]    
Total non related party notes [6] 60,000 85,000
10% Note Payable [Member]    
Total non related party notes 50,000 50,000
Various Note Payable [Member]    
Total non related party notes 38,500 13,500
Note Payable [Member]    
Total non related party notes [7] 27,000 27,000
Demand Note [Member]    
Total non related party notes [8] $ 6,725 $ 6,725
[1] Notes issued net of 10% original discount (fully amortized). This note is in default.
[2] Note issued net of original discount (fully amortized). Effective May 8, 2015, the Company is subject to a default judgment of approximately $175,000, plus subsequent penalty interest for non-payment of convertible debt and interest. The Company is negotiating a reduced settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
[3] Notes issued net of discount from derivative liabilities (fully amortized). At December 31, 2016, the Company held approximately 97 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
[4] Notes issued net of discount (fully amortized). This note is in default.
[5] Notes issued net of discount from derivative liabilities (fully amortized). At March 31, 2017, the Company held 233.3 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. This note is in default.
[6] Notes issued net of discount from derivative liabilities (fully amortized). The Company is subject to litigation judgment of approximately $150,000, plus subsequent penalty interest for non–payment. Company is seeking to arrange a settlement. Unpaid interest, default penalties and default interest is included in accounts payable and accrued liabilities.
[7] Interest of $3,000 to be paid in 1,500,000 shares of restricted company common stock This note is in default
[8] Note convertible into common stock at a 40% discount to 20 day market average.
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.7.0.1
Notes and Other Loans Payable - Schedule of Non-related Party Notes and Other Loans Payable (Details) (Parenthetical) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Interest paid $ 1,603  
Conversion of debt shares converted 144,500,000    
12% Convertible Notes Payable [Member]      
Convertible notes payable, maturity date description November 2013 through April 2016   November 2013 through April 2016
Original discount rate 10.00%   10.00%
10% Convertible Notes Payable [Member]      
Convertible notes payable, maturity date description December 2013 through July 2014   December 2013 through July 2014
10% Convertible Notes Payable [Member] | Derivative Liabilities [Member]      
Payments for legal settlements $ 175,000   $ 175,000
10% One Convertible Notes Payable [Member]      
Convertible notes payable, maturity date description May 2015 through February 2016   May 2015 through February 2016
10% One Convertible Notes Payable [Member] | Derivative Liabilities [Member]      
Conversion of debt shares converted     97,000,000
10% Two Convertible Notes Payable [Member]      
Convertible notes payable, maturity date description December 2015 through January 2016   December 2015 through January 2016
10% Three Convertible Notes Payable [Member]      
Convertible notes payable, maturity date description February 2015 through August 2015   February 2015 through August 2015
10% Three Convertible Notes Payable [Member] | Derivative Liabilities [Member]      
Conversion of debt shares converted 233,300,000    
12% One Convertible Notes Payable [Member]      
Convertible notes payable, maturity date description April 2015 through May 2015   April 2015 through May 2015
12% One Convertible Notes Payable [Member] | Derivative Liabilities [Member]      
Payments for legal settlements $ 150,000   $ 150,000
10% Note Payable [Member]      
Note payable maturity date Feb. 03, 2018   Feb. 03, 2018
Various Note Payable [Member]      
Convertible notes payable, maturity date description 2016 and 2017   2016 and 2017
Note Payable [Member]      
Note payable maturity date Oct. 14, 2016   Oct. 14, 2016
Interest paid $ 3,000   $ 3,000
Number of restricted shares 1,500,000   1,500,000
Note Convertible [Member] | Derivative Liabilities [Member]      
Original discount rate 40.00%   40.00%
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.7.0.1
Notes and Other Loans Payable - Schedule of Related Party Notes (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Total current related party notes, inclusive of accrued interest $ 389,217 $ 393,760
Six Percent Demand Loans Per Operations Agreement With Schoell Marine Inc [Member]    
Total current related party notes, inclusive of accrued interest [1] 172,751 169,751
Six Percent Non-collateralized Loans from Officer and Shareholder [Member]    
Total current related party notes, inclusive of accrued interest 94,849 107,842
Twelve Percent Non-collateralized Loans from Officer and Shareholder [Member]    
Total current related party notes, inclusive of accrued interest 21,044 21,044
Accrued Interest [Member]    
Total current related party notes, inclusive of accrued interest $ 100,573 $ 95,123
[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.
