CelLynx 10Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarterly Period Ended June 30, 2012
OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File No. 000-27147

CelLynxGroup,Inc.

(Exact name of small business issuer as specified in its charter)

NEVADA

(State or other jurisdiction of

incorporation or organization)

95-4705831

(I.R.S. Employer

Identification No.)

4014 Calle Isabella, San Clemente, California 92672

(Address of principal executive offices)

(949)305-5290

(Registrant’s telephone number, including area code)

Indicatebycheck markwhetherthe registrant (1) has filed allreports required to be filed bysection13or15(d) ofthe Securities ExchangeAct of 1934 duringthe preceding 12months (or for suchshorter period thattheregistrantwas required tofilesuchreports), and (2)hasbeensubjecttosuch filingrequirements forthepast90 days.Yes xNo o

Indicate bycheck mark whether the registrant has submitted electronically and posted onitscorporateWebsite,if any,everyInteractive DataFile required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12months (or forsuchshorter period thatthe registrantwas required tosubmitand postsuchfiles).Yes xNo o

Indicatebycheck markwhetherthe registrant is alarge accelerated filer, anaccelerated filer, anon-accelerated filer, orasmaller reportingcompany. See thedefinitions of“largeaccelerated filer,”“accelerated filer”and “smaller reportingcompany” inRule12b-2oftheExchangeAct.(Check one):

Large Accelerated filer o Non-Accelerated Filer o

Accelerated Filer o Smaller Reporting Companyx

Indicateby check markwhethertheregistrantis ashellcompany(asdefined by Rule12b-2oftheExchangeAct).Yes oNox

APPLICABLE ONLY TOCORPORATEISSUERS:

Indicatethenumberofsharesoutstanding ofeachissuer'sclasses ofcommonstock,asofthelatestpracticable date: The total shares outstanding for this company is 1,445,498,134 shares outstanding as of August 15, 2012.

TABLE OF CONTENTS

PARTI	FINANCIALINFORMATION	3

Item1.	Financial Statements	3

Item2.	Management's Discussion and AnalysisofFinancial Condition and Results ofOperations	29

Item3.	Quantitative and QualitativeDisclosures About Market Risk	41

Item4.	Controls and Procedures	41

PARTII	OTHER INFORMATION	35

Item1.	Legal Proceedings	42

Item2.	Unregistered Sales ofEquity Securities and Use ofProceeds	42

Item3.	DefaultsUponSenior Securities	42

Item4.	(Removed and Reserved)	42

Item5.	Other Information	42

Item6.	Exhibits	43

PartI–FINANCIAL INFORMATION ITEM1. FINANCIAL STATEMENTS

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


			June 30,		September 30,
			2012		2011
			(unaudited)
ASSETS
CURRENT ASSETS:
	Cash		$	(355)	$	178
	Accounts receivable			-		-
	Other receivable					1,200,651
	Investment in 5Barz - current			400,000		-
	Prepaids and other current assets			-		20,090
TOTAL CURRENT ASSETS				399,645		1,220,919

EQUIPMENT, net				1,736		2,900
INTANGIBLE ASSETS, net				46,616		53,967
	Investment in 5Barz - long term			1,400,000		-
TOTAL ASSETS			$	1,847,996	$	1,277,786

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
	Accounts payable and accrued expenses		$	1,781,000	$	1,622,307
	Accrued interest			64,444		51,692
	Accrued derivative liabilities			1,996,800		102,286
	Deferred gain			-		1,200,651
	Line of credit net of debt discount of $105,985			465,592		241,038
	Convertible promissory notes, net of debt discount of $27,474.68 and $29,533 as of June 30, 2012 and September 30, 2011, respectively			384,381		379,823
TOTAL CURRENT LIABILITIES				4,692,217		3,597,797

TOTAL LIABILITIES				4,692,217		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; 1,457,498,001 and 195,991,082 shares issued and outstanding as of June 30, 2012 and September 30, 2011, respectively			1,457,498		195,991
	Additional paid-in capital			13,170,581		14,113,270
	Accumulated deficit			(17,472,300)		(16,629,272)
		Total stockholders' deficit	$	(2,844,221)	$	(2,320,011)
	TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT			1,847,996		1,277,786

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

CELLYNX GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2012 AND 2011

		ThreeMonthsEnded			NineMonthsEnded
		June30,2012	June30,2011		June30,2012		June30,2011
		(unaudited)	(unaudited)		(unaudited)		(unaudited)

Net Revenue		-	$	-	$	-	$	-
Cost of Revenue		-		-		-		-
Gross profit		-		-		-		-
Operating expenses
	Research and development	-		-		-		-
	General and administrative	32,229		235,842		405,467		1,365,526
	Total operating expenses	32,229		235,842		405,467		1,365,526

Loss from operations		(32,229)	$	(235,842)	$	(405,467)		(1,365,526)

