CYCLONE POWER TECHNOLOGIES INC (Form: 10-Q, Received: 08/21/2017 10:16:02)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

	For the quarterly period ended June 30, 2017

[ ]

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 August 11, 2017, there were 1,847,264,078 shares of the registrant’s common stock issued and outstanding.

CYCLONE POWER TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	2

Condensed Consolidated Statements of Operations for the six and three months ended June 30, 2017 and 2016 (unaudited)	3

Condensed Consolidated Statements of Cash Flows for the six months ended June 31, 2017 and 2016 (unaudited)	4

Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures about Market Risk	18

Item 4. Controls and Procedures	18

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	19

Item 1A. Risk Factors	19

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3. Defaults upon Senior Securities	19

Item 4. Mine Safety Disclosures	20

Item 5. Other Information	20

Item 6. Exhibits	20

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CYCLONE POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2017 AND DECEMBER 31, 2016

(Unaudited)

	June 30, 2017			December 31, 2016

ASSETS
CURRENT ASSETS
Cash	$	-		$	591
Inventory, net		27,155			26,667
Other current assets		193			193
Total current assets		27,348			27,451

PROPERTY AND EQUIPMENT
Furniture, fixtures, and equipment		302,770			302,770
Accumulated depreciation		(223,558	)		(209,498	)
Net property and equipment		79,212			93,272

OTHER ASSETS
Patents, trademarks and copyrights		394,980			394,980
Accumulated amortization		(229,226	)		(216,502	)
Net patents, trademarks and copyrights		165,754			178,478
Other assets		7,862			7,862
Total other assets		173,616			186,340

Total Assets	$	280,176		$	307,063

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Bank Overdraft	$	16,883		$	-
Accounts payable and accrued expenses		1,749,627			1,472,851
Accounts payable and accrued expenses-related parties		712,725			545,225
Notes and other loans payable-current portion		476,407			512,642
Derivative liabilities		1,307,001			754,000
Notes and other loans payable-related parties		378,285			393,760
Capitalized lease obligations-current portion		14,312			14,312
Deferred revenue and license deposits		323,826			323,826
Total current liabilities		4,979,066			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		5,004,602			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 June 30, 2017 and December 31, 2016, respectively.		-			-
Common stock, $.0001 par value, 8,000,000,000 shares authorized, 1,738,246,344 and 1,517,400,273 shares, issued and outstanding June 30, 2017 and December 31, 2016 respectively.		173,823			151,737
Additional paid-in capital		57,210,252			56,915,794
Treasury Stock, 317,000 shares at June 30, 2017 and December 31, 2016 respectively, at cost.		(3,000	)		(3,000	)
Accumulated deficit		(62,134,540	)		(60,828,659	)
Total stockholders’ deficit-Cyclone Power Technologies Inc.		(4,753,465	)		(3,764,128	)
Non controlling interest in consolidated subsidiary		29,039			29,039

Total Stockholders’ Deficit		(4,724,426	)		(3,735,089	)

Total Liabilities and Stockholders’ Deficit	$	280,176		$	307,063

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

CYCLONE POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Six Months Ended June 30,						Three Months Ended June 30,
	2017			2016			2017			2016

REVENUES	$	-		$	-		$	-		$	-

COST OF GOODS SOLD		-			-			-			-

Gross profit		-			-			-			-

OPERATING EXPENSES
Advertising and promotion		6,652			5,839			6,472			548
General and administrative		537,383			385,509			219,828			194,890
Research and development		96,918			73,850			56,242			39,157

Total operating expenses		640,953			465,198			282,542			234,595

Operating loss		(640,953	)		(465,198	)		(282,542	)		(234,595	)

OTHER (EXPENSE) INCOME
Other (expense)		(70,934	)		(12,969	)		-			(13,469	)
Derivative (expense) income		(407,467	)		2,777			(84,000	)		456
Interest (expense)		(186,023	)		(62,442	)		(136,049	)		(29,614	)

Total other (expense)		(664,424	)		(72,634	)		(220,049	)		(42,627	)

Loss before income taxes		(1,305,377	)		(537,832	)		(502,591	)		(277,222	)
Income taxes		-			-			-			-

Net loss	$	(1,305,377	)	$	(537,832	)	$	(502,591	)	$	(277,222	)

Net loss per common share, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding		1,589,583,513			1,393,890,683			1,669,513,344			1,403,288,754

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

CYCLONE POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2017			2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,305,377	)	$	(537,832	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		26,784			34,872
Issuance of restricted common stock, options and warrants for services		1,733			987
Loss on debt paid with common stock		70,934			57,383
Loss (gain) from derivative liability-notes payable		400,701			(2,777	)
Issuance of restricted common stock for services		5,096			-
Amortization of derivative debt discount		92,382			11,680
Amortization of prepaid interest expenses via common stock and warrants		-			6,000
Changes in operating assets and liabilities:
(Increase) in inventory		(488	)		(26,005	)
Decrease in other current assets		-			337
Increase in accounts payable and accrued expenses		414,086			203,521
Increase (decrease) in cash overdraft		16,883			(3,221	)
Increase in accounts payable and accrued expenses-related parties		167,500			167,500
Increase in deferred revenue and deposits		-			40,700
Net cash used in operating activities		(109,766	)		(46,855	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing activities		-			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of capitalized leases		-			(7,754	)
Proceeds from notes and loans payable		124,650			7,000
Repayment of notes and loans payable		-			(1,500	)
(Decrease) increase in related party notes and loans payable-net		(15,475	)		63,970
Net cash provided by financing activities		109,175			61,716

Net (decrease) increase in cash		(591	)		14,861
Cash, beginning of period		591			-

Cash, end of period	$	-		$	14,861

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Payment of interest in cash	$	-		$	3,379
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		$	-
Issuance of 70,000,000 shares of Common stock for liability settlement	$	123,000		$	-
Issuance of 6,370,000 shares of Common stock for services	$	5,096		$	-
Issuance of 45,730,741 shares of Common stock for liability settlements	$	-		$	24,932
Issuance of 3,000,000 shares of Common stock for services	$	-		$	6,000

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

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 June 30, 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 six months ended June 30, 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.

C. CASH

Cash includes cash on hand and cash in banks. At June 30, 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 June 30, 2017 and 2016, total anti-dilutive shares amounted to approximately 15.4 and 14.3 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 June 30,2017, 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 included 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 June 30, 2017 (end of period) is as follows:

Instrument

Beginning

of Period

Change

End of

Period

Level

Valuation

Methodology

Derivative liabilities

754,000

553,001

1,307,001

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 and six months ended June 30, 2017 and 2016 were $56,242, $96,918, $39,157 and $73,850, 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

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. The Company is still in the process of evaluating the effect of adoption on its financial position, results of operations and cash flows. 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 June 30, 2017, the Company maintained its cash in one quality financial institution. The Company has not experienced any losses in its bank accounts through June 30, 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 $0.6 million and $0.4 for the six months ended June 30, 2017 and 2016 respectively. The cumulative deficit since inception is approximately $62.1 million. The Company has a working capital deficit at June 30, 2017 of approximately $5.0 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern. 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.