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.7.0.1
Notes and Other Loans Payable - Schedule of Related Party Notes (Details) (Parenthetical) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Schoell Marine [Member]    
Debt instrument note bears an interest rate 6.00% 6.00%
Six Percent Non-collateralized Loans from Officer and Shareholder [Member]    
Debt instrument note bears an interest rate 6.00% 6.00%
Original principal balances $ 157,101 $ 157,101
Officer and Shareholder [Member]    
Debt instrument note bears an interest rate 12.00% 12.00%
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Transactions- Deferred Compensation (Details Narrative) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Related Party Transactions [Abstract]    
Accounts payable and accrued expenses - related parties $ 628,975 $ 545,225
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.7.0.1
Preferred Stock (Details Narrative)
 3 Months Ended
Mar. 31, 2017
shares
Voting control percentage 51.00%
Series B Preferred Stock [Member]  
Preferred stock shares convertible with common stock 1,000
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Transactions (Details Narrative)
 3 Months Ended
Mar. 31, 2017
USD ($)
shares
Equity [Abstract]  
Amortized common stock options based on vesting $ 923
Number of common stock shares pursuant to conversion of notes payable, accrued liabilities and related interest | shares 144,500,000
Number of common stock pursuant to conversion of notes payable, accrued liabilities and related interest $ 83,000
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants (Details Narrative)
 3 Months Ended
Mar. 31, 2017
USD ($)
$ / shares
shares
Share-based compensation arrangement by share-based payment award, options, grants in period, gross | shares 450,000
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price (in dollars per share) | $ / shares $ 0.002
Share-based compensation $ 923
Employee service share-based compensation, nonvested awards, compensation cost not yet recognized $ 2,149
Employment Contracts [Member] | Officers [Member]  
Share-based compensation arrangement by share-based payment award, options, grants in period, gross | shares 450,000
Share-based compensation arrangement by share-based payment award, options, grants in period value $ 675
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price (in dollars per share) | $ / shares $ 0.0015
Stock options issued during period, maturity life 10 years
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants - Schedule of Common Stock Option (Details)
 3 Months Ended
Mar. 31, 2017
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Number Outstanding, Balance | shares 14,030,000
Number Outstanding, Options issued | shares 450,000
Number Outstanding, Options exercised | shares
Number Outstanding, Options Expired | shares
Number Outstanding, Balance | shares 14,480,000
Weighted Avg Exercise Price, Balance | $ / shares $ 0.096
Weighted Avg Exercise Price, Options issued | $ / shares 0.002
Weighted Avg Exercise Price, Options exercised | $ / shares
Weighted Avg Exercise Price, Options Expired | $ / shares
Weighted Avg Exercise Price, Balance | $ / shares $ 0.093
Weighted Avg Remaining Contractual Life (Years), Beginning Balance 5 years 3 months 19 days
Weighted Avg Remaining Contractual Life (Years), Options issued 10 years
Weighted Avg Remaining Contractual Life (years), Ending Balance 5 years 2 months 12 days
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants - Schedule of Vested and Exercisable Options (Details)
 3 Months Ended
Mar. 31, 2017
$ / shares
shares
Exercisable/Vested Options Outstanding | shares 12,680,000
Weighted Avg Exercise Price | $ / shares $ 0.100
Weighted Avg Remaining Contractual Life (Years) 4 years 7 months 6 days
Additional vesting by June 30, 2017 [Member]  
Exercisable/Vested Options Outstanding | shares 450,000
Weighted Avg Exercise Price | $ / shares $ 0.002
Weighted Avg Remaining Contractual Life (Years) 9 years
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) - $ / shares
 3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Risk free interest rate 1.00%    
Expected volatility 121.00%    
Expected term 3 months    
Expected dividend yield 0.00%   0.00%
Stock Options And Purchase Warrants [Member]      
Risk free interest rate 1.50% 0.89%  
Expected volatility 134.00% 102.00%  
Expected term 3 years 3 years  
Expected dividend yield 0.00% 0.00%  
Average value per options and warrants $ 0.0015 $ 0.0003  
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Options and Warrants - Schedule of Outstanding Vested Warrant Activity (Details)
 3 Months Ended
Mar. 31, 2017
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Number Outstanding, Balance | shares 500,000
Number Outstanding, Warrants issued | shares
Number Outstanding, Warrants expired | shares
Number Outstanding, Warrants cancelled | shares
Number Outstanding, Balance | shares 500,000
Weighted Average Exercise Price, Balance | $ / shares $ 0.08
Weighted Average Exercise Price, Warrants issued | $ / shares
Weighted Average Exercise Price, Warrants expired | $ / shares