Non-operating income (expense):
	Interest and financing costs, net	(129,907)		(37,030)		(222,038)		(87,021)
	Change in fair value of accrued beneficial conversion liability,	3,890,419		(1,679)		(1,704,593)		(2,331)
	Change in fair value of accrued warrant and options liability	(5,120)		285,560		(2,402)		124,712
	Gain on settlement of debt	-		-		3,766		-
	Gain on sale of intangible assets	-		200,388		1,485,513		200,388
	Total non-operating income (expense), net	3,755,392		447,239		(439,754)		235,748

Net loss		3,723,163	$	211,397	$	(845,221)	$	(1,129,778)


Weighted average shares outstanding
	Basic	721,078,212	188,929,177		302,827,156		183,230,269
	Diluted	721,078,212	211,766,333		302,827,156		183,230,269
Loss per share :
	Basic	0.0052	$	0.0011	$	(0.0028)	$	(0.0062)
	Diluted	0.0052		0.0010		(0.0028)		(0.0062)

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

CELLYNX GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2012 AND 2011

			2012		2011
				(unaudited)		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(845,221)	$	(1,129,778)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization		6,350		5,889
		Stock issued for services		-		228,015
		Note payable issued for services		50,000		-
		Stock compensation expense for options issued to employees and consultants		80,966		238,586
		Change in fair value of accrued beneficial conversion liability		1,988,238		2,331
		Change in fair value of accrued warrant and option liability		(8,562)		(124,712)
		Gain on sale of intangible assets		(1,485,513)		(200,388)
		Amortization of debt discount		(83,593)		70,445
		Gain on settlement of debt		3,766		-
	Changes in operating assets and liabilities:
		Change in accounts receivable		-		1,925
		Change in other assets		20,090		165,411
		Change in accounts payable, accrued expenses and accrued interest		171,445		98,474
	Net cash used in operating activities			(102,033)		(643,802)

CASH FLOWS FROM INVESTING ACTIVITIES:
		Proceeds from sale of intangible assets		-		260,434
	Net cash used in investing activities			0		260,434

CASH FLOWS FROM FINANCING ACTIVITIES:
		Payments of shareholders convertible notes
		Debt discount
		Payments of convertible notes
		Proceeds from issuance of convertible notes		52,500		165,000
		Proceeds from line of credit		49,000		216,619
	Net cash provided by financing activities			101,500		381,619

NET DECREASE IN CASH				(533)		(1,749)

CASH, BEGINNING OF PERIOD				178		6,601

CASH, END OF PERIOD			$	(355)	$	4,852

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		$	65,500	$	55,000
	Deferred revenue from sale of intangible assets			-		1,239,566

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

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 1 – Organization and Basis of Presentation

The unaudited consolidated financial statements have been prepared by CelLynx Group, Inc., formerly known as NorPac Technologies, Inc. (hereinafter referred to as “CelLynx” or the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K. The results for the three and nine months ended June 30, 2012, are not necessarily indicative of the results to be expected for the full year ending September 30, 2012.

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 towhichthe Company issued10,500,000 sharesofitscommon stock and warrants topurchase 10,500,000 sharesof 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’sissued and outstandingshares of capital stock. As a result, the CelLynx-California shareholders were to receive 77,970,956shares oftheCompany’s common stockin exchange for 100%, or 61,983,580 shares, of CelLynx-California’s commonstock. However, the Company had only 41,402,110 authorized, unissued and unreserved sharesofcommon stock available, after takinginto 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 aninsufficient numberofauthorized but unissued and unreserved common stock tocomplete 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 SeriesA Convertible PreferredStock (“Series A Preferred Stock”)and issuethat number of sharesof SeriesA Preferred Stocksuch that the common stockunderlying the SeriesAPreferred Stockplus the common stockactually issuedtothe CelLynx- California shareholders would equal thetotalnumberofshares ofcommonstock dueto theCelLynx-California shareholders underthe Share Exchange Agreement. As aresult,the Company issuedtothe CelLynx-California shareholders anaggregateof32,454,922 shares ofcommon stockand 45,516,034 sharesof SeriesAPreferred Stock.The SeriesAPreferred Stockautomatically wouldconvert into common stockon a one-to-one ratio upon theauthorized capitalstock oftheCompany being increased toincludenotlessthan 150,000,000 shares ofcommon stock.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

OnNovember 7, 2008, theCompanyamendedtheArticlesof Incorporation to increasethenumber 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 ofshareswith CelLynx-California wasaccounted forasa reverse acquisition under thepurchasemethodofaccounting because the shareholders of CelLynx-California obtained control of the Company. On August 5, 2008,NorPac Technologies, Inc.changed its nameto CelLynx Group, Inc. Accordingly the merger of CelLynx-California into the Company was recorded as a recapitalization of CelLynx-California, with CelLynx-California being treatedas the continuing entity.The historicalfinancialstatements presentedare the financialstatements of CelLynx-California. TheShare Exchange Agreement hasbeen treated asa recapitalization andnotasa business combination; therefore, nopro formainformationisdisclosed. At the dateof the reversemergertransaction,the net assets of the legal acquirerCelLynxGroup,Inc.were$1,248,748.

Asaresult ofthereversemergertransactions described above,thehistorical financial statements presented arethose ofCelLynx-