CelLynx Group, Inc. - FORM 10-K/A

Attached files

file	filename
EX-31.2 - SECTION 302 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - CelLynx Group, Inc.	exhibit_31-2.htm
EX-31.1 - SECTION 302 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - CelLynx Group, Inc.	exhibit_31-1.htm
EX-32.2 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - CelLynx Group, Inc.	exhibit_32-2.htm
EX-23.1 - REGISTERED AUDITOR'S CONSENT - CelLynx Group, Inc.	exhibit_23-1.htm
EX-32.1 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - CelLynx Group, Inc.	exhibit_32-1.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment Number 1

[X]	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2012

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 000-27147

CelLynx Group, Inc.

(Name of small business issuer in its charter)

Nevada	95-4705831
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

4014 Calle Isabelle San Clemente, California	92672
(Address of principal executive offices)	(Zip Code)

877-723-7255

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class registered:	Name of each exchange on which registered:
None	None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 (Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes [ ] No [X]

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 checkmark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III if this Form 10-K or any amendment to this Form 10-K. [X]

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

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ] Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [ ] No [X]

State issuer's revenues for its most recent fiscal year: None.

At March 31, 2012, the end of our second fiscal quarter, the aggregate market value of common stock held by non-affiliates of the registrant was approximately $690,165 based on the closing price of $0.001 as reported on the Over-the-Counter Bulletin Board.

Number of shares of the registrant’s common stock outstanding as of December 31, 2012 was 1,457,498,001

DOCUMENTS INCORPORATED BY REFERENCE: None

EXPLANATORY NOTE

This Amendment No. 1 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended September 30, 2012, originally filed on January 15, 2013 (the “Original Filing”) by CelLynx Group, Inc. The Form 10-K/A is being filed for the purpose of inserting the opinion of auditor, with the auditors signature in the body of the report. The signature of the auditor was appended to the original 10-K filed. Further, in that auditor report, the Company was referred to as a “Development Stage Company” a caption that no longer applies to the Companies state of operations. In addition, as the prior year financial statements were audited by another registered independent accountant as auditor, the amended report herein includes the opinion of that accountant on the financial statements for the fiscal year ended September 30, 2011.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the Original Filing.

For purposes of clarity, only the audited financial statements and audit opinions thereon for the Form 10K/A has been filed as amended.

EXHIBIT INDEX

The following exhibits are included in this Amendment (and are numbered in accordance with Item 601 of Regulations S-K). Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index

immediately precedes the exhibits.

Exhibit

Number Description

23.1*		REGISTERED AUDITOR'S CONSENT

31.1*		Section 302 Certification by the Corporation’s Chief Executive Officer *

31.2*		Section 302 Certification by the Corporation’s Chief Financial Officer *

32.1*		Section 906 Certification by the Corporation’s Chief Executive Officer *

32.2*		Section 906 Certification by the Corporation’s Chief Financial Officer *

* Filed herewith.

CelLynx Group, Inc.

Consolidated Financial Statements

Contents

	Page
Reports of Independent Registered Public Accounting Firms	F-2

Consolidated Balance Sheets as of September 30, 2012 and 2011	F-4

Consolidated Statements of Operations for the Years Ended September 30, 2012 and 2011	F-5

Consolidated Statements Of Stockholders’ Deficit for the Years Ended September 30, 2012 and 2011	F-6

Consolidated Statements of Cash Flows for the Years Ended September 30, 2012 and 2011	F-7

Notes To Financial Statements	F-8

F-1

THOMAS J. HARRIS

CERTIFIED PUBLIC ACCOUNTANT

3901 STONE WAY N., SUITE 202

SEATTLE, WA 98103

206.547.6050

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

CelLynx Group, Inc.

We have audited the accompanying balance sheets of CelLynx Group, Inc. as of September 30, 2012, and the related statements of income, stockholders’ equity and cash flows for the period then ended. The prior year was audited by other accountants and we accordingly express no opinion on them. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CelLynx Group, Inc. as of September 30, 2012 and the results of its operations and cash flows for the period then ended in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note #1 to the financial statements, the Company has had no operations and has no established source of revenue. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note # 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Thomas J. Harris CPA

Thomas J. Harris CPA

Seattle, Washington

January 14, 2013

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

CelLynx Group, Inc.

Mission Viejo, California

We have audited the accompanying consolidated balance sheet of CelLynx Group, Inc. and subsidiary (formerly Norpac Technologies, Inc.), as of September 30, 2011 and 2010, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CelLynx Group, Inc. as of September 30, 2011 and 2010, and the results of operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has net operating cash flow deficits and a deficit accumulated during the development stage. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Gruber & Company, LLC

St Louis, Missouri

January 12, 2012

F-3

CELLYNX GROUP, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011


				September 30,		September 30,
				2012		2011

ASSETS
CURRENT ASSETS:
	Cash		$	(284)	$	178
	Accounts receivable			-		-
	Other receivable					1,200,651
	Prepaids and other current assets			-		20,090
TOTAL CURRENT ASSETS				(284)		1,220,919

EQUIPMENT, net				1,359		2,900
INTANGIBLE ASSETS, net				48,737		53,967
TOTAL ASSETS			$	49,812	$	1,277,786

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
	Accounts payable and accrued expenses		$	1,890,211	$	1,622,307
	Accrued interest			69,346		51,692
	Accrued derivative liabilities			1,487,568		102,286
	Deferred gain			-		1,200,651
	Line of credit net of debt discount of $88,371			580,473		241,038
	Convertible promissory notes, net of debt discount of $18,868.68 and $29,533 as of September 30, 2012 and September 30, 2011, respectively			390,488		379,823
TOTAL CURRENT LIABILITIES				4,418,086		3,597,797

