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Wednesday, May 23, 2012 1:20:55 AM
i have a filing is full , glance thinkzzz sawer it;
<CYNX.OB > SEC Filings for CYNX.OB > Form 10-Q on 22-May-2012 All Recent SEC Filings
http://biz.yahoo.com/e/120522/cynx.ob10-q.html
Show all filings for CELLYNX GROUP, INC. | Request a Trial to NEW EDGAR Online Pro
Form 10-Q for CELLYNX GROUP, INC.
22-May-2012
Quarterly Report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. Forward Looking Statements
Certain statements in the Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward -looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements generallyare identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likelyresult," and similar expressions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as aresult of new information, future events, or otherwise.
As used in this Form 10-Q, unless the contextrequires otherwise, "we" or "us" or the "Company" or "CelLynx" means CelLynx Group, Inc.,and our subsidiary.
Plan of Operations
We are a producer of the next generation of cellular network extenders for the small office, home office and vehicle/marine markets.
"This next generation product line, CelLynx 5BARz?, barz" uses our patent-pending technology to create a single-piece, plug'n play unit that strengthens weak cellular signals to deliver higher quality signals for voice, data and video reception on cell phones and other cellular devices being used indoors or in vehicles.
Our first product, The Road Warrior, has passed FCC Certification, and in July 2009, we commenced the ordering of production units.
While we havecompleted the first prototype of the @Homeunits which will eventually deliver 70 decibel (dB) of gain in a Single Band PCS environment providing up to 2500 square feet of indoor coverage, the completion of its developmentand its commercialization has been delayed so that resources can be allocated to the Road Warrior and its existing orders.
As a result, the Road Warrior orders presently consisting of 16,000 units will be ready for shipment pendingapproval of COFETEL, The MexicanFederal Telecommunications Commission on the following schedule:The first 4,000 of those units will be shipped within 90 days of approvaland the remaining 12,000 units will be shipped within 180 days there after.
Our @Home unit measures 6.5 x 7.5 x 2.5 inches, weighs approximately one pound and does not require the installation of antennas or cables in order to function.
Most small office home office ("SOHO") cellular network extenders currently on the market require a receiving tower or antenna, usually placed in an attic or on arooftop, and a transmitting tower or antenna to be placed at least 35 feet from the other antenna with each connected to the amplifier bycable.
Our patent pending technology is designedto eliminate the need to distance the receiving and transmitting towers, allowing the two towers to be placed directly inside the amplifier, resulting in a more affordable, one-piece unit sometimes referred to as 'plug 'n play,' i.e., requiring no installation other than plugging the unit into a power source.
In order to optimize marketability, we are developing an improved model which is expected to operate in a dual band, PCS and Cellular, environment delivering 65 dB of gain, thereby allowing forcoverage of 2,500 to 3,000 square feet.
Thisdual-band unit would workwith all current wireless carriers except Nextel nxtl, which operates on its own frequency. The PCS network is generally used by the older carriers such as TAT&T at 850MHz, while the newer carriers such as T-Mobile operate on the cellular network at 1900 MHz.
Management believes that all of the critical functions required for this dual-band unit have been identified and that we have the capability to complete development leading to commercialization.
Our Road Warrior product line is being manufactured by contract manufacturers located inthe Philippines, with whom CelLynx has established manufacturing and supply chain relationships.
These manufacturers allow us to capitalize on the full advantages of multiple manufacturing locations with a trainedand experienced technical work force, state-of-the-art facilities and knowledge of all aspects of supply chain management, operational execution, global logistics and reverse logistics.
The marketing and sales functions will be handled by 5BARz barz International, Inc., in accordance with the M&D Agreement discussed below, incorporating a multi-channel strategy that includes distribution partners, wireless service providers, retail outlets and international joint ventures.
Agreement;5BARz International, Inc. barz
On December 31, 2010, the Company consented to the transfer of three agreements that they had entered into with
Dollardex Group Corp. to 5BARz International, Inc. as follows;
(i) An "Amended and Restated Master Global Marketing and Distribution Agreement."