Inventory, net consists of:

	June 30, 2017		December 31, 2016
Raw materials	$	27,155	$	26,667
Total	$	27,155	$	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:

	June 30, 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		(223,558	)		(209,498	)
Net property and equipment	$	79,212		$	93,272

Depreciation expense for the six months ended June 30, 2017 and 2016 was $14,060 and $17,328, 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 June 30, 2017 and December 31, 2016 were $165,754 and $178,478, respectively. For the six months ended June 30, 2017 and for the year ended December 31, 2016, the Company capitalized $0 and $0, respectively, of expenditures related to these assets. As of June 30, 2017, the Company had 15 patents issued on its technology both in the U.S. and internationally, and six trademarks in the U.S.

Patents, trademarks and copyrights are amortized over the life of the intellectual property which is 15 years. Amortization expenses for the six months ended June 30, 2017 and 2016 were $12,724 and $17,544, 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:

	June 30, 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		43,150		13,500

Note payable, maturing Oct 14 2016, (I)		27,000		27,000

Demand Note, (H)		6,725		6,725

12% convertible notes payable maturing October 2017 ( J )		708		-

12% convertible notes payable maturing May 2018 ( K )		360		-

8% convertible note payable maturing May 2018 ( L )		4,047		-

Total non related party notes-current portion	$	476,407	$	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 June 30, 2017, 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 June 30, 2017, the Company held 1 billion 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 has arranged 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

	(J)	Note convertible into common stock at a 55% discount to average of three lowest closing prices of previous 20 day market prices. Derivative discount $ 26,792. Note originally issued less $5,000 OID interest.

	(K)	Note convertible at the lower of a 50% discount to the lowest trading price during the previous 20 trading days prior to conversion, or a 50% discount to the lowest trading price during the previous 20 trading days before the date this note was executed. At June 30, 2017, the Company held 900 million shares in reserve to cover the potential conversion of this note into common stock pursuant to debt covenants. Derivative discount $30,640.

	(L)	Note convertible at a 50% discount to the lowest trading price during the previous 20 trading days prior to conversion. Derivative discount $ 25,950.

B.	RELATED PARTIES

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

	June 30, 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)	$	155,058	$	169,751
6% non-collateralized loans from officer and shareholder, payable on demand.		96,484		107,842
12% non-collateralized loans from officer and shareholder, payable on demand		21,044		21,044
Accrued Interest		105,699		95,123
Total current related party notes, inclusive of accrued interest	$	378,285	$	393,760

(A)

This note arose from rent, equipment leases, 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 June 30, 2017 and December 31, 2016 are $712,725 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 six months ended June 30, 2017, the Company:

	a-	Amortized (based on vesting) $1,733 of common stock options for employee services.

	b-	Issued approximately 214.5 million shares of common stock pursuant to conversions of approximately $206,000 of notes payable, accrued liabilities and related interest

	c-	The Company issued 6.4 million shares of common stock valued at approximately $5,000 for services

NOTE 10 – STOCK OPTIONS AND WARRANTS

A. COMMON STOCK OPTIONS

Per the employment contracts with certain officers, for the six months ended June 30, 2017, the company issued 900,000 common stock options, valued at $1,080 ( pursuant to the Black Scholes valuation model) ) that are exercisable into shares of common stock at an average exercise price of $.0012 and with a maturity life of 10 years. For the six months year ended June 30, 2017, the amortization of stock options was $1,733 and the unamortized balance was $1,744.

A summary of the common stock options for the period from December 31, 2016 through June 30, 2017 follows:

	Number Outstanding		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (Years)
Balance, December 31, 2016		14,030,000	$	.0960		5.3
Options issued		900,000		.0012		9.9
Options exercised		-		-		-
Expired		-		-		-
Balance, June 30 , 2017		14,930,000	$	.0910		5.1

The vested and exercisable options at period end follows:

	Exercisable/ Vested Options Outstanding		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (Years)
Balance June 30 , 2017		13,130,000	$	.096		4.7
Additional vesting by Sept. 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:

	Six Months Ended June 30, 2017			Six Months Ended June 30, 2016
Risk free interest rate		1.5-1.50%			.71-.86%
Expected volatility		122-134%			136-137%
Expected term		3			3
Expected dividend yield		0	%		0	%
Average value per options and warrants		$ .0009-.0015			$ .0019-.0019

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 June 30, 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, June 30, 2017		500,000	$	.08		.17

NOTE 11 – INCOME TAXES

A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the six months ended June 30, 2017 and 2016 are as follows:

	Six Months ended June 30 , 2017			Amount			Six Months ended June 30, 2016			Amount
Tax benefit at U.S. statutory rate		34	%	$	247,704			34	%	$	133,086
State taxes, net of federal benefit		4	%		29,142			4	%		15,657
Change in valuation allowance		(38	)%	$	(276,846	)		(38	)%	$	(148,743	)
					-						-

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at June 30 , 2017 and December 31, 2016 consisted of the following:

Deferred Tax Assets	June 30, 2017			December 31, 2016
Net Operating Loss Carry-forward	$	10,886,278		$	10,577,607
Deferred Tax Liabilities – Accrued Officers’ Salaries		(926,431	)		(900,306	)
Net Deferred Tax Assets		9,959,847			9,677,301
Valuation Allowance		(9,959,847	)		(9,677,301	)
Total Net Deferred Tax Assets	$	-		$	-

As of June 30, 2017, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $23.5 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 the six months ended June 30, 2017 and 2016 were $32,522 and $32,300 respectively.

B. CAPITALIZED LEASE OBLIGATIONS

Total lease payments made for the six months ended June 30, 2017 were $0. The balance of capitalized lease obligations payable at June 30, 2017 and December 31, 2016 was $39,848 , respectively. 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 June 30, 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 June 30, 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 $$206,950 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 the Company entered into no convertible note agreements. In the second quarter of 2017 we again entered into additional convertible debt agreements. The current convertible notes have 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 six months ended June 30, 2017, the Company recorded a $85,618 non-cash charge to interest expense (reflective of debt discount amortization), and a non cash charge of $407,467 of derivative losses related to adjusting the derivative liability to fair value. At June 30, 2017, the derivative related fair value of debt and related convertible liabilities was $1,307,001.

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 June 30 , 2017			Year Ended December. 31, 2016
Volatility		121% - 277	%		71% - 91	%
Risk Free Rate		1.0% - 1.24	%		.02% -.28	%
Expected Term (years)		.25-1.0	-		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 of June 30, 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 of June 30, 2017, outstanding interest, default interest and default judgment penalties are included in accrued liabilities.