TOTAL LIABILITIES				4,418,086		3,597,797

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
	Series A preferred stock, $0.001 par value; 100,000,000 shares authorized; nil shares issued and outstanding			-		-
	Common stock, $0.001 par value, 2,000,000,000 shares authorized; 1,457,498,081 and 195,991,082 shares issued and outstanding as of September 30, 2012 and September 30, 2011, respectively			1,457,498		195,991
	Additional paid-in capital			13,170,581		14,113,270
	Accumulated deficit			(17,196,353)		(16,629,272)
	Treasury stock – shares held in 5BARz International Inc.			(450,000)
	Accumulated other comprehensive income			(1,350,000)
		Total stockholders' deficit	$	(4,368,275)	$	(2,320,011)
	TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT			49,812		1,277,786

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

F-4

CELLYNX GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2012 AND 2011

			September 30, 2012		September 30, 2011

Net Revenue		$	-	$	-
Cost of Revenue			-		-
Gross profit			-		-
Operating expenses
	Research and development		12,893		-
	General and administrative		611,092		1,595,975
	Total operating expenses		623,985		1,595,975

Loss from operations		$	(623,985)	$	(1,595,975)

Non-operating income (expense):
	Interest and financing costs, net		(239,679)		(129,380)
	Change in fair value of accrued beneficial conversion liability		(1,190,295)		647
	Change in fair value of accrued warrant and options liability		(2,402)		167,696
	Gain on settlement of debt		3,766		-
	Gain on sale of intangible assets		1,485,513		239,303
	Total non-operating income (expense), net		56,903		278,266

Net loss		$	(567,082)	$	(1,317,709)


Weighted average shares outstanding
	Basic		710,515,971		185,193,816
	Diluted		710,515,971		185,193,816
Loss per share :
	Basic	$	(0.0008)	$	(0.01)
	Diluted		(0.0008)		(0.01)

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

F-5

CELLYNX GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

													Total
	Preferred Stock			Common Stock				Additional Paid-		Accumulated Other	Accumulated		Stockholders'
	Shares		Amount	Shares		Amount		in Capital		Comprehensive Income	Deficit		Deficit

Issuance of common stock for promissory note	-		-	37,500		38		4,208			-		4,246
Issuance of warrants for consulting services	-		-	-		-		118,382			-		118,382
Issuance of common stock for accounting services	-		-	400,000		400		71,600			-		72,000
Issuance of common stock for consulting services	-		-	3,970,908		3,971		722,628			-		726,599
Issuance of common stock for cash	-		-	6,845,000		6,844		706,156			-		713,000
Net loss	-		-	-		-		-			(3,978,762)		(3,978,762)
Balance, September 30, 2009	-	$	-	137,379,397	$	137,379	$	10,501,965	$		(11,674,210)	$	(1,034,866)

Conversion of convertible note payable to common stock	-		-	6,290,792		6,291		134,532			-		140,823
Stock based compensation for employees and consultants	-		-	-		-		1,060,170			-		1,060,170
Issuance of warrants for consulting services	-		-	-		-		327,087			-		327,087
Issuance of common stock for consulting services	-		-	4,445,486		4,445		696,671			-		701,116
Issuance of common stock for cash	-		-	23,636,897		23,637		1,487,064			-		1,510,701
Reclassification of beneficial conversion liability to equity	-		-	-		-		(59,964)			-		(59,964)
Reclassification of warrant liability to equity	-		-	-		-		(635,537)			-		(635,537)
Net loss	-		-	-		-		-			(3,637,353)		(3,637,353)
Balance, September 30, 2010	-	$	-	171,752,572	$	171,752	$	13,511,988	$		(15,311,563)	$	(1,627,823)

Conversion of convertible note payable to common stock	-		-	10,192,539		10,193		94,985			-		105,178
Cancellation of options and issuance of shares	-		-	14,045,971		14,046		227,902			-		241,948
Fair value of share based compensation for employees and consultants	-		-	-		-		278,395			-		278,395
Net loss	-		-	-		-		-			(1,317,709)		(1,317,709)
Balance, September 30, 2011	-	$	-	195,991,082	$	195,991	$	14,113,270	$		(16,629,272)	$	(2,320,011)

Conversion of convertible note payable to common stock	-		-			1,261,507		(942,689)			-		318,818
Other comprehensive income (loss)										(1,350,000)
Net loss	-		-	-		-		-			(567,082)		(567,082)
Balance, September 30, 2012	-	$	-	195,991,082	$	1,457,498	$	13,170,581	$	(1,350,000)	(17,196,354)	$	(3,918,275)

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

F-6

CELLYNX GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2012 AND 2011

				2012		2011

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(567,082)	$	(1,317,709)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization		2,588		6,946
		Stock issued for services		-		241,948
		Note payable issued for services		50,000		-
		Stock compensation expense for options issued to employees and consultants		79,618		278,395
		Change in fair value of accrued beneficial conversion liability		1,190,295		(647)
		Change in fair value of accrued warrant and option liability		2,402		(167,696)
		Gain on sale of intangible assets		(1,485,513)		(239,303)
		Amortization of debt discount		114,897		101,730
		Gain on settlement of debt		(3,766)		-
	Changes in operating assets and liabilities:
		Change in accounts receivable		-		1,925
		Change in inventory		-		30,212
		Change in other assets		20,090		145,321
		Change in accounts payable, accrued expenses and accrued interest		285,558		227,068
	Net cash used in operating activities			(310,913)		(691,810)

CASH FLOWS FROM INVESTING ACTIVITIES:
		Proceeds from sale of intangible assets		-		299,349
	Net cash used in investing activities			0		299,349

CASH FLOWS FROM FINANCING ACTIVITIES:
		Payments of shareholders convertible notes		(30,582)		-
		Proceeds from issuance of convertible notes		65,000		165,000
		Proceeds from line of credit		276,033		221,038
	Net cash provided by financing activities			310,451		386,038

NET DECREASE IN CASH				(462)		(6,423)

CASH, BEGINNING OF PERIOD				178		6,601

CASH, END OF PERIOD			$	(284)	$	178

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for interest		$	-	$	-
	Cash paid for income taxes		$	-	$	-


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING:
	Conversion of convertible note payable to common stock		$	239,200	$	73,000
	Deferred revenue from sale of intangible assets			-		1,200,651


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

F-7

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Note 1 – Organization and Basis of Presentation

Organization and Line of Business

CelLynx Group, Inc. (the “Company”) was originally incorporated under the laws of the State of Minnesota on April 1, 1998.