(ii) An "Asset Purchase Agreement"
(iii) A "Revolving line of credit agreement and security agreement".
These agreements with provide for the exclusive global marketing and distribution of the 5BARz line of products and
related accessories and a 50% ownership interest in the 5BARz intellectual property. In addition, a revolving line
of credit facility has been made available to Cellynx.
On March 29, 2012, the Company and 5BARz International, Inc. barz entered into an agreement which provided several amendments to the agreement referred to above. As a result of those amendments, the following arrangements between the Companies were established;
(iv)barz 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.
answer;
this appears to be very important above;
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.
(v)barz 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 $636,606 has been advanced as of March 31, 2012.
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 cynx , 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 $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.
cynx
As a result, Cellynx became a consolidated subsidiary of 5Barz International Inc., on March 29, 2012.
answer;
so cynx is subsidary of barz
cynxCELLYNXGROUP, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31,2012 and 2011
(Unaudited)
(vi) 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.
Convertible Promissory Notes
Convertible Promissory Note IssuedFebruary 22, 2011
On February 22, 2011,the Company entered into a Securities Purchase Agreement (the"SPA") with an unrelated entity (the "Holder"), in connection with the purchase by the Holder of a Convertible Promissory Note (the"February 2011 Note").
Pursuant to the February 2012 Note, the Holder loaned to the Company theprincipal amount of $40,000. The February2011 Note bears interest at a rate of 8%, and is due on November 17,2011.
The Holder may convert principal and unpaid interest on the note intoshares of the Company's common stock,with the number ofshares issuable determined bydividing the amount to be converted by the conversion price which is equal to63% 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.
The Company recorded a $23,492 debt discount related to the beneficial conversion feature. The loan was fully repaid on November 17, 2011.
Convertible Promissory Note IssuedMarch 10, 2011
OnMarch 10, 2011, the Company entered into a Securities Purchase Agreement (the "SPA")with an unrelated entity (the "Holder"), in connection with the purchase by the Holder of a Convertible Promissory Note (the "March 2011 Note").
Pursuantto the March 2011 Note, the Holder loaned to the Company the principal amount of $42,500. The March 2011 Note bearsinterest at a rateof 8%, and was due on December 7, 2011. Subject to a revision of that note agreement dated January 6, 2012,
the Holder may convert principal and unpaid intereston the note into shares of the Company's common stock, with the number of shares issuable determined as the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by dividing the amount to be converted by the conversion price which is equal to 25% 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. The Holder is prohibited under the March2011 Note from converting amounts if principal and interest that would result in The Holder receiving shares, which when combined with shareso f the Company's common stock held by
The Holder, would result in The Holder holding more than 4.99% of the Company's then- outstanding common stock. No registration rights were granted in connection with thepurchase of the March 2011 Note, and the shares of common stock, if any,issued upon conversion, willbe restricted securities as defined pursuantto the terms of Rule 144. The loan was repaid in full via conversion by April 12, 2012.
Convertible Promissory Note IssuedMay 18, 2011
OnMay 18, 2011, 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 $32,500.
The May 2011 Note bearsinterest at a rate of 8%, and was due on February 23, 2012. Pursuant to the terms of a January 6, 2012 amendment agreement between the Company and holder, the note may be converted into shares of the Company's common stock, with the number of shares issuable determined to be the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by
dividing theamount to be converted by the conversion price which is equalto 25% of the average of thethree 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% ofthe Company's then- outstanding common stock.
No registration rights were granted in connection with the purchase ofthe Asher May 2011 Note, and the shares of common stock, if any, issued upon conversion, will berestricted securities as defined pursuant tothe terms of Rule 144. At the date of issuance of this report, $1,000 plus interest remains outstanding on this note.
ConvertiblePromissory Note IssuedJanuary 10, 2012
On January 10, 2012, theCompany entered into a Securities Purchase Agreement (the "SPA") with an unrelated holder, inconnection with the purchase by Holder of a Convertible Promissory Notein the principle amount of $15,000. The January 2012 notebears interest at a rate of8%, and is due on October 10, 2012.