NOTE 19 – SUBSEQUENT EVENTS

Subsequent to the second quarter of 2017, the Company engaged in the following activities:

	a-	Q2 Power transferred it’s exclusive license agreement with Cyclone Power to the Phoenix Power Group. On the transfer, the license transforms from an exclusive to a non-exclusive basis and Phoenix will be authorized to produce the Waste Heat Engine.

	b-	The company delivered an engine to FSDS pursuant to the contract, resulting in the recognition of deferred income of $75,000.

	c-	The Company issued 109,017,734 shares of common stock pursuant to conversions of debts and related interest.

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.

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.

Results of Operations

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Revenue. The Company had no revenues in the quarters ended June 30, 2017 and June 30, 2016.

Gross Profit. In the quarters ended June 30, 2017 and 2016, the company has no gross profit.

Operating Expenses.

Operating expenses incurred for the quarter ended June 30, 2017 were $282,542 as compared to $234,595 for the same period in the previous year, an increase of $47,947 or 20%. The majority of the variance was due to higher General and Administrative expenses of $24,938 (13%) from consulting and professional fees, and higher R&D expenses of $ 17,085 (44%) from increased staffing.

Operating Loss. The operating losses for the quarters ended June 30, 2017 and 2016 were $282,542 and $234,595, respectively, a variance of $47,947 or 20%, due to the factors outlined above.

Other Expense. Other expense for the quarter ended June 30, 2017 was $220,049 versus $42,627 for the same period in the prior year, an increase of $177,422 or 416%.

The 2017 other expenses include: $50,431 of interest expense, $85,618 of non cash derivative interest expense and $84,000 of non cash derivative fair value accounting related charges. The 2016 other expenses included $29,614 of interest expense, a $57,383 loss on the settlement of a liability pursuant to payment in common stock, net of a $44,000 gain on the sale of the Q2 Power investment.

Net Loss and Loss per Share. The net loss for the quarter ended June 30, 2017 was $502,591, compared to a net loss of $277,222 for the same period in the previous year. The increased loss of $225,369 or 81% 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 comparable quarter of the prior year.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30 , 2016

Revenue. The Company had no revenues in the six months ended June 30, 2017 and June 30, 2016.

Gross Profit. In the six months ended June 30, 2017 and 2016, the company has no gross profit.

Operating Expenses.

Operating expenses incurred for the six months ended June 30, 2017 were $640,953 as compared to $465,198 for the same period in the previous year, an increase of $175,755 or 38%. The majority of the variance was due to a higher General and Administrative expenses of $151,874 (39%) from consulting and professional fees and higher R&D expenses of $23,068 (31%) attributable to re staffing.

Operating Loss. The operating losses for the six months ended June 30, 2017 and 2016 were $640,953 and $465,198, respectively, a variance of $175,755 or 38%, due to the factors outlined above.

Other Expense. Other expense for the six months ended June 30, 2017 was $664,424 versus $72,634 for the same period in the prior year, an increase of $591,790 or 815%.

The 2017 other expenses include a $70,934 loss on debt conversion via common stock, $100,405 of interest expense and $493,085 of non cash derivative fair value accounting and derivative interest expense. The 2016 other expenses included $62,442 of interest expense a $57,383 loss on the settlement of a liability pursuant to payment in common stock, net of a $44,000 gain on the sale of the Q2 Power investment

Net Loss and Loss per Share. The net loss for the six months ended June 30, 2017 was $1,305,377, compared to a net loss of $537,832 for the same period in the previous year. The increased loss of $767,545 or 143% is related to the other factors outlined above. The net loss per weighted average share was $0.00 for both the current six months and the comparable period of the prior year.

Liquidity and Capital Resources

At June 30, 2017, the net working capital deficiency was $4,951,718 as compared to a deficiency of $3,989,165 at December 31, 2016, an unfavorable variance of $962,553 or 24%.

For the six months ended June 30, 2017, cash decreased by $591. This is reflective of funds used by the net loss of $1,305,377 which was offset by funds provided by debt proceeds of $124,650, higher accounts payable and accrued expenses of $414,086 and a net increase of $152,025 in related party notes payables and accrued expenses. Non cash charges were a $70,934 loss recognized by settling debt with common stock and $493,085 of non cash charges from fair value derivative accounting and derivative expense.

For the six months ended June 30, 2016, cash increased by $14,861. This is reflective of funds used by the net loss of $537,832 and an increase of $26,005 in inventory. This was offset by funds provided by higher accounts payable and accrued expenses of $203,521, an increase of $231,470 in related party payables, accrued expenses and notes payable and a $40,700 increase in customer contract deposits recorded in deferred revenue.

Cash Flow Management Plan

As shown in the accompanying condensed financial statements, the Company incurred substantial operating losses and other for the six months ended June 30, 2017 of approximately $1.3 million. Cumulative operating and other losses since inception are approximately $29.0 million and non cash derivative losses are $33.1 million. The Company has a working capital deficit at June 30, 2017 of approximately $5.0 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. An engine for the FSDS contract has been delivered in the third quarter and the final engine is anticipated to be delivered and accepted prior to year end. The remaining $75,000 balance of the contract is contractually required upon delivery. 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 June 30, 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.

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 has arranged a settlement.

ITEM 1A. RISK FACTORS

Not required.

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

In the first half of 2017 the Company issued approximately 214.5 million shares of common stock in settlement of debt, related accrued interest and accrued liabilities and of approximately $206,000

In the first half of 2017, the Company issued 6,370,000 shares of restricted common value at $5,096 for services.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS:

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

Exhibit Number		Description
10.60		Settlement Agreement with Anton and Chia
10.61		License Modification. Agreement and Transfer Consent with Q2 Power
10.62		$31,000 Note from JSJ Investments Inc
10.63		$30,000 Note Union Capital LLC
10.64		$30,000 Back end Note Union Capital LLC
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.

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.

August 21, 2017	/s/ Frankie Fruge
	Frankie Fruge
	President
	(Principal executive officer)

August 21, 2017	/s/ Bruce Schames.
	Bruce Schames
	Chief Financial Officer
	(Principal financial and accounting officer)

AGREEMENT

THIS AGREEMENT is made June 22, 2017, between CYCLONE POWER TECHNOLOGIES, INC., a Florida corporation, Pompano Beach, Florida (“Cyclone Power”) and ANTON & CHIA, LLP, Newport Beach, California (“ANC”).

WHEREAS, the ANC has provided auditing services to Cyclone Power in connection with Cyclone Power’s SEC reporting requirements; and

WHEREAS, concerns arose with respect to ‘additional professional fees requested by ANC from Cyclone Power to complete Cyclone Power’s 2014 and 2015 audits — thereby necessitating Cyclone Power to sign two (2) Promissory Notes (the “Notes”) in favor of ANC; and

WHEREAS, the parties wish resolve the payment of the Notes; and

NOW, THEREFORE, in consideration of the foregoing and mutual promises the parties agree as follows:

1. Promissory Notes: The Notes are: (A) Note #1 dated January 30, 2017 in the amount of $60,000.00 and (8) Note #2 dated March 16, 2017 in the amount of $25,000.00. True copies of the Notes are attached to this Agreement.