On July 23, 2008, prior to the closing of a Share Exchange Agreement (described below), the Company entered into a Regulation S Subscription Agreement pursuant to which the Company issued 10,500,000 shares of its common stock and warrants to purchase 10,500,000 shares of common stock at an exercise price of $0.20 per share to non-U.S. persons for an aggregate purchase price of $1,575,000.

On July 24, 2008, the Company entered into a Share Exchange Agreement, as amended, with CelLynx, Inc., a California corporation ("CelLynx- California"), and twenty-three CelLynx-California shareholders who, immediately prior to the closing of the transaction, collectively held 100% of CelLynx-California’s issued and outstanding shares of capital stock. As a result, the CelLynx-California shareholders were to receive 77,970,956 shares of the Company’s common stock in exchange for 100%, or 61,983,580 shares, of CelLynx-California’s common stock. However, the Company had only 41,402,110 authorized, unissued and unreserved shares of common stock available, after taking into account the shares of common stock issued in the July 23, 2008, financing described above. Pursuant to the Share Exchange Agreement, in the event that there was an insufficient number of authorized but unissued and unreserved common stock to complete the transaction, the Company was to issue all of the available authorized but unissued and unreserved common stock to the CelLynx-California shareholders in a pro rata manner and then establish a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”) and issue that number of shares of Series A Preferred Stock such that the common stock underlying the Series A Preferred Stock plus the common stock actually issued to the CelLynx- California shareholders would equal the total number of shares of common stock due to the CelLynx-California shareholders under the Share Exchange Agreement. As a result, the Company issued to the CelLynx-California shareholders an aggregate of 32,454,922 shares of common stock and 45,516,034 shares of Series A Preferred Stock. The Series A Preferred Stock automatically would convert into common stock on a one-to-one ratio upon the authorized capital stock of the Company being increased to include not less than 150,000,000 shares of common stock.

On November 7, 2008, the Company amended the Articles of Incorporation to increase the number of authorized shares to 400,000,000 and converted the 45,516,034 shares of Series A Preferred Stock into 45,516,034 shares of the Company’s common stock.

The exchange of shares with CelLynx-California was accounted for as a reverse acquisition under the purchase method of accounting because the shareholders of CelLynx-California obtained control of the Company. On August 5, 2008, NorPac Technologies, Inc. changed its name to CelLynx Group, Inc. Accordingly the merger of CelLynx-California into the Company was recorded as a recapitalization of CelLynx-California, with CelLynx-California being treated as the continuing entity. The historical financial statements presented are the financial statements of CelLynx-California. The Share Exchange Agreement has been treated as a recapitalization and not as a business combination; therefore, no pro forma information is disclosed. At the date of the reverse merger transaction, the net assets of the legal acquirer CelLynx Group, Inc. were $1,248,748.

As a result of the reverse merger transactions described above, the historical financial statements presented are those of CelLynx-California, the operating entity. Each CelLynx-California shareholder received 1.2579292 shares of stock in the Company for each share of CelLynx- California capital stock. All shares and per-share information have been retroactively restated for all periods presented to reflect the reverse merger transaction.

On October 27, 2008, the Board of Directors approved a change of the Company’s fiscal year end from June 30 to September 30 to correspond to the fiscal year of CelLynx-California. The fiscal year end change was effective for the year ended September 30, 2008.

The Company develops and manufactures cellular network extenders which enable users to obtain stronger signals and better reception.

F-8

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Going Concern and Exiting Development Stage

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the ability of the Company to obtain necessary equity and debt financing to continue operations and to generate sustainable revenue. There is no guarantee that the Company will be able to raise adequate equity or debt financing or generate profitable operations. For the year ended September 30, 2012, the Company incurred a net loss of $567,082. As of September 30, 2012, the Company had an accumulated deficit of $17,196,354. Further, as of September 30, 2012 and 2011, the Company had negative working capital of $4,018,370 and $2,376,878, respectively, and had negative cash flows from operations of $623,985 and $1,595,975 for the years ended September 30, 2012 and 2011, respectively. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management intends to raise additional funds through equity or debt financing and to generate cash from the sale of the Company’s products and from license fees as further described below.

The Company was in the development stage through June 30, 2009. In July 2009, the Company received the first 220 units of the Company’s cellular network extender, The Road Warrior, from its manufacturer. As of July 2009, the Company was fully operational and as such was no longer considered a development stage company. During the period that the Company was considered a development stage company, the Company incurred accumulated losses of approximately $10,948,625.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the accounts of CelLynx Group, Inc., and its 100% wholly owned subsidiary, CelLynx, Inc. All intercompany accounts and transactions have been eliminated in consolidation.

Cash

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Inventory

Inventory consists of finished goods ready for sale and is valued at the lower of cost (determined on a first-in, first-out basis) or market. The Company reviews its reserves for slow moving and obsolete inventories. As of September 30, 2011, the Company wrote off its entire inventory balance.

Accounts Receivable

The Company maintains reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded based on the Company’s historical collection history. Receivables are written off when they are determined to be uncollectible. As of September 30, 2010, the Company determined that allowance for bad debt was not necessary.

Other Receivable

Other receivables were amounts due from the sale of 50% of the Company’s intangible assets.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-9

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Concentration of Credit Risk

Cash includes deposits in accounts maintained at financial institutions. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. As of September 30, 2012 and 2011, the Company did not have any deposits in excess of federally-insured limits. To date, the Company has not experienced any losses in such accounts.

