CelLynx Group Inc (fka CYNX)

[As I See It]

obsidian v,
I will try to add some clarity to my post using quotations from 5BARz SEC filings which can be found on their website.

The following quotes are pulled from the Master Global Marketing and Distribution Agreement:

1. Sale and Purchase. Seller hereby agrees to sell, and Buyer hereby agrees to purchase, pursuant to the terms of this Agreement, the following (collectively, the “Purchased Assets”):

1.1. Fifty percent (50%) of the Seller’s right, title and interest for the United States and all foreign countries to use, offer for sale, and sell any and all improvements which are disclosed in the patent applications, patents, and legal equivalents thereto identified in EXHIBIT A (collectively, the “Patents”) to this Agreement, such applications, patents and all other divisional, continuing, substitute, renewal, reissue and all other applications for patent or the legal equivalent thereof which have been or may be filed in the United States and all foreign countries relating to any of such improvements; all original, reexamined and reissued patents which have been or shall be issued in the United States and all foreign countries on such improvements; and specifically including the right to file foreign applications under the provisions of any convention or treaty and claim priority based on such applications; provided, however, that the Seller retains 100% of its right to make and import under the Patents; and

1.2. Fifty Percent (50%) of the Seller’s right, title and interest for the United States and all foreign countries to the Seller’s trademarks described in EXHIBIT B (collectively, the “Marks”) attached hereto and incorporated by reference herein.

4.3. Intellectual Property. Seller has delivered to Buyer correct and complete copies of all such patents, registrations, applications, licenses, agreements, and permissions (as amended to date). Seller is transferring any and all intellectual property and proprietary rights of any kind relating to the Purchased Assets to Buyer.

The language concerning "the sellers right,title, and interest" is part of the key to understanding how the sale of the IP later on will affect CelLynx share of income. Obviously, the seller must own what he is selling to be able to receive compensation for it. In other parts of the "Agreement" the compensation is referred to as a royalty. This royalty is for allowing 5BARz to reap the rewards from selling any product that is produced using CelLynx's 100% owned intellectual property. At this point CelLynx is entitled to 50% of net income from sale of 5BARz products arising from the IP.

Then about a year later this was announced:

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 intellectual property does represent that proportionate interest in income earned from the intellectual property.

Pay special attention to the section that I have highlighted in bold letters. This was added specifically to clarify the exact point which seemed kind of "foggy" to you. The outright purchase of 60% of the IP has entitled 5BARz to the proportionate interest in income without sharing any of that income with CelLynx.

Because CelLynx no longer owns all of the IP, they can only collect their 50% royalty on their 40% "right, title and interest" of the IP mentioned near the top of this post. This leaves CelLynx shareholders with 20% of net income at this point.

The most crushing blow to (non 5BARz) CelLynx shareholders will be the massive dilution of their holdings if the defaulted debt owed to 5BARz by CYNX is converted into CelLynx shares. This could reduce the remaining non 5BARz holders of CelLynx stock down to a fraction of 1% share of the income from any sales.

Though I know it is not what you want to hear, I hope this helps in assessing your investment.

P.S. Full disclosure - I am not an accountant. My reference was that "only a forensic accountant" would enjoy this. Not necessarily me. In Aug. of 2015 before I first posted this I vetted my findings thru 5BARz's Investor Relations (Alan Stamper) who in turn spoke with Mark Geoghegan CFO @ 5BARz.