2. Satisfaction of Notes: Cyclone Power agrees to pay, and ANC agrees to accept the total sum of $20,000.00 in full satisfaction of the $85,000.00 face value due under both Notes. That sum has been deposited to the Attorney Trust Account of Elliott Goldberg, Esq, (with proof provided to ANC within 3 days) and shall be irrevocably released by Mr. Goldberg to ANC no later than 3 days following full execution of this Agreement and ANC’s compliance with its obligations in Paragraph 3 below.

3. ANC Obligations: In consideration for the satisfaction of the Notes, ANC agrees to do the following:

A. Transmit all Cyclone Power, information, consent letters and accountant “work papers” to its successor auditor, Patrick Heyn CPA of Soles, Heyn & Company LLC, which relate to ANC’s 2015 Audit of the financial statements of Cyclone Power, on or before June 28, 2017;

B. Allow Soles, Heyn & Company LLC full access to and provide copies of (if requested) ANC work papers related to ANC’s audit of the 2014 and 2015 financial statements of Cyclone Power — similarly, on or before June 28, 2017;

Refrain from withdrawing any prior opinion or audit letters related to the 2014 and 2015 financial statements of Cyclone Power, unless such withdrawal is required under applicable ethical, audit and SEC standards and rules, or the standards and rules of any applicable regulatory body;

D. Subject to applicable ethical, audit and SEC standards and rules, or the standards and rules of any applicable regulatory body, and subject to ANC’s review and comments, permit the re-issuance of its previously filed opinion related to the December 31, 2015 Cyclone Power financial statements to be included in Cyclone Power’s 2016 1OK filing . It is understood that should A&C identify any concerns, they will alert Cyclone Power and Patrick Heyn CPA of Soles, Heyn & Company LLC to allow them to resolve thier concern so as to allow the re-issuance its previously filed opinion related to the December 31, 2015 Cyclone Power financial statements to be included in Cyclone Power’s 2016 1OK Filing , obviously its up to A&C to determine if the concern was resolved. ;

£. Communicate and cooperate with successor auditor Soles, Heyn & Company LLC with respect to ANC’s obligations identified in subparagraphs A., B. and 0., above — not to exceed five (5) hours of time;

4. Applicability: The terms of this Agreement are limited to the payment of the subject Notes and transfer of related information. IN WITNESS WHEREOF, the Parties have executed this Agreement the day and

year first above written.

With respect only to Paragraph Number 2, above.

License Modification Agreement and Transfer Consent

Cyclone Power Technologies, Inc. (“Licensor”) and Q2Power Corp., f/k/a WHE Generation Corp. (“Q2”) signed on July 15, 2014 -an Amended and Restated License Agreement (the “License”), which is attached as an exhibit hereto, which Q2 now wishes to assign and transfer to Phoenix Power Group LLC (“Phoenix” or “Licensee”), subject to the following conditions, additional terms and changes to the License which are hereby incorporated into and made a part of the License:

	1)	Upon payment to Licensor of the amount of $25,000, Licensor hereby consents to the assignment and transfer of the License from Q2 to Phoenix.

	2)	The License shall now be non-exclusive , thus allowing both parties to use their respective engine technologies for waste heat, waste fuels or other fuels.

	3)	Licensor shall have the right to visit Licensee’s facility to view Licensee Improvements with reasonable prior notice; provided however, Licensor shall not have the right to receive copies of plans, blueprints, drawings or other manifestations of Licensee’s intellectual property, and shall not have the right to manufacture Licensee’s engine or other technology. Licensee shall not have the right to receive copies of plans, blueprints, drawings of Licensor’s engines or other intellectual property, and shall not have the right to manufacture Lic ensee’s engines or other technology. This provision is agreed by both parties to be integral to allowing each of them to operate their respective businesses without directly competing with the other under the non—exclusive framework of the License. Licensor hereby provides notice that it will visit Licensee’s facility in Lancaster, Ohio within 30 days of the date hereof with the exact date to be scheduled by reasonable agreement of the parties.

	4)	To further allow the parties to operate without direct competition, the term “Improvements” and other like terms in the License, shall be limited to optimizations and advancements to only subject matter actually patented by Licensor or developed by Licensor and disclosed to Licensee after the date hereof Unless Licensor has patented or directly disclosed to Licensee any new or different structures, configurations, or other like method of use. then such items are not to be considered an “Improvement” under the License.

	5)	After the first 120 days subsequent to the date of the License transfer to Phoenix, either party may terminate the License by giving the other party ninety (90) days prior notice for any reason.

	6)	Licensor confirms: (a) the License is currently in full force and effect; (ii) there exists no defaults under the License; and (iii) there are no outstanding sums due from Q2 to Licensor under the License.

	7)	Upon the execution of this Consent and Modification Agreement, both Licensor and Phoenix, severally but notjointly, hereby release and forever waive any and all claims in law or equity they may have now or in the future against Q2 and its affiliated or parent companies, for any matter arising out of or related in any way to the License, the technology developed under or from the License, any third-party claims of infringement, or any other matter that would reasonably be related to the subject of the License or this Consent and Modification Agreement.

	8)	In the event of any conflict between any term or provision of the License and any term of provision contained herein, the term or provision contained herein shall prevail.

NEITHER THIS NOTE NOR TUE SECURITIES THAT MAY BE ISSUED BY THE COMPAXY UPON CO:’\YERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEX REGISTERED UXDER TIIE SECUR!TIES ACT OF 1933,AS AMENDED (THE “1933 ACT”), Oil THE Securities LA”\VS OF ANY STATE OR OTHER .JUIUSDICTIO:X. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED:(1)IN THE ABSENCE OF AN EFFECTI\’E REG!STRATIOX STATEMENT FOR THE SECURITIES UNDER THE 1033 ACT, OR APPLICABLE STATE SECURITIES LAWS:OR (II) IN THEABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDF.R THE HJ33 ACT OR; (m) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE1933ACT.

12% CONVERTIBLE PROMISSORY NOTE

Maturity Date February 125, 2018 ‘TIIE “Maturity Date”

31, MAY 15, 2017 ‘The “issuance Date”

FOR VALUE RECEIVED, Cyclone Power Technologies, Inc., a Florida Corporation (the “Company”) doing business in Pompano Beach, Fl, hereby promises to pay to the order of JSJ Investments lnc., an accredited investor and Texas Corporation, or its assigns (the “Holder”), the principal amount of Thirty One Thousand Dollars ($31,000) (“Note”), on demand of the Holder at any time on or after February 1 5, 2017 (the Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of Twelve Percent (12%) per annum (the “Interest Rate) commencing on the date hereof (the “Issuance Date”).