Equipment

Equipment is recorded at historical cost and is depreciated using the straight-line method over their estimated useful lives. The useful life and depreciation method are reviewed periodically to ensure that the depreciation method and period are consistent with the anticipated pattern of future economic benefits. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. The useful life of the equipment is being depreciated over three years.

Intangible Assets

Acquired patents, licensing rights and trademarks are capitalized at their acquisition cost or fair value. The legal costs, patent registration fees, and models and drawings required for filing patent applications are capitalized if they relate to commercially viable technologies. Commercially viable technologies are those technologies that are projected to generate future positive cash flows in the near term. Legal costs associated with applications that are not determined to be commercially viable are expensed as incurred. All research and development costs incurred in developing the patentable idea are expensed as incurred. Legal fees from the costs incurred in successful defense to the extent of an evident increase in the value of the patents are capitalized.

Capitalized costs for patents are amortized on a straight-line basis over the remaining twenty-year legal life of each patent after the costs have been incurred. Once each patent or trademark is issued, capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively. The licensing right is amortized on a straight-line basis over a period of 10 years.

Impairment or Disposal of Long-lived Assets

The Company applies the provisions of Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant, and Equipment,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review, the Company believes that as of September 30, 2012, and September 30, 2011, there was no significant impairment of its long-lived assets.

Revenue Recognition

The Company's revenue recognition policies are in compliance with ASC Topic 605, “Revenue Recognition.” Revenue is recognized at the date of shipment to customers, and when the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.

F-10

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables, certain other current assets and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

·	Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

·	Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·	Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s warrant liability is carried at fair value totaling $8,354 and $6,160, as of September 30, 2012 and 2011, respectively. The Company’s conversion option liability is carried at fair value totaling $1,479,204 and $96,126 as of September 30, 2012 and 2011, respectively. The Company used Level 2 inputs for its valuation methodology for the warrant liability and conversion option liability as their fair values were determined by using the Black-Scholes option pricing model using the following assumptions:

September 30, 2012
Annual dividend yield		-
Expected life (years)		0.25 – 4.75
Risk-free interest rate		0.01% -0.81%
Expected volatility		183%

Expected volatility is based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods that correspond to the term of the warrants and conversion options. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and conversion options. We have no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants and conversion options. The risk-free interest rate is based on U.S. Treasury securities with maturity terms similar to the expected remaining term of the warrants and conversion options.

At September 30, 2012, the Company identified the following assets and liabilities that are required to be presented on the balance sheet at fair value:

	Fair Value		Fair Value Measurements at
	As of		September 30, 2011
	September 30, 2012		Using Fair Value Hierarchy
Liabilities	Level 1		Level 1		Level 2		Level 3
Warrant liability	$	8,364		-	$	8,364		-
Conversion option liability		1,479,204		-		1,479,204		-
Total accrued derivative liabilities	$	1,487,568		-	$	1,487,568		-

For the year ended September 30, 2012, the Company recognized a gain of $2,402 for the change in the fair value of accrued warrant liability and the Company recognized a loss of $1,190,295 for the change in fair value of accrued beneficial conversion liability, respectively. For the year ended September 30, 2011, the Company recognized a gain of $167,696 for the change in the fair value of accrued warrant liability and $647 for the change in fair value of accrued beneficial conversion liability.

The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 825.

F-11

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes were incurred during the years ended September 30, 2012 and 2011.

Basic and Diluted Net Loss Per Share

The Company reports loss per share in accordance with the ASC Topic 260, “Earnings-Per-Share.” Basic-earnings per-share is based upon the weighted average number of common shares outstanding. Diluted-earnings-per-share is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period. Due to the net loss for the years ended September 30, 2012 and 2011, none of the potential dilutive securities have been included in the calculation of dilutive earning per share because their effect would be anti-dilutive.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation.” ASC 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. Under ASC 718, the Company’s volatility is based on the historical volatility of the Company’s stock or the expected volatility of similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company uses the Black-Scholes option-pricing model which was developed for use in estimating the fair value of options. Option-pricing models require the input of highly complex and subjective variables including the expected life of options granted and the Company’s expected stock price volatility over a period equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect the estimated value of the Company’s employee stock options, it is management’s opinion that the Black-Scholes option-pricing model may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with ASC 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/seller market transaction.

The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.

Recent Accounting Pronouncements

In December 2011, the FASB issued guidance on offsetting (netting) assets and liabilities. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The new guidance is effective for annual periods beginning after January 1, 2013.

F-12

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

In September 2011, the FASB issued guidance on testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is no less than its carrying amount, the two-step goodwill impairment test is not required. The new guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.

In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. The new guidance is effective for annual periods beginning after December 15, 2011. In December 2011, the FASB issued a deferral of certain portion of this guidance.

In May 2011, the FASB issued guidance to amend the accounting and disclosure requirements on fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counter-party credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The new guidance is effective for annual periods beginning after December 15, 2011.

Note 3 – Equipment

Equipment consisted of the following at September 30, 2012 and 2011:

	September 30,			September 30,
	2012			2011
Office furniture and equipment	$	9,879		$	9,879
Computer equipment		8,930			8,930
		18,809			18,809
Accumulated depreciation		(17,450	)		(15,909	)
Equipment, net	$	1,359		$	2,900

The Company recorded depreciation expense of $2,588 and $3,187 for the years ended September 30, 2012 and 2011.

Note 4 – Intangible Assets

The Company incurred legal costs in acquiring patent and trademark rights. These costs are projected to generate future positive cash flows in the near term and have been capitalized to intangible assets in the period incurred. Once each patent or trademark is issued, capitalized costs are amortized on a straight-line basis over a period not to exceed 20 years and 10 years, respectively.