Pursuant to the terms of a January 6, 2012 amendment agreement between the Company and holder, the note may be converted into shares of the Company's common stock, with the number of shares issuable determined to be the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by dividing the amount to beconverted by the conversion price which is equal to25% 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 inAsher 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% ofthe Company's then- outstanding common stock.
No registration rights were granted in connection with the purchase ofthe Asher May 2011 Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant tothe terms of Rule 144.
Pursuant to the terms of the Note, while there remains any unpaid amounts owing on theNote, the Companymay not incur additional debt without Holder's approval exceptfor (i) debt that was owed or committed aso f the date ofthe SPA and of which theCompany had informed holder;(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 first120 days following the date of theNote by paying to Holder 150% of the then- outstanding principal amount and any accrued and unpaid interest,penalties, or other amounts owing.
Pursuantto the SPA, theCompany 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 asMay 23, 2011. The right of first refusal does not apply to any transactionsin excess of $250,000.
At March 31, 2012 the Company had $13,400 due under the terms of the promissory notes described above.
At May 15, 2012 the Company had a principle balance of $16,000 due under the terms of the promissory notes described above, of which $1,000 was current due and $15,000 may be repaid by July 10, 2012.
DwayneYaretz Agreement
On April5, 2011, CelLynx Group,Inc., ("the Company"), finalized a transaction pursuant to a Securities Purchase Agreement (the"SPA") with one of itsdirectors, Dwayne Yaretz, in connectionwith the purchase by Mr. Yaretz of a Convertible Promissory Note(the "Note").
Pursuant to the Note, Mr.Yaretz loaned to the Companythe principal amount of $50,000. The Note bears interest at a rate of 8%, and due on January 5, 2012 (the"Due Date").
Mr. Yaretz may convert principal and unpaid interest on the note into shares of the Company's commonstock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price (the "Conversion Price") which is equalto 63% of the average of the three lowest trading prices of the Company's common stock over the ten tradingdays prior to the date of the conversion.
Mr. Yaretz is prohibited under the Note from converting amounts ifprincipal and interest that wouldresult in Mr. Yaretz receiving shares, which when combined with shares of the Company's common stockheld by Mr. Yaretz, would result in Mr. Yaretz holding more than 4.99% of the Company's then-outstanding common stock.
No registration rights were granted in connection withthe purchase of the Note, and the shares of common stock, if any, issuedupon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.
Pursuantto the terms of the Note, while there remains any unpaid amounts owing on the Note, the Company may not incur additional debt without Mr. Yaretz's approval except for (i) debt that was owed orcommitted as of the date of the SPA and of which the
Company had informed Mr. 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 Note.
The Company has theright to pre-pay the Note during the first 120 days following the date of the Note by paying to Mr. Yaretz 150% of the then outstanding principal amount and any accrued and unpaid interest, penalties, or other amount sowing.
Pursuantto the SPA, theCompany agreed to grant to Mr. Yaretza right offirst refusal for any subsequenttrans actions occurring during the twelve monthperiod following the Closing Date, which was defined as April 5, 2011. The right of first refusal does not apply to any transactions in excess of $250,000.
By way of background, the SPA and the Note were onthe same terms as those recently invested in by Asher Enterprises, Inc. a Delaware corporation ("Asher"), as disclosed in a Current Report filed with the Commission on March 17, 2011.
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 transfer ability 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 hereinby this reference.
Thestatus of this transaction remains the same as of the date of this filing.
Resultsof Operations
Comparison of thethree months ended March 31, 2012 and 2011
Three months ended March 31,
2012 2011 $ Change % Change
REVENUE $ $
COST OF REVENUE
GROSS PROFIT
OPERATING EXPENSES 218,109 473,913 (255,804) 53.97 %
NON OPERATING INCOME (EXPENSES) (4,185,990) (108,615) 4,077,375 3,754 %
NET LOSS $ (4,404,099) $ (582,528) 3,521,571 604 %
Revenue and Cost of Revenue
During the three months ended March 31, 2012 and 2011,we generated $0 and $0, respectively. Cost of revenues was $0 and $0, respectively, resulting in a gross profit of $0.