Weighted Average Exercise Price, Warrants cancelled | $ / shares
Weighted Average Exercise Price, Balance | $ / shares $ 0.08
Weighted Average Remaining Contractual Life (Years), Beginning Balance 8 months 2 days
Weighted Average Remaining Contractual Life (years), Ending Balance 5 months 1 day
XML 65 R54.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes (Details Narrative)
 3 Months Ended
Mar. 31, 2017
USD ($)
Operating loss carryforwards $ 23,200,000
Operating loss carryforwards expiration date 2031
Minimum [Member]  
Percentage that carry forwards will expire unused 50.00%
XML 66 R55.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Tax Disclosure [Abstract]    
Tax benefit at U.S. statutory rate $ 134,493 $ 143,606
Tax benefit at U.S. statutory rate, Percent 34.00% 34.00%
State taxes, net of federal benefit $ 15,823 $ 16,895
State taxes, net of federal benefit, Percent 4.00% 4.00%
Change in valuation allowance $ (150,316) $ (160,501)
Change in valuation allowance, Percent (38.00%) (38.00%)
XML 67 R56.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]    
Net Operating Loss Carry-forward $ 10,759,748 $ 10,577,607
Deferred Tax Liabilities - Accrued Officers' Salaries (926,431) (900,306)
Net Deferred Tax Assets 9,833,317 9,677,301
Valuation Allowance (9,833,317) (9,677,301)
Total Net Deferred Tax Assets
XML 68 R57.htm IDEA: XBRL DOCUMENT v3.7.0.1
Lease Obligations (Details Narrative)
 3 Months Ended
Mar. 31, 2017
USD ($)
ft²
Mar. 31, 2016
USD ($)
Dec. 31, 2016
USD ($)
Leases [Abstract]      
Area of warehouse and office | ft² 6,000    
Monthly current lease increasing rate, percentage     3.00%
Occupancy costs $ 15,900 $ 15,900  
Repayments of long-term capital lease obligations 0    
Capital lease obligations $ 39,847   $ 39,847
XML 69 R58.htm IDEA: XBRL DOCUMENT v3.7.0.1
Lease Obligations - Schedule of Future Minimum Lease Payments for Capital Leases (Details)
Mar. 31, 2017
USD ($)
Leases [Abstract]  
2017 $ 14,312
2018 9,754
2019 8,127
2020 7,655
2021 0
Total $ 39,848
XML 70 R59.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies (Details Narrative)
 3 Months Ended
Mar. 31, 2017
USD ($)
Employment agreements, initial term of employment 3 years
Automatic renewing period of employment agreements 1 year
Harry Schoell Chairman And CTO [Member]  
Employment agreements, officer salary $ 150,000
Frankie Fruge COO [Member]  
Employment agreements, officer salary $ 120,000
XML 71 R60.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Subsidiary (Details Narrative) - USD ($)
 3 Months Ended
Dec. 31, 2012
Mar. 31, 2017
Cumulative unallocated losses to non-controlling interest of subsidiary   $ 953
Unrelated Investor [Member]    
Noncontrolling interest, ownership percentage by noncontrolling owners 5.00%  
Proceeds from issuance or sale of equity $ 30,000  
Corporate Officer[Member]    
Noncontrolling interest, ownership percentage by noncontrolling owners 5.00%  
Cyclone Performance LLC [Member]    
Percentage of ownership in a consolidated subsidiary 100.00%  
XML 72 R61.htm IDEA: XBRL DOCUMENT v3.7.0.1
Receivables, Deferred Revenue and Backlog (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Customer advance and deposits   $ 175,700
Payment of contracts for engines $ 355,000  
Combilift Agreement [Member]    
Backlog for prototype engines purchased 400,000  
Deferred revenue $ 100,000  
XML 73 R62.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Financial Instruments (Details Narrative)
 3 Months Ended
Mar. 31, 2017
USD ($)
Integer
Mar. 31, 2016
USD ($)
Dec. 31, 2016
USD ($)
Derivative losses related to adjusting the derivative liability | $ $ 323,467 $ (2,321)  
Derivative Liability | $ $ 1,045,001   $ 754,000
Minimum [Member]      
Debt instrument convertible price 30.00%    
Debt instrument trading days | Integer 10    
Maximum [Member]      
Debt instrument convertible price 45.00%    
Debt instrument trading days | Integer 20    
XML 74 R63.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Financial Instruments - Schedule of Derivative Liabilities at Fair Value (Details)
 3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Volatility 121.00%  
Risk Free Rate 1.00%  
Expected Term (years) 3 months  
Dividend Rate 0.00% 0.00%
Minimum [Member]    
Volatility   71.00%
Risk Free Rate   0.02%
Expected Term (years)   0 years
Maximum [Member]    
Volatility   91.00%
Risk Free Rate   0.28%
Expected Term (years)   1 year 18 days
XML 75 R64.htm IDEA: XBRL DOCUMENT v3.7.0.1
Litigation (Details Narrative) - USD ($)
 1 Months Ended
May 08, 2015
Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]    
Litigation settlement amount $ 175,000 $ 150,000
XML 76 R65.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events (Details Narrative) - Subsequent Event [Member]
 3 Months Ended
Jun. 30, 2017
USD ($)
shares
Number of shares issued for services | shares 6,400,000
Stock issued during period, value, issued for services $ 5,000
Proceeds from issuance of indebtness to existing debt holders $ 99,650
Accrued Liability [Member]  
Number of shares issued for services | shares 70,000,000
Stock issued during period, value, issued for services $ 123,000
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