Intangible assets consist of the following:

	September 30,			September 30,
	2012			2011
Patents	$	46,862		$	49,586
Trademarks		4,995			6,243
Licensing rights		4,214			4,214
		56,071			60,043
Accumulated Amortization		(7,334	)		(6,076	)
Intangibles, net	$	48,737		$	53,967

F-13

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

The Company recorded amortization expense related to the intangible assets of $2,092 and $1,554 for the years ended September 30, 2012 and 2011, respectively.

The following table summarizes the amortization for the above intangible assets over the next 3 years and thereafter:

Years ended September 30,	Amount
2013	$	2,092
2014		2,092
2015		2,092
	$	6,276

Convertible Promissory Note Issued August 15, 2006

On August 15, 2006, the Company issued a secured promissory note (the “August 2006 Note”) for $250,000 to an unrelated entity (the “Holder”). On November 10, 2007, the August 2006 Note was amended (the “Amended Note”). At the date of the amendment, the Company was obligated to pay to the Holder $262,356 which represented the principal and accrued interest, and the Holder was entitled to purchase shares of the Company’s securities pursuant to a Warrant to Purchase Common Stock dated August 15, 2006 (“August 2006 Warrant”). In contemplation of the completion of the reverse merger, the Company and the Holder reached an agreement whereby this Amended Note superseded the August 2006 Note and canceled the August 2006 Warrant. The principal amount of the Amended Note is $262,356, is unsecured and is convertible into 6,340,029 shares of common stock of the Company and bears interest at 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. All unpaid principal, together with the accrued but unpaid interest was due and payable upon the earlier of (i) November 9, 2010, at the written request of the Holder to the Company, or (ii) the occurrence of an event of default. At the date of amendment, the Company determined that the Amended Note had a beneficial conversion feature with a fair value of $767,047. The Company recorded a debt discount of $262,356 and expensed as financing costs the $504,691 of the beneficial conversion feature that exceeded the principal balance. The Company did not pay the note per the terms of the agreement and as of September 30, 2011, the total unpaid principal balance and accrued interest is $262,356 and $51,321, respectively.

Asher Convertible Promissory Note Issued July 22, 2010

On July 22, 2010, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher Note”).

Pursuant to the Asher Note, Asher loaned to the Company the principal amount of $55,000. The Asher Note bears interest at a rate of 8%, and was due on April 21, 2011. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion.

On various days during the six months ended March 31, 2011, Asher converted the $55,000 note for 3,763,967 shares of the Company’s common stock. .

Asher Convertible Promissory Note Issued February 22, 2011

On February 22, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher February 2011 Note”).

F-14

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Pursuant to the Asher February 2011 Note, Asher loaned to the Company the principal amount of $40,000. The Asher February 2011 Note bears interest at a rate of 8%, and is due on November 17, 2011. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Asher February 2011 Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Asher Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

Pursuant to the terms of the Asher February 2011 Note, while there remains any unpaid amounts owing on the Asher February 2011 Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Asher Note.

The Company has the right to pre-pay the Asher February 2011 Note during the first 120 days following the date of the Asher February 2011 Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

The Company determined that the Asher February 2011 Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance. The Company recorded a $23,492 debt discount related to the beneficial conversion feature.

Asher converted the $40,000 note for 25,326,008 shares of the Company’s common stock, completing on November 17, 2011.

Asher Convertible Promissory Note Issued March 10, 2011

On March 10, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher March 2011 Note”).

Pursuant to the Asher March 2011 Note, Asher loaned to the Company the principal amount of $42,500. The Asher March 2011 Note bears interest at a rate of 8%, and is due on December 7, 2011. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Asher March 2011 Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Asher March 2011 Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

Pursuant to the terms of the Asher March 2011 Note, while there remains any unpaid amounts owing on the Asher March 2011 Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Asher March 2011 Note.

The Company has the right to pre-pay the Asher March 2011 Note during the first 120 days following the date of the Asher March 2011 Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

The Company determined that the Asher March 2011 Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance. The Company recorded a $24,960 debt discount related to the beneficial conversion feature.

F-15

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

The note was paid by the conversion into 225,942,808 common shares over various days completing April 12, 2012.

Asher Convertible Promissory Note Issued May 18, 2011

On May 18, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher May 2011 Note”).

Pursuant to the Asher May 2011 Note, Asher loaned to the Company the principal amount of $32,500. The Asher May 2011 Note bears interest at a rate of 8%, and is due on February 23, 2012. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Asher May 2011 Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Asher May 2011 Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

Pursuant to the terms of the Asher May 2011 Note, while there remains any unpaid amounts owing on the Asher May 2011 Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Asher May 2011 Note.

The Company has the right to pre-pay the Asher May 2011 Note during the first 120 days following the date of the Asher May 2011 Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

The Company determined that the Asher May 2011 Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance. The Company recorded a $19,087 debt discount related to the beneficial conversion feature.

The note was paid in full by conversion into 180,000,000 shares, over various days completing May 4, 2012.

Yaretz Convertible Promissory Note Issued April 5, 2011 – Related Party

On April 5, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with one of its directors, Dwayne Yaretz (“Yaretz”), in connection with the purchase by Yaretz of a Convertible Promissory Note (the “Yaretz Note”).

Pursuant to the Yaretz Note, Yaretz loaned to the Company the principal amount of $50,000. The Yaretz Note bears interest at a rate of 8%, and is due on January 5, 2012. Yaretz may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Yaretz is prohibited under the Yaretz Note from converting amounts if principal and interest that would result in Yaretz receiving shares, which when combined with shares of the Company’s common stock held by Yaretz, would result in Yaretz holding more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Yaretz Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

Pursuant to the terms of the Yaretz Note, while there remains any unpaid amounts owing on the Yaretz Note, the Company may not incur additional debt without Yaretz’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Yaretz; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Yaretz Note.