Operating Expenses
Total operating expenses incurred for the three and six months ended March 31, 2012 were $218,109 and $373,238, respectively, compared to $473,913 and $1,129,684 for the three and six months ended March 31, 2011, which decreased by $255,804 and $756,446. The decrease was due to a significant decrease in salaries and wages.
Non Operating Income and Expenses
Total non-operating income (expenses) incurred for the three months ended March 31, 2012 was $4,185,970 compared to $108,615 for the three months ended March 31, 2011 which was an increase of $4,077,375 or 3,754%. The difference wasdue to the increased in Beneficial Conversion Factor for the three months ended March 31, 2011.
Liquidityand Capital Resources
Financial Condition
As ofMarch 31, 2012, we had cash of $3,246, and we had a working capital deficit of $2,270,931 compared to cash of $178 and a working capital deficit of $2,376,878 as of December 31, 2011, which was a decrease on working capital deficit of $105,947 or 4.4%.
Duringthe six months ended March 31,2012, cash used inoperating activities was $99,038.
During the period, the Company incurred a loss arising from the mark to market valuation of convertible features that were provided to the holders of convertible debt an January 6, 2012 as well as the convertible features provide to 5BARz International Inc. under the terms of the revolving line of credit agreement as amended on March 29, 2012.
That expense item of $5.5 million was not a cash loss. In addition the gain on sale of intangibles were not a cash transaction as the sale proceeds were paid to Cellynx in share capital.
The Company received $102,106 from financing activities for the six months ended March 31, 2012,comprised of advances from 5BARz International Inc. of $87,106 and proceeds from other convertible debt in the amount of $15,000.
Going Concern
In our Annual Report on Form 10-K for the year ended September30, 2011, our independent auditors included an explanatory paragraph in its report relatingto our consolidated financial statementsfor the yearsended September 30, 2011 and 2010, which states that we have incurred negative cash flows from operations since inception, and expect to incur additional losses in the future and have a substantial accumulated deficit.
These conditions give rise to substantial doubt about our ability to continue as a going concern.
Our ability to expand operations and generate additional revenue and our ability to obtain additional funding will determine our ability to continueas a going concern.
Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We have prepared our consolidated financial statements assuming that we will continue as a going concern,which contemplates realization of assets and the satisfaction of liabilities in the normalcourse of business.
As of March 31, 2012,we had an accumulated deficit of $21,197,656, negative cash flows from operations since inception, and expect to incur additional losses in the future as we continue to develop and grow our business.
We have funded our losses primarily through the sale of common stockand warrants in private placements; borrowings from related parties and other investors; and revenue provided by the sales of our 5Barz unit. Thefurther development of our business will require capital.
Our operating expenses will consume a material amount of our cash resources.
Our current cash levels, together with the cash flows we generate from operating activities, are not sufficient to enable us to execute our business strategy.
We require additional financing to execute our business strategy and to satisfy our near-term working capital requirements. In the event that we cannot obtain additional funds ona timely basis or our operations do not generate sufficient cash flow, we may be forced to curtail or cease our activities, which would likely result in the loss to investors of all or a substantial portion of their investment.
We are actively seeking to raise additional capital through thesale of shares of our capital stock to institutional investors and through strategic investments. If management deems necessary, we might also seek additional loans from related parties. However, there can be no assurance that we will be able to consummate any of these transactions, or that these transactions will be consummated on a timely basis or on terms favorable to us.
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.
We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder's equity orthat are not reflected in our financial statements.
Furthermore, we do nothave any retained or contingent interest in assets transferred to anunconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do nothave any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
CriticalAccounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at thedate of the financial statements as well as the reported net sales and expenses during the reporting periods.
On an on going basis, we evaluate our estimates and assumptions. We base our estimateson historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent fromother sources. Actual results may differ fromthese estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note2 to our consolidated financial statements, we believe thatthe following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
Intangible Assets
Acquired patents, licensing rights and trademarks are capitalized at their acquisition costor 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 developmentcosts 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 theremaining twenty-year legal life ofeach patent after the costs have been incurred. Once each patent or trademark is issued, capitalized costs are amortized ona straight-line basis over a period not to exceed 20 years and 10 years, . . .