Payments of Principal and Interest.

Pre-Payment and Payment of Principal and Interest. The Company may pay this Note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium set forth herein and subject to the terms of this Section 1.a, at any time on or prior to the date which occurs 180 days after the Issuance Date hereof (the “Prepayment Date”). In the event the Note is not prepaid in full on or before the Prepayment Date, it shall be deemed a “Pre-Payment Default” hereunder. Until the Ninetieth (90th) day after the Issuance Date the Company may pay the principal at a cash redemption premium of 13 5%, in addition to outstanding interest, without the Holder’s consent; from the 91st day to the One Hundred and Twentieth {120th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 140%, in addition to outstanding interest, without the Holder’s consent; from the 121st day to the Prepayment Date, the Company may pay the principal at a cash redemption premium of 145%, in addition to outstanding interest, without the Holder’s consent. After the Prepayment Date up to the Maturity Date this Note shall have a cash redemption premium of 1SO% of the then outstanding principal amount of the Note, plus accrued interest and Default Interest, if any, which may only be paid by the Company upon Holder’s prior written consent. At any time on or after the Maturity Date, the Company may repay the then outstanding principal plus accrued interest and Default Interest (defined below), if any, to the Holder.

	b.	Demand of Repayment. The principal and interest balance of this Note shall be paid to the Holder hereof on demand by the Holder at any time on or after the Maturity Date. The Default Amount (defined herein), if applicable, shall be paid to Holder hereof on demand by the Holder at any time such Default Amount becomes due and payable to Holder.

	c.	Interest. This Note shall bear interest (“interest) at the rate of Twelve Percent (12%) per annum from the Issuance Date until the same is paid, or otherwise converted in accordance with Section 2 below, in full and the Holder, at the Holder’s sole discretion, may Include any accrued but unpaid Interest in the Conversion Amount. Interest shall commence accruing on the Issuance Date, shall be computed on the basis of a 36S-day year and the actual number of days elapsed and shall accrue daily and, after the Maturity Date, compound quarterly. Upon an Event of Default, as defined in Section 10 below, the Interest Rate shall increase to Eighteen Percent {18%) per annum for so tong as the Event of Default is continuing (“Default Interest”).

General Payment Provisions. This Note shall be paid in lawful money of the United States of America by check or wire transfer to such account as the Holder may from time to time designate by written notice to the Company in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Texas are authorized or required by law or executive order to remain closed

2.	Conversion of Note. At any time after the Issuance Date, the Conversion Amount (see Paragraph 2(a)(i)) of this Note shall be convertible into shares of the Company’s common stock (the “Common Stock”) according to the terms and conditions set forth in this Paragraph 2.

Certain Defined Terms. For purposes of this Note, the following terms shall have the following meanings:

	i.	“Conversion Amount” means the sum of (a) the principal amount of this Note to be converted with respect to which this determination is being made, (b) Interest; and (c) Default Interest, if any, if so included at the Holder’s sole discretion.

	ii.	“Conversion Price” means the lower of; (i) a 50% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice; or (ij) a 50% discount to the lowest trading price during the previous twenty (20) trading days before the date that this note was executed.

	iii.	“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

	iv.	“Shares” means the Shares of the Common Stock of the Company into which any balance on this Note may be converted upon submission of a “Conversion Notice” to the Company substantially in the form attached hereto as Exhibit 1.

	b.	Holder’s Conversion Rights. At any time after the Issuance Date, the Holder shall be entitled to convert all of the outstanding and unpaid principal and accrued interest of this Note into fully paid and non assessable shares of Common Stock in accordance with the stated Conversion Prlce. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, whlch would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 there under. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of 4.99% (“Conversion limitation 1”). The Holder shall have the authority to determine whether the restriction contained in this Section 2(b) will limit any conversion hereunder, and accordingly, the Holder may waive the conversion limitation described in this Section 2(b) , in whole or in part, upon and effective aher 61 days prior written notice to the Company to increase or decrease such percentage to any other amount as determined by Holder in its sole discretion ( Conversion Limitation 2n).

	c.	Fractional Shares. The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share except in the event that rounding up would violate the conversion limitation set forth in section Z(b) above.

	d.	Conversion Amount. The Conversion Amount shall be converted pursuant to Rule 144(b)(l)(ii) and Rule 144(d)(l )(ii) as promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, into unrestricted shares at the Conversion Price.

	e.	Mechanics of Conversion. The conversion of this Note shall be conducted in the following manner;

Holder’s Conversion Requirements. To convert this Note into shares of Common Stock on any date set forth in the Conversion Notice by the Holder (the “Conversion Date”), the Holder shall transmit by email, facsimile or otherwise deliver, for receipt on or prior to 11:59 p.m., Eastern Time, on such date or on the next business day, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit 1 to the Company.

	ii.	Company’s Response. Upon receipt by the Company of a copy of a Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier, a confirmation of receipt of such Conversion Notice to such Holder indicating that the Company will process such Conversion Notice in accordance with the terms herein. Within two (2) Business Days after the date the Conversion Notice is delivered, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, it shall, within two (2) Business Days after the date the Conversion Notice was delivered, have surrendered to an overnight courier for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shat! be entitled.

	iii.	Record Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

	iv.	Timely Response by Company. Upon receipt by Company of a Conversion Notice, Company shall respond within one business day to Holder confirming the details of the Conversion, and provide within two business days the Shares requested in the Conversion Notice.

	v.	Liquidated Damages for Delinquent Response. If the Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the Company, its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice within three (3) business days of the Conversion Date, the Company shall be deemed in “Default of Conversion’s Beginning on the fourth (4th ) business day after the date of the Conversion Notice, after the Company is deemed in Default of Conversion, there shall accrue liquidated damages (the “Conversion Damages”) of $2,000 per day for each day after the third business day until delivery of the Shares is made, and such penalty will be added to the Note being converted (under the Company’s and Holder’s expectation and understanding that any penalty amounts will tack back to the Issuance Date of the Note). The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the delinquent response are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.

	vi.	Liquidated Damages for Inability to Issue Shares. If the Company fails to deliver Shares requested by a Conversion Notice due to an exhaustion of authorized and issuable common stock such that the Company must increase the number of shares of authorized Common Stock before the Shares requested may be issued to the Holder, the discount set forth in the Conversion Price will be increased by 5 percentage points (i.e. from 40% to 45%) for the Conversion Notice in question and all future Conversion Notices until the outstanding principal and interest of the Note is converted or paid in full. These liquidated damages shall not render the penalties prescribed by Paragraph 2(e)(v) void, and shall be applied in conjunction with Paragraph 2(e)(v) unless otherwise agreed to in writing by the Holder. The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the inability to issue shares are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.

vii.