F-16

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

The Company has the right to pre-pay the Yaretz Note during the first 120 days following the date of the Yaretz Note by paying to Yaretz 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

The Company determined that the Yaretz Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance. The Company recorded a $29,365 debt discount related to the beneficial conversion feature.

Asher Convertible Promissory Note Issued January 10, 2012

On January 10, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, in connection with the purchase by Holder of a Convertible Promissory Note in the principle amount of $15,000, filed herein as Exhibit 10.33. On July 9, 2012, the Company paid $31,582 in full settlement of the note principle, accrued interest and prepayment penalty for a convertible note that had been entered into on January 10, 2012 in the principle amount of $15,000.

Asher Convertible Promissory Note Issued May 24, 2012

On May 24, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, in connection with the purchase by Holder of a Convertible Promissory Note in the principle amount of $37,500, filed herein as Exhibit 10.35.

Asher Convertible Promissory Note Issued August 14, 2012

On August 14, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, in connection with the purchase by Holder of a Convertible Promissory Note in the principle amount of $12,500, filed herein as Exhibit 10.36.

We received the funds on September 21, 2012. Pursuant to the Note, Asher loaned to the Company the principal amount of $12,500. The Note bears interest at a rate of 8%, and due on May 16, 2013, (the “Due Date”). Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price (the “Conversion Price”) which is equal to 51% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

F-17

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Pursuant to the terms of the Note, while there remains any unpaid amounts owing on the Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Note.

The Company has the right to pre-pay the Note during the first 120 days following the date of the Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

Pursuant to the SPA, the Company agreed to grant to Asher a right of first refusal for any subsequent transactions occurring during the twelve month period following the Closing Date, which was defined as September 21, 2013. The right of first refusal does not apply to any transactions in excess of $250,000.

In the above transaction, the Note was issued to an accredited investor pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and rules promulgated pursuant thereto. Additionally, the underlying shares of common stock, if any, issued upon conversion of the Note will be issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and rules promulgated pursuant thereto. All certificates for such shares will contain the appropriate legends restricting their transferability absent registration or applicable exemption. The accredited investor received information concerning the Company and had the ability to ask questions about the Company.

These descriptions of the SPA and the Note are not complete, and are qualified in their entirety by reference to the SPA and the Note themselves, which are included in this filing as exhibits and which are incorporated herein by this reference.

As of September 30, 2012, the Company has notes outstanding to Asher in the amount of $12,500 plus accrued interest. That amount plus interest is expected to be converted into shares in accordance with the Convertible Notes referred to above.

The Company recorded interest expense relating to the convertible promissory notes of $35,063 and $25,049 for the years ended September 30, 2012 and 2011, respectively.

The Company amortized $114,897 and $101,730 of the debt discount for the years ended September 30, 2012 and 2011, respectively.

The following table summarizes the convertible promissory notes at September 30, 2012 and September 30, 2011:

	September 30,			September 30,
	2012			2011

Issued August 2006, amended November 2007	$	262,356		$	262,356
Issued through September 30, 2011		220,000			220,000
Issued during fiscal year 2012		115,000
Less amounts converted		(170,000	)		(73,000	)
Less principle amount paid off		(15,000	)
Less: Debt discount		(21,868	)		(29,533	)
Convertible promissory notes, net	$	390,488		$	379,823

F-18

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Note 5 - License Agreement

On January 12, 2009, the Company entered into a Licensing Agreement with an unrelated party. The Licensing Agreement gives the Company the right to manufacture, have manufactured, use, import, and offer to sell, lease, distribute or otherwise exploit certain technology rights and intellectual rights. The License Agreement has a term of ten years. As consideration for the License Agreement, the Company issued 57,143 shares of its common stock and paid $1,000 in cash. The Company determined the fair value of the License Agreement to be $7,429 based on the market value of its common stock on the date of the agreement plus the $1,000, for a total acquisition cost of $8,429, which is included in the accompanying consolidated balance sheet.

The Company recorded amortization expense related to the licensing agreement of $632 and $632 for the years ended September 30, 2012 and 2011, respectively.

Note 6 - Consulting Agreement

On January 15, 2010, the Company entered into a consulting agreement with Seahawk Capital Partners, Inc. The Company issued 1,000,000 shares of Company restricted stock and 2,000,000 warrants upon signing of agreement. In addition, the Company agreed to issue an additional 50,000 shares of restricted Company stock.

The exercise prices of the warrants are as follows and expire December 1, 2012:

Number of		Exercise
Warrants Issued		Price
285,714		$0.10 per share
285,714		$0.75 per share
285,714		$01.5 per share
285,714		$2.00 per share
285,714		$3.00 per share
285,714		$3.50 per share
285,716		$4.00 per share
2,000,000

Note 7 - 5BARz Agreement

On March 29, 2012, the Company and 5BARz International, Inc. entered into a definitive set of agreements which super cede all previous agreements and amendments thereto. As a result of those agreements, the following arrangements between the Companies was established;

(i) 5BARz International, Inc. acquired a 60% interest in the patents and trademarks held by CelLynx Group Inc., referred to as the “5BARz™” technology. That interest in the technology was acquired for proceeds comprised of 9,000,000 shares of the common stock of the Company, valued at the date of acquisition at $0.20 per share or $1,800,000 USD. The acquisition agreement also clarified that the ownership interest in the “5BARz™” technology does represent that proportionate interest in income earned from the intellectual property. This acquisition of intellectual property represents an amendment to an original acquisition of a 50% interest in the CelLynx intellectual property for debt of $1,500,000 established on October 5, 2010.