<CYNX.OB > SEC Filings for CYNX.OB > Form 10-Q on 22-May-2012 All Recent SEC Filings
http://biz.yahoo.com/e/120522/cynx.ob10-q.html
Show all filings for CELLYNX GROUP, INC. | Request a Trial to NEW EDGAR Online Pro
Form 10-Q for CELLYNX GROUP, INC.
22-May-2012
Quarterly Report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. Forward Looking Statements
Certain statements in the Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward -looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements generallyare identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likelyresult," and similar expressions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as aresult of new information, future events, or otherwise.
As used in this Form 10-Q, unless the contextrequires otherwise, "we" or "us" or the "Company" or "CelLynx" means CelLynx Group, Inc.,and our subsidiary.
Plan of Operations
We are a producer of the next generation of cellular network extenders for the small office, home office and vehicle/marine markets.
"This next generation product line, CelLynx 5BARz?, barz" uses our patent-pending technology to create a single-piece, plug'n play unit that strengthens weak cellular signals to deliver higher quality signals for voice, data and video reception on cell phones and other cellular devices being used indoors or in vehicles.
Our first product, The Road Warrior, has passed FCC Certification, and in July 2009, we commenced the ordering of production units.
While we havecompleted the first prototype of the @Homeunits which will eventually deliver 70 decibel (dB) of gain in a Single Band PCS environment providing up to 2500 square feet of indoor coverage, the completion of its developmentand its commercialization has been delayed so that resources can be allocated to the Road Warrior and its existing orders.
As a result, the Road Warrior orders presently consisting of 16,000 units will be ready for shipment pendingapproval of COFETEL, The MexicanFederal Telecommunications Commission on the following schedule:The first 4,000 of those units will be shipped within 90 days of approvaland the remaining 12,000 units will be shipped within 180 days there after.
Our @Home unit measures 6.5 x 7.5 x 2.5 inches, weighs approximately one pound and does not require the installation of antennas or cables in order to function.
Most small office home office ("SOHO") cellular network extenders currently on the market require a receiving tower or antenna, usually placed in an attic or on arooftop, and a transmitting tower or antenna to be placed at least 35 feet from the other antenna with each connected to the amplifier bycable.
Our patent pending technology is designedto eliminate the need to distance the receiving and transmitting towers, allowing the two towers to be placed directly inside the amplifier, resulting in a more affordable, one-piece unit sometimes referred to as 'plug 'n play,' i.e., requiring no installation other than plugging the unit into a power source.
In order to optimize marketability, we are developing an improved model which is expected to operate in a dual band, PCS and Cellular, environment delivering 65 dB of gain, thereby allowing forcoverage of 2,500 to 3,000 square feet.
Thisdual-band unit would workwith all current wireless carriers except Nextel nxtl, which operates on its own frequency. The PCS network is generally used by the older carriers such as TAT&T at 850MHz, while the newer carriers such as T-Mobile operate on the cellular network at 1900 MHz.
Management believes that all of the critical functions required for this dual-band unit have been identified and that we have the capability to complete development leading to commercialization.
Our Road Warrior product line is being manufactured by contract manufacturers located inthe Philippines, with whom CelLynx has established manufacturing and supply chain relationships.
These manufacturers allow us to capitalize on the full advantages of multiple manufacturing locations with a trainedand experienced technical work force, state-of-the-art facilities and knowledge of all aspects of supply chain management, operational execution, global logistics and reverse logistics.
The marketing and sales functions will be handled by 5BARz barz International, Inc., in accordance with the M&D Agreement discussed below, incorporating a multi-channel strategy that includes distribution partners, wireless service providers, retail outlets and international joint ventures.
Agreement;5BARz International, Inc. barz
On December 31, 2010, the Company consented to the transfer of three agreements that they had entered into with
Dollardex Group Corp. to 5BARz International, Inc. as follows;
(i) An "Amended and Restated Master Global Marketing and Distribution Agreement."
(ii) An "Asset Purchase Agreement"
(iii) A "Revolving line of credit agreement and security agreement".