Resdndment of Conversion Notice. lf: (i) the Company fails to respond to Holder within one business day from the date of delivery of a Conversion Notice confirming the details of the Conversion, (ii) the Company fails to provide the Shares requested in the Conversion Notice within three business days from the date of the delivery of the Conversion Notice, (iii) the Holder is unable to procure a legal opinion required to have the Shares issued unrestricted and/or deposited to sell for any reason related to the Company’s standing with the SEC or FINRA, or any action or inaction by the Company, (iv) the Holder is unable to deposit the Shares requested in the Conversion Notice for any reason related to the Company’s standing with the SEC or FINRA, or any action or inaction by the Company, (v) if the Holder is informed that the Company does not have the authorized and issuable Shares available to satisfy the Conversion, or (vi) if OTC Markets changes the Company’s designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) on the day of or any day after the date of the Conversion Notice, the Holder maintains the option and sole discretion to rescind the Conversion Notice (“Rescindment”) by delivering a notice of rescindment to the Company in the same manner that a Conversion Notice is required to be delivered to the Company pursuant to the terms of this Note.

	viii.	Transfer Agent Fees and Legal Fees. The issuance of the certificates shall be without charge or expense to the Holder. The Company shall pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Note and processing of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to the Conversion. The Holder will deduct $1,000 from the principal payment of the Note solely to cover the cost of obtaining any and all legal opinions required to obtain the Shares requested in any given Conversion Notice. These fees do not make provision for or suffice to defray any legal fees incurred in collection or enforcement of the Note as described in Paragraph 13.

	ix.	Conversion Right Unconditional. If the Holder shall provide a Notice of Conversion as provided herein, the Company’s obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company.

Other Rights of Holder: Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities, cash or other assets with respect to or in exchange for Common Stock is referred to herein as “Organic Change.” Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance reasonably satisfactory to the Holder) to deliver to Holder in exchange for this Note, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Note, and reasonably satisfactory to the Holder. Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance reasonably satisfactory to the Holder) to ensure that the Holder will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of the Note, such shares of stock, securities, cash or other assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock which would have been acquirable and receivable upon the conversion of the Note as of the date of such Organic Change (without taking into account any limitations or restrictions on the convertibility of the Note set forth in Section 2(b) or otherwise). All provisions of this Note must be included to the satisfaction of Holder in any new Note created pursuant to this section.

4.	Representations and Warranties of the Company. In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holder the following:

	a.	Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

	b.	Authorization. All corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement. The Company has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this Agreement, valid and enforceable obligations. The shares of capital stock issuable upon conversion of the Note have been authorized or will be authorized prior to the issuance of such shares.

	c.	Fiduciary Obligations. The Company hereby represents that it intends to use the proceeds of the Note primarily for the operations of its business and not for any personal, family, or household purpose. The Company hereby represents that its board of directors, in the exercise of its fiduciary duty, has approved the execution of this Agreement based upon a reasonable belief that the proceeds of the Note provided for herein is appropriate for the Company after reasonable inquiry concerning its financial objectives and financial situation.

Data Request Form. The Company hereby represents and warrants to Holder that all of the information furnished to Holder pursuant to the data request form (“ORF”) dated May 1S, 2017 is true and correct ln all material respects as of the date hereof.

5.	Covenants of the Company.

	a.	So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent pay, declare or set apart for such payment any dividend or other distribution (whether in cash, property, or other securities) on shares of capital stock solely in the form of additional shares of Common Stock

	b.	So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent redeem, repurchase, or otherwise acquire (whether for cash or in exchange for property or other securities) in any one transaction or series of transactions any shares of capital stock of the Company or any warrants, rights, or options to acquire any such shares.

	c.	So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent incur any liability for borrowed money, except (a) borrowings in existence as of this date and of which the Company has informed the Holder in writing before the date hereof or (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business.

	d.	So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent sell, lease, or otherwise dispose of a significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned upon a specified use of the proceeds thereof.

6.	Issuance of Common Stock Equivalents. lf the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“Convertible Securities”), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “Common Stock Equivalents”) and the aggregate of the price per share for which additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the Aggregate Per Common Share Price”) shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (8) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date.

7.	Reservation of Shares. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Note, eight times the number of shares of Common Stock as shall at al! times be sufficient to effect the conversion of all of the principal amount, plus Interest and Default Interest, if any, of the Note then outstanding (“Share Reserve”), unless the Holder stipulates otherwise in the “Irrevocable Letter of Instructions to the Transfer Agent.” So long as this Note is outstanding, upon written request of the Holder or via telephonic communication, the Company’s Transfer Agent shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, the then-current number of unrestricted shares, and the then-current number of shares reserved for third parties.

8.	Voting Rights. The Holder of this Note shal! have no voting rights as a note holder, except as required by law, however, upon the conversion of any portion of this Note into Common Stock, Holder shall have the same voting rights as all other Common Stock holders with respect to such shares of Common Stock then owned by Holder.

9.	Reissuance of Note. !n the event of a conversion or redemption pursuant to this Note of less than all of the Conversion Amount represented by this Note, the Company shall promptly cause to be issued and delivered to the Holder, upon tender by the Holder of the Note converted or redeemed, a new note of like tenor representing the remaining principal amount of this Note which has not been so converted or redeemed and which is in substantially the same form as this Note, as set forth above.

10.	Default and Remedies.

Event of Default. For purposes of this Note, an Event of Default shall occur upon:

	i.	the Company’s default in the payment of the outstanding principal, Interest or Default Interest of this Note when due, whether at Maturity, acceleration or otherwise;
	ii.	the occurrence of a Default of Conversion as set forth in Section Z(e)(v);
	iii.	the failure by the Company for ten (10) days aher notice to it to comply with any material provision of this Note not included in this Section 1O(a);
	iv.	the Company’s breach of any covenants, warranties, or representations made by the Company herein;
	v.	any of the information in the DRF is false or misleading in any material respect;
	vi.	the default by the Company in any Other Agreement entered into by and between the Company and Holder, for purposes hereof “Other Agreement” shall mean, collectively, all agreements and instruments between, among or by: (1) the Company, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including without limitation, promissory notes;
	vii.	the cessation of operations of the Company or a material subsidiary;
	viii.	the Company pursuant to or within the meaning of any Bankruptcy Law; (a) commences a voluntary case; (b) consents to the entry of an order for relief against it in an involuntary case; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing that it is generally unable to pay its debts as the same become due;
	ix.	court of competent jurisdiction entering an order or decree under any Bankruptcy Law that: (a) is for relief against the Company in an involuntary case; (b) appoints a Custodian of the Company or for all or substantially all of its property; or (c) orders the liquidation of the Company or any subsidiary, and the order or decree remains un stayed and in effect for thirty (30) days;
	x.	the Company files a Form 1 5 with the SEC;
	xi.	the Company’s failure to timely file all reports required to be filed by it with the Securities and Exchange Commission;
	xii.	the Company’s failure to timely file all reports required to be filed by it with OTC Markets to remain a “Current Information” designated company;
	xiii.	the Company sells securities after the Issuance Date that do not have a fixed conversion price;
	xiv.	the Company’s Common Stock is reported as “No Inside” by OTC Markets at any time while any principal, Interest or Default Interest under the Note remains outstanding;
	xv.	the Company’s failure to maintain the required Share Reserve pursuant to the terms of the Irrevocable Letter of Instructions to the Transfer Agent;
	xvi.	the Company directs its transfer agent not to transfer, or delays, impairs, or hinders Its transfer agent in transferring or issuing (electronically or in certificated form) any certificate for Shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw and stop transfer instructions) on any certificate for any Shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor its obligations pursuant to a Conversion Notice submitted by the Holder) and any such failure shall continue uncured for three (3) Business Days after the Conversion Notice has been delivered to the Company by Holder;
	xvii.	the Company’s failure to remain current in its billing obligations with its transfer agent and such delinquency causes the transfer agent to refuse to lssue Shares to Holder pursuant to a Conversion Notice;