F-19

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

(ii) 5BARz International, Inc. agreed to make available to CelLynx Group, Inc. a revolving line of credit facility in the amount of $2.2 million dollars of which $668,844 is the net amount advanced as of September 30, 2012. In addition, advances in the amount of an additional $139,700 had been made under the terms of the revolving line of credit, and was repaid by conversion of such amount into shares. As a result aggregate advances under the line of credit have been $808,544. This revolving line of credit facility expires on October 5, 2013. Under the terms of the line of credit facility, the Company has the right to convert amounts due under the facility into common stock of CelLynx, at a conversion rate which is the lesser of a fixed conversion rate of $0.00015 per share or a variable rate which is calculated at 25% of the average lowest three closing bid prices of the CelLynx Group, Inc. common stock for a period which is ten (10) days prior to the date of conversion. At March 31, 2012, the Company converted an initial $78,500 of the amount due under the revolving line of credit facility for 350,000,000 shares of the capital stock of CelLynx Group, Inc. As a result, CelLynx became a consolidated subsidiary of 5BARz International Inc., on March 29, 2012,with a 60% interest in the Company. Subsequent conversions aggregating $61,200 have been made to maintain the 5BARz International Inc. ownership interest at 60%.

(iii) Pursuant to the Master Global Marketing and Distribution agreement between 5BARz International Inc. and CelLynx Group, Inc., 5BARz International, Inc. was obligated to pay to CelLynx Group, Inc. a royalty fee amounting to 50% of the Company’s Net Earnings. That fee would be paid on a quarterly basis, payable in cash or immediately available funds and shall be due and payable not later than 45 days following the end of each calendar quarter of the year. The asset acquisition agreement amendment referred to herein specified that the royalties would be paid in relation to the ownership of the intellectual property.

F-20

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Note 8 - Stockholders' Equity

During fiscal year ended September 30, 2012 the following issuance of common stock, par value $0.001 per share was issued upon conversion of convertible promissory notes by Asher Enterprises, Inc.

Date	Number of shares issued	Principle/Interest Converted	Conversion rate
January 20, 2012	11,333,333	$1,700	$0.00015
February 21, 2012	12,000,000	$1,800	$0.00015
March 2, 2012	12,000,000	$1,800	$0.00015
March 9, 2012	12,000,000	$1,800	$0.00015
March 14, 2012	12,000,000	$1,800	$0.00015
March 16, 2012	12,000,000	$1,800	$0.00015
March 21, 2012	12,000,000	$1,800	$0.00015
March 27, 2012	12,000,000	$1,800	$0.00015
March 28, 2012	12,000,000	$1,800	$0.00015
March 29, 2012	15,333,333	$2,300	$0.00015
April 2, 2012	15,333,333	$2,300	$0.00015
April 4, 2012	18,000,000	$2,700	$0.00015
April 5, 2012	18,000,000	$2,700	$0.00015
April 10, 2012	18,000,000	$2,700	$0.00015
April 12, 2012	19,333,333	$2,900	$0.00015
April 16, 2012	23,333,333	$3,500	$0.00015
April 18, 2012	23,333,333	$3,500	$0.00015
April 21, 2012	23,333,333	$3,500	$0.00015
April 23, 2012	23,333,333	$3,500	$0.00015
April 26, 2012	23,333,333	$3,500	$0.00015
May 1, 2012	22,666,667	$3,400	$0.00015
May 3, 2012	23,333,333	$3,500	$0.00015
May 4, 2012	17,333,333	$2,600	$0.00015
May 8, 2012	30,000,000	$4,500	$0.00015
May 22, 2012	15,333,334	$2,300	$0.00015

In each issuance above, the shares of common stock were issued without registration under the 1933 Act in reliance on Section 4(2) of the 1933 Act and the rules and regulations promulgated thereunder.

Stock Options

At September 30, 2012 CelLynx Group Inc. has the following Options and Warrants outstanding.

The number and weighted average exercise prices of all options outstanding as of September 30, 2012, are as follows:

F-21

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Options Exercisable
						Weighted
				Weighted		Average
		Number		Average		Remaining
Range of		Outstanding as of		Exercise		Contractual Life
Exercise Price		September 30, 2012		Price		(Years)
$	$.0006	12,500,000		.0006		4.72
$	0.001		2,500,000		0.001		2.44
$	0.10 – 0.25		21,554,757		0.17		0.20
$	0.26-4.00		2,000,000		2.00		0.17
			38,554,757

Warrants

The following table summarizes the warrant activity:

			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Warrants		Price		Life (in years)		Value
Outstanding, December 31, 2011		42,514,757		0.12
Granted		-		-
Exercised		-		-
Expired		10,060,000		-
Outstanding, September 30, 2012		32,454,757	$	0.275		.88	$	–
Exercisable, September 30, 2012		32,454,757	$	0.27		.88	$	–

F-22

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

Note 9 - Commitments and Contingencies

Operating Leases

The Company has terminated all operating leases. See litigation.

Litigation

As earlier reported in the Company’s Form 10K and 10Q, the Company was a Defendant in an action brought by Dolphinshire L.P. regarding its office space in Mission Viejo, CA. That action has since been dismissed. Dolphinshire L.P., a California limited partnership v. CelLynx Group, Inc., a Nevada corporation and Does 1-10, Superior Court of California, Orange County, Case No. 00521213. On November 8, 2011, plaintiff brought suit against the Company for unlawful detainer of offices located at 25910 Acero, Suite 370, Mission Viejo, CA 92691 pursuant to a lease agreement, seeking an unspecified amount of damages not to exceed $25,000. The Company has engaged in settlement negotiations with the plaintiff and management expected to settle before eviction. The Company has since, by agreement, vacated the leased premises and continues to negotiate a payout of past due rent and penalties and has moved the general office to 4014 Calle Isabella, San Clemente, CA 92672.

A similar action for past due rent has been filed as to its facility in El Dorado Hills, CA. CSS Properties, v. CelLynx Group, Inc., and Does 1-10, Superior Court of California, El Dorado County, Case No. PCU 2 0 110442. On October 12, 2011, plaintiff brought suit against the Company for unlawful detainer of offices located at 5047 Robert J Matthews Parkway, El Dorado Hills, CA 95762 pursuant to a lease agreement, seeking an unspecified amount of damages not to exceed $25,000. The Company has engaged in settlement negotiations with the plaintiff and management expected to settle before eviction. The Company has since, by agreement, vacated the leased premises and continues to negotiate a payout of past due rent and penalties.