These agreements with provide for the exclusive global marketing and distribution of the 5BARz line of products and
related accessories and a 50% ownership interest in the 5BARz intellectual property. In addition, a revolving line
of credit facility has been made available to Cellynx.
On March 29, 2012, the Company and 5BARz International, Inc. barz entered into an agreement which provided several amendments to the agreement referred to above. As a result of those amendments, the following arrangements between the Companies were established;
(iv)barz 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.
answer;
this appears to be very important above;
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.
(v)barz 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 $636,606 has been advanced as of March 31, 2012.
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 cynx , 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 $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.
cynx
As a result, Cellynx became a consolidated subsidiary of 5Barz International Inc., on March 29, 2012.
answer;
so cynx is subsidary of barz
cynxCELLYNXGROUP, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31,2012 and 2011
(Unaudited)
(vi) 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.
Convertible Promissory Notes
Convertible Promissory Note IssuedFebruary 22, 2011
On February 22, 2011,the Company entered into a Securities Purchase Agreement (the"SPA") with an unrelated entity (the "Holder"), in connection with the purchase by the Holder of a Convertible Promissory Note (the"February 2011 Note").
Pursuant to the February 2012 Note, the Holder loaned to the Company theprincipal amount of $40,000. The February2011 Note bears interest at a rate of 8%, and is due on November 17,2011.
The Holder may convert principal and unpaid interest on the note intoshares of the Company's common stock,with the number ofshares issuable determined bydividing the amount to be converted by the conversion price which is equal to63% 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.
The Company recorded a $23,492 debt discount related to the beneficial conversion feature. The loan was fully repaid on November 17, 2011.
Convertible Promissory Note IssuedMarch 10, 2011
OnMarch 10, 2011, the Company entered into a Securities Purchase Agreement (the "SPA")with an unrelated entity (the "Holder"), in connection with the purchase by the Holder of a Convertible Promissory Note (the "March 2011 Note").
Pursuantto the March 2011 Note, the Holder loaned to the Company the principal amount of $42,500. The March 2011 Note bearsinterest at a rateof 8%, and was due on December 7, 2011. Subject to a revision of that note agreement dated January 6, 2012,
the Holder may convert principal and unpaid intereston the note into shares of the Company's common stock, with the number of shares issuable determined as the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by dividing the amount to be converted by the conversion price which is equal to 25% 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. The Holder is prohibited under the March2011 Note from converting amounts if principal and interest that would result in The Holder receiving shares, which when combined with shareso f the Company's common stock held by
The Holder, would result in The Holder holding more than 4.99% of the Company's then- outstanding common stock. No registration rights were granted in connection with thepurchase of the March 2011 Note, and the shares of common stock, if any,issued upon conversion, willbe restricted securities as defined pursuantto the terms of Rule 144. The loan was repaid in full via conversion by April 12, 2012.
Convertible Promissory Note IssuedMay 18, 2011
OnMay 18, 2011, 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 $32,500.
The May 2011 Note bearsinterest at a rate of 8%, and was due on February 23, 2012. Pursuant to the terms of a January 6, 2012 amendment agreement between the Company and holder, the note may be converted into shares of the Company's common stock, with the number of shares issuable determined to be the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by
dividing theamount to be converted by the conversion price which is equalto 25% of the average of thethree 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% ofthe Company's then- outstanding common stock.
No registration rights were granted in connection with the purchase ofthe Asher May 2011 Note, and the shares of common stock, if any, issued upon conversion, will berestricted securities as defined pursuant tothe terms of Rule 144. At the date of issuance of this report, $1,000 plus interest remains outstanding on this note.
ConvertiblePromissory Note IssuedJanuary 10, 2012
On January 10, 2012, theCompany entered into a Securities Purchase Agreement (the "SPA") with an unrelated holder, inconnection with the purchase by Holder of a Convertible Promissory Notein the principle amount of $15,000. The January 2012 notebears interest at a rate of8%, and is due on October 10, 2012.