	xviii.	the Company effectuates a reverse split of its Common Stock and fails to provide twenty (20) days prior written notice to Holder of its intention to do so; or
	xix.	OTC Markets changes the Company’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).
	xx.	“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 1 3d-S(b)( 1) promulgated under the Securities Exchange Act of 1934) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company, (b) the Company merges into or consolidates with any other Person, as that term is defined in the Securities Act of 1933, as amended, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Issuance Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound.
	xxi.	Altering the conversion terms of any notes that are currently outstanding.

The Term “Bankruptcy Lawn means Title 11, U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy law.

Remedies. If an Event of Default occurs, the Holder may in its sole discretion determine to request immediate repayment of all or any portion of the Note that remains outstanding; at such time the Company will be required to pay the Holder the Default Amount (defined herein) in cash. For purposes hereof, the Default Amount shall mean: the product of (A) the then outstanding principal amount of the Note, plus accrued Interest and Default Interest, divided by (B) the Conversion Price as determined on the Issuance Date, multiplied by (C) the highest price at which the Common Stock traded at any time between the Issuance Date and the date of the Event of Default. If the Company fails to pay the Default Amount within five (5) Business Days of written notice that such amount is due and payable, then Holder shall have the right at any time, so long as the Company remains in default (and so !long and to the extent there are a sufficient number of authorized but unissued shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.

11.	Vote to Change the Terms of this Note. This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder.

12.	Lost or Stolen Note. Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of the Note, the Company shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously requests the Company to convert such remaining principal amount, plus accrued Interest and Default Interest, if any, into Common Stock.

13.	Payment of Collection, Enforcement and Other Costs. lf: (i) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; or (ii) an attorney is retained to represent the Holder of this Note in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Note, then the Company shall pay to the Holder all reasonable attorneys’ fees, costs and expenses incurred in connection therewith, in addition to all other amounts due hereunder.

14.	Cancellation. After al! principal, accrued Interest and Default Interest, if any, at any time owed on this Note has been paid in full or otherwise converted in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

15.	Waiver of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.

16.	Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws. Each party hereby irrevocably submits to the non exclusive jurisdiction of the state and federal courts sitting in Texas for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding ls brought in an inconvenient forum or that the venue of such sult, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending, through certified mail or overnight courier, a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT 1T MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

17.	Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).

18.	Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.

19.	Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude further exercise thereof or of any other right, power or privilege.

20.	Partial Payment. In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the consideration actually paid by the Holder such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note, with the exception of any 010 contemplated herein.

21.	Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed by all Parties hereto.

22.	Additional Representations and Warranties. The Company expressly acknowledges that the Holder, including but not limited to its officer, directors, employees, agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement. The Company further acknowledges that there have been no representations or warranties about future financing or subsequent transactions between the parties.

23.	Notices. All notices and other communications given or made to the Company pursuant hereto shall be in writing (including facsimile or similar electronic transmissions) and shall be deemed effectively given: (i) upon personaldelivery, (ii) when sent by electronic mail or facsimile, as deemed received by the close of business on the date sent, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery. Al! communications shall be sent either by email, or fax, or to the email address or facsimile number set forth on the signature page hereto. The physical address, email address, and phone number provided on the signature page hereto shall be considered valid pursuant to the above stipulations; should the Company’s contact information change from that listed on the signature page, it is incumbent on the Company to inform the Holder.

24.	Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the rest of the Agreement shall be enforceable in accordance with its terms.

25.	Usury. If it shalL be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that !t will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal, Interest or Default Interest on this Note.

26.	Successors and Assigns. This Agreement shall be binding upon all successors and assigns hereto.

- S/G,\’.4 TUREPAGETOFOLLO W -

Exhibit 1

Conversion Notice

Reference is made to the 12% Convertible Note issued by Cyclone Power Technologies, Inc. (the “Note”), dated May 15, 2017 in the principal amount of $31,000 with 12% interest. This note currently holds a principal balance of $31,000. The features of conversion stipulate a Conversion Price equal to the lower of (i) a 50% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice; or (ii) a SO% discount to the lowest trading price during the previous twenty (20) trading days before the date that this note was executed, pursuant to the provisions of Section Z(a)(ii) in the Note.

ln accordance with and pursuant to the Note, the undersigned hereby elects to convert $ ________ of the principal/interest

balance of the Note, indicated below into shares of Common Stock (the “Common Stock”), of the Company, by tendering the Note specified as of the date specified below.

[DATE]

[CONTINUED ON NEXT PAGE]

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)

us$30,000.00

CYCLONE POWER TECHNOLOGIES, INC.

8% CONVERTIBLE REDEEMABLE NOTE

DUE MAY 8, 2018

FOR VALUE RECEIVED, Cyclone Power Technologies, Inc. (the “Company”) promises to pay to the order of UNION CAPITAL, LLC and its authorized successors and Permitted Assigns, defined below, (“ Holder ”), the aggregate principal face amount Thirty Thousand Dollars exactly (U.S. $30,000.00) on May 8, 2018 (“ Maturity Date ”) and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on May 8, 2017. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 91 Shelton Ave, Suite 107, New Haven, CT 06511, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.

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This Note is subject to the following additional provisions:

l. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“ Act ”), applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set fmth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion ”) in the form annexed hereto as Exhibit A . The date of receipt (including receipt by tele-copy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.

4. (a) The Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “ Common Stock ”) at a price (“Conversion Price”) for each share of Common Stock equal to 55% of the lowest trading price of the Common Stock as re ported on the National Quotations Bureau OTC Markets exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“ Exchange” ), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4

P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Con version may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 45% instead of 55% while that “Chill” is in effect. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. In no event, shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

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(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

(c) During the first six months this Note is in effect, the Company may re- deem this Note by paying to the Holder an amount equal to 145% of the unpaid principal amount of this Note along with any interest that has accrued during that period. This Note may not be prepaid after the 180 ^th day. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of out standing shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as deter mined by the Board of Directors of the Company or successor person or entity acting in good faith.