As had been previously reported in the Company’s Form 10K and 10Q, the Company was facing claims for back wages by some of its former employees. Some of those claims have been partially paid and others were expected to be paid in the normal course of business or were to be otherwise defended. Those claims have now been incorporated into California Labor Commission awards in favor of those former employees. Those awards total approximately $312,986.45 depending on interest charges. The first award has been converted into a judgment in the amount of $118,224. Management had negotiated a monthly payment plan amounting to $10,000 per month commencing on February 1, 2012 and every month thereafter until the judgment has been satisfied. This agreement is now in the process of revision.

The Company has received a Cease Trading Order from the British Columbia Securities Commission (BCSC) alleging that the Company is in violation of the British Colombia reporting requirements. The BCSC has assumed that since two the Company's Directors are domiciled in BC that the company is controlled out of BC and therefore subject to its reporting requirements. The Company denies that premise and is appealing the issuance of the CTO.

Note 10 – Taxes

The Company has provided no current income taxes due to the losses incurred from October 11, 2005 (date of inception), through September 30, 2012. Net operating losses of approximately $7,200,000 at September 30, 2012, are available for carryover. The net operating losses will expire from 2022 through 2026. The Company has provided a 100% valuation allowance for the deferred tax benefit resulting from

the net operating loss carryover due to our limited operating history. In addressing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. When we demonstrate a history of profitable operation, we will reduce our valuation allowance at that time.

A reconciliation of the statutory Federal income tax rate and the effective income tax rate for the years ended September 30, 2012 and 2011 follows:

F-23

CELLYNX GROUP, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2012 and 2011

	September 30,			September 30,
	2012			2011
Statutory federal income tax rate		(34%	)		(34%	)
State income taxes (benefit), net of federal taxes		(6%	)		(6%	)
Equity instruments issued for compensation/services		16%			16%
Change in derivative liabilities		(5%	)		(5%	)
Non-cash financing costs		(3%	)		(3%	)
Valuation allowance		32%			32%
Effective income tax rate		—			—

The significant components of deferred tax assets and liabilities are as follows:

	September 30,			September 30,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	7,200,000		$	2,931,884
Valuation allowance		(7,200,000	)		(2,931,884	)
Net deferred tax assets	$	–		$	–

Note 11 – Related Party Transactions

On June 20, 2012, the Board of Directors passed a resolution for the issuance of options to each of the Directors as follows;

Name	Number of Options	Exercise price	Date of expiry
Mr. Norm Collins	6,000,000	$0.0006	October 9, 2013
Mr. Dwayne Yaretz	3,500,000	$0.0006	June 20, 2017
Mr. Malcolm Burke	3,000,000	$0.0006	June 20, 2017

Subsequent to the acquisition of a 60% interest in CelLynx Group, Inc. by 5BARz International Inc., on April 13, 2012 5BARz converted $7,700 for 51,333,333 shares of CelLynx Group, Inc. common stock and on May 15, 2012 5BArz Interantional Inc. converted $58,500 for 390,000,000 shares of CelLynx Group, Inc. common stock. These conversions made by 5BArz International Inc. maintain the equity interst held in CelLynx Group, Inc on or around 60% as CelLynx experisnces dilution from sales of shares to third parties.

Note 12 – Subsequent Events

The Company has evaluated all subsequent events that occurred up to the time of the Company's issuance of its financial statements.

Departure of Director

Mr. Norm Collins, Sr., who has served as a Director on the CelLynx Group, Inc., Board of Directors, since July 2008, and as the Chairman of the Board, since July 2010, has recently passed away. As a result, the Company held a Board of Directors meeting on October 13, 2012 to formally end Mr. Collins term of service with the Company. At that date, in addition to his Directorship, Mr. Collins acted as the interim Chief Executive Officer for the Company as well as the Chief Financial Officer. Further, Mr. Collins served on a committee of the Board of Directors, to search for a new CEO for the Company. On October 17, 2012, the Company issued a press release announcing the fact that Mr. Norm Collins, Sr. had passed away, and the loss of Mr. Collins as a valued director and officer of CelLynx Group, Inc.

Appointment of Certain Officers

On October 13, 2012 the Board of Directors of CelLynx Group, Inc. appointed Mr. Dwayne Yaretz as the Chief Executive Officer as well as the Chief Financial Officer for the Company. Mr. Yaretz has been a Director of CelLynx Group, Inc. since December 19, 2009. Mr. Yaretz has also been a member of a Committee set up July 15, 2010, to search for a Chief Executive Officer for the Company.

The compensation arrangements for Mr. Yaretz are comprised of a monthly fee of $10,000 per month, with such compensation to be deferred until such time as the Company has adequate working capital to pay the fees accrued to Mr. Yaretz.

F-24

ITEM 15. Exhibits, Financial Statement Schedules, SIGNATURES

(a) The following documents are filed as part of this report:

3. Exhibits:

The exhibits listed in the exhibit index of this Amendment are filed with, or incorporated by reference in this report.

SIGNATURES

Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CELLYNX GROUP, INC.

Dated: March 12, 2013	By:	/s/ Dwayne Yaretz
		Dwayne Yaretz
		Chief Executive Officer and Chairman of the Board

Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Position	Date

By: s/ Dwayne Yaretz	Chairman of the Board, Chief Executive Officer (Principal Executive Officer) and CFO (Chief Financial Officer)	March 12, 2013
Dwayne Yaretz

By: s/ Malcolm P. Burke	Director	March 12, 2013
Malcolm P. Burke	Director

CelLynx Group, Inc. - FORM 10-K/A - March 13, 2013

Attached files

CelLynx Group, Inc. Reports