Pursuant to the terms of a January 6, 2012 amendment agreement between the Company and holder, the note may be converted into shares of the Company's common stock, with the number of shares issuable determined to be the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by dividing the amount to beconverted by the conversion price which is equal to25% 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 inAsher 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% ofthe Company's then- outstanding common stock.
No registration rights were granted in connection with the purchase ofthe Asher May 2011 Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant tothe terms of Rule 144.
Pursuant to the terms of the Note, while there remains any unpaid amounts owing on theNote, the Companymay not incur additional debt without Holder's approval exceptfor (i) debt that was owed or committed aso f the date ofthe SPA and of which theCompany had informed holder;(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 first120 days following the date of theNote by paying to Holder 150% of the then- outstanding principal amount and any accrued and unpaid interest,penalties, or other amounts owing.
Pursuantto the SPA, theCompany 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 asMay 23, 2011. The right of first refusal does not apply to any transactionsin excess of $250,000.
At March 31, 2012 the Company had $13,400 due under the terms of the promissory notes described above.
At May 15, 2012 the Company had a principle balance of $16,000 due under the terms of the promissory notes described above, of which $1,000 was current due and $15,000 may be repaid by July 10, 2012.
DwayneYaretz Agreement
On April5, 2011, CelLynx Group,Inc., ("the Company"), finalized a transaction pursuant to a Securities Purchase Agreement (the"SPA") with one of itsdirectors, Dwayne Yaretz, in connectionwith the purchase by Mr. Yaretz of a Convertible Promissory Note(the "Note").
Pursuant to the Note, Mr.Yaretz loaned to the Companythe principal amount of $50,000. The Note bears interest at a rate of 8%, and due on January 5, 2012 (the"Due Date").
Mr. Yaretz may convert principal and unpaid interest on the note into shares of the Company's commonstock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price (the "Conversion Price") which is equalto 63% of the average of the three lowest trading prices of the Company's common stock over the ten tradingdays prior to the date of the conversion.
Mr. Yaretz is prohibited under the Note from converting amounts ifprincipal and interest that wouldresult in Mr. Yaretz receiving shares, which when combined with shares of the Company's common stockheld by Mr. Yaretz, would result in Mr. Yaretz holding more than 4.99% of the Company's then-outstanding common stock.
No registration rights were granted in connection withthe purchase of the Note, and the shares of common stock, if any, issuedupon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.
Pursuantto the terms of the Note, while there remains any unpaid amounts owing on the Note, the Company may not incur additional debt without Mr. Yaretz's approval except for (i) debt that was owed orcommitted as of the date of the SPA and of which the
Company had informed Mr. 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 Note.
The Company has theright to pre-pay the Note during the first 120 days following the date of the Note by paying to Mr. Yaretz 150% of the then outstanding principal amount and any accrued and unpaid interest, penalties, or other amount sowing.
Pursuantto the SPA, theCompany agreed to grant to Mr. Yaretza right offirst refusal for any subsequenttrans actions occurring during the twelve monthperiod following the Closing Date, which was defined as April 5, 2011. The right of first refusal does not apply to any transactions in excess of $250,000.
By way of background, the SPA and the Note were onthe same terms as those recently invested in by Asher Enterprises, Inc. a Delaware corporation ("Asher"), as disclosed in a Current Report filed with the Commission on March 17, 2011.
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 transfer ability 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 hereinby this reference.
Thestatus of this transaction remains the same as of the date of this filing.
Resultsof Operations
Comparison of thethree months ended March 31, 2012 and 2011
Three months ended March 31,
2012 2011 $ Change % Change
REVENUE $ $
COST OF REVENUE
GROSS PROFIT
OPERATING EXPENSES 218,109 473,913 (255,804) 53.97 %
NON OPERATING INCOME (EXPENSES) (4,185,990) (108,615) 4,077,375 3,754 %
NET LOSS $ (4,404,099) $ (582,528) 3,521,571 604 %
Revenue and Cost of Revenue
During the three months ended March 31, 2012 and 2011,we generated $0 and $0, respectively. Cost of revenues was $0 and $0, respectively, resulting in a gross profit of $0.
Operating Expenses
Total operating expenses incurred for the three and six months ended March 31, 2012 were $218,109 and $373,238, respectively, compared to $473,913 and $1,129,684 for the three and six months ended March 31, 2011, which decreased by $255,804 and $756,446. The decrease was due to a significant decrease in salaries and wages.
Non Operating Income and Expenses
Total non-operating income (expenses) incurred for the three months ended March 31, 2012 was $4,185,970 compared to $108,615 for the three months ended March 31, 2011 which was an increase of $4,077,375 or 3,754%. The difference wasdue to the increased in Beneficial Conversion Factor for the three months ended March 31, 2011.
Liquidityand Capital Resources
Financial Condition
As ofMarch 31, 2012, we had cash of $3,246, and we had a working capital deficit of $2,270,931 compared to cash of $178 and a working capital deficit of $2,376,878 as of December 31, 2011, which was a decrease on working capital deficit of $105,947 or 4.4%.
Duringthe six months ended March 31,2012, cash used inoperating activities was $99,038.
During the period, the Company incurred a loss arising from the mark to market valuation of convertible features that were provided to the holders of convertible debt an January 6, 2012 as well as the convertible features provide to 5BARz International Inc. under the terms of the revolving line of credit agreement as amended on March 29, 2012.
That expense item of $5.5 million was not a cash loss. In addition the gain on sale of intangibles were not a cash transaction as the sale proceeds were paid to Cellynx in share capital.
The Company received $102,106 from financing activities for the six months ended March 31, 2012,comprised of advances from 5BARz International Inc. of $87,106 and proceeds from other convertible debt in the amount of $15,000.
Going Concern
In our Annual Report on Form 10-K for the year ended September30, 2011, our independent auditors included an explanatory paragraph in its report relatingto our consolidated financial statementsfor the yearsended September 30, 2011 and 2010, which states that we have incurred negative cash flows from operations since inception, and expect to incur additional losses in the future and have a substantial accumulated deficit.
These conditions give rise to substantial doubt about our ability to continue as a going concern.
Our ability to expand operations and generate additional revenue and our ability to obtain additional funding will determine our ability to continueas a going concern.
Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We have prepared our consolidated financial statements assuming that we will continue as a going concern,which contemplates realization of assets and the satisfaction of liabilities in the normalcourse of business.
As of March 31, 2012,we had an accumulated deficit of $21,197,656, negative cash flows from operations since inception, and expect to incur additional losses in the future as we continue to develop and grow our business.
We have funded our losses primarily through the sale of common stockand warrants in private placements; borrowings from related parties and other investors; and revenue provided by the sales of our 5Barz unit. Thefurther development of our business will require capital.
Our operating expenses will consume a material amount of our cash resources.
Our current cash levels, together with the cash flows we generate from operating activities, are not sufficient to enable us to execute our business strategy.
We require additional financing to execute our business strategy and to satisfy our near-term working capital requirements. In the event that we cannot obtain additional funds ona timely basis or our operations do not generate sufficient cash flow, we may be forced to curtail or cease our activities, which would likely result in the loss to investors of all or a substantial portion of their investment.
We are actively seeking to raise additional capital through thesale of shares of our capital stock to institutional investors and through strategic investments. If management deems necessary, we might also seek additional loans from related parties. However, there can be no assurance that we will be able to consummate any of these transactions, or that these transactions will be consummated on a timely basis or on terms favorable to us.
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.
We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder's equity orthat are not reflected in our financial statements.
Furthermore, we do nothave any retained or contingent interest in assets transferred to anunconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do nothave any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
CriticalAccounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at thedate of the financial statements as well as the reported net sales and expenses during the reporting periods.
On an on going basis, we evaluate our estimates and assumptions. We base our estimateson historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent fromother sources. Actual results may differ fromthese estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note2 to our consolidated financial statements, we believe thatthe following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
Intangible Assets
Acquired patents, licensing rights and trademarks are capitalized at their acquisition costor 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 developmentcosts 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 theremaining twenty-year legal life ofeach patent after the costs have been incurred. Once each patent or trademark is issued, capitalized costs are amortized ona straight-line basis over a period not to exceed 20 years and 10 years, . . .
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