Cyclone Power Technologies, Inc. (fka CYPW)

[BuddyWhazhizname]

Nelson/Schoell pull another fast one on investors...


From the separation agreement:

SCHEDULE 1.1
USE OF PROCEEDS

Series A Round (provided a full $2 million is raised):

$1,825,000 – WHE operations over the following 12 to 18 months

$175,000 – licensing and consulting services over the following 6 months to assist WHE GEN and its engineering team (the “Cyclone Fee”). The Cyclone Fee is payable to Cyclone upon the First Series A Closing of at least $500,000.

In Exhibit 1.01 they said

Cyclone may raise $500,000 in additional capital from the sale of a portion of its WHE GEN equity holdings to further reduce existing debt and provide operating capital.

Then at the end they have Exhibit 10.41, the July 23, 2014 letter to shareholders:

1) It will allow Cyclone to monetize its investment in WHE GEN, part of which is expected to be sold to private investors to raise non-dilutive capital for Cyclone. We intend on selling up to $500,000 worth of our WHE GEN stock simultaneously with the separate funding of our subsidiary.

Nowhere did they say WHE GEN was going to pay Cyclone $500K to buy back stock. They represented that Cyclone would sell the stock "simultaneously with the separate funding" of WHE GEN.

So WHE GEN ends up with not the $1.3m for operations that the investors thought the would, but with only $800K.

Given that WHE GEN does not yet have a product that meets a minimal requirement to be considered a beta test prototype, and that Ohio State has worked for more than a year without meeting even this goal, this $500K being siphoned off from R&D is going to have a major material impact on WHE GEN's chances of survival.

You'd think people would look into who they are giving their money to...