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5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

8 If one or more of the following described “Events of Default” shall occur:

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or

(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged with in sixty (60) days after such appointment; or

(i) Any governmental agency or any comt of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

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(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

(h) Defaulted on or breached any tern1 of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or

(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 act reports with the SEC;

(G) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or

(I) The Company shall not replenish the reserve set forth in Section 12, with- in 3 business days of the request of the Holder.

(m) The Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission; or

(n) The Company shall cause to lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).

Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, with out presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section S(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an in crease of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the out standing principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future con versions at $0.005 per share.

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If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:

Failure to Deliver Loss= [(High trade price within 20 trading days or after the day of exercise) x (Number of conversion shares)]

The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s-written notice to the Company.

9. In case any provision of this Nate is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a -written instrument signed by the Company and the Holder.

11. The Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has re ported Form 10 type information indicating it is no longer a “shell issuer.

12. The Company shall issue irrevocable transfer agent instructions reserving 1,033,316,000 shares of its Common Stock for conversions under this Note and the following Notes in the amounts of: $31,396.00 on August 17, 2015, $58,100.00 on December 18, 2015, $112,000.00 on December 18, 2015, $60,193.00 on January 19, 2016, $210,000.00 on February 8, 2016 (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs associated with issuing and delivering the share certificates to Holder. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The company should at all times reserve a minimum of four times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.

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13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.

14. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

Dated: 2 —/Z :1((7

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EXHIBIT A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert$___________________of the above Note into_______________Shares of Common Stock of Cyclone Power Technologies, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

Date of Conversion: _______________________________________________

Applicable Conversion Price: ________________________________________

Signature: ____________________________________________________

[Print Name of Holder and Title of Signer]

Address: ______________________________________________________

SSN or EIN: __________________________

Shares are to be registered in the following name: ___________________________________________

Name:__________________________________________________________

Address: _______________________________________________________

Tel: _________________________________

Fax: ________________________________

SSN or EIN: ___________________________

Shares are to be sent or delivered to the following account:

Account Name: __________________________________________________

Address: ______________________________________________________

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us $30,000.00

CYCLONE POWER TECHNOLOGIES, INC. 8% CONVERTIBLE REDEEMABLE NOTE

DUE MAY 8, 2018

BACK END NOTE

FOR VALUE RECEIVED, Cyclone Power Technologies, Inc. (the “Company”) promis es to pay to the order of UNION CAPITAL, LLC and its authorized successors and Permitted Assigns, defined below, (“ Holder ”), the aggregate principal face amount Thirty Thousand Dollars exactly (U.S. $30,000.00) on May 8, 2018 (“ Maturity Date ”) and to pay interest on the prin cipal amount outstanding hereunder at the rate of 8% per annum commencing on May 8, 2017. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 91 Shelton Ave, Suite 107, New Haven, CT 06511, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and dis charge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to par agraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(t) of the Securities Purchase Agreement.

This Note is subject to the following additional provisions:

1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomi nation notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(0 of the Securities Purchase Agreement.

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

3. This Note may be transfened or exchanged only in compliance with the Securities Act of 1933, as amended (“ Act ”), applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“ Notice of Conversion ”) in the form annexed hereto as Exhibit A . The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.

4. (a) The Holder of this Note is entitled, at its option, at any time, after full cash payment for this Note, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “ Common Stock ”) at a price (“ Conversion Price ”) for each share of Common Stock equal to 55% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Markets ex change which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“ Exchange ’’), for the twenty prior trading days including the day up on which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered with in 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be is sued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 45% instead of 55% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares’1). Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

(c) This Note may not be prepaid, except that if the $30,000 Rule 144 convertible redeemable note issued by the Company of even date herewith is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and all obligations of the Holder under the Holder issued Back End Note will be auto matically be deemed satisfied and this Note and the Holder issued Back End Note will be auto matically be deemed cancelled and of no further force or effect.

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of out standing shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150¾ of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the considerawtion received by the holders of Common Stock is other than cash, the value shall be as deter mined by the Board of Directors of the Company or successor person or entity acting in good faith.

7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

8. If one or more of the following described “Events of Default” shall occur:

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a sub stantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unhanded or unstayed for a period of fifteen (I 5) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

(h) Defaulted on or breached any term of any other note of similar debt in- strument into which the Company has entered and failed to cure such default within the appropriate grace period; or

G) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

(I) The Company shall not replenish the reserve set forth in Section 12, with- in 5 business days of the request of the Holder; or

(m) The Company’s Common Stock has a closing bid price of less than $0.0005 per share for at least 5 consecutive trading days; or

(n) Intentionally deleted; or

(o) The Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or

(p) The Company shall lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange)

Then, or at any time thereafter, unless cured (except for 8(m) and 8(n)) which are incurable de faults, the sole remedy of which is to allow the Holder to cancel both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary not with standing, and the Holder may immediately, and without expiration of any period of grace, en force any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(p) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. Further, if a breach of Section 8(0) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%.

Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company-written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:

Failure to Deliver Loss= [(High trade price within 20 trading days or after the day of exercise) x (Nwnber of conversion shares)]

The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.

9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be ad justed rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a “144” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

12. Prior to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section 4(a) herewith. Upon full conversion of this Note, the reserve representing this Note shall be can celled. The Company will pay all transfer agent costs associated with issuing and delivering the shares. If such amounts are to be paid by the Holder, it may deduct such amounts from the Con version Price. Conversion Notices may be sent to the Company or its transfer agent via electric mail. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.

13. The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

EXHIBIT A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $”______________ of the above Note into______________ Shares of Common Stock of Cyclone Power Technologies, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date‘ Witten below.

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

Date of Conversion:
Applicable Conversion Price:
Signature:
	[Print Name of Holder and Title of Signer]

Address:

SSN or EIN:
Shares are to be registered in the following name:

Name:
Address:
Tel:
Fax:
SSN or EIN:

Shares are to be sent or delivered to the following account:

Account Name:
Address:

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;

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:

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;

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;

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

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):

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

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: August 21, 2017	/s/ Frankie Fruge
	Frankie Fruge
	President
	(Principal Executive Officer)

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;

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):

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: August 21, 2017	/s/ Bruce Schames
	Bruce Schames,
	Chief Financial Officer
	(Principal Accounting Officer)

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 June 30, 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. cysection 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: August 21, 2017	/s/ Frankie Fruge
	Frankie Fruge
	President (Principal Executive Officer)

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 June 30, 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: August 21, 2017

/s/ Bruce Schames

Bruce Schames

Chief Financial Officer and Secretary

(Principal Accounting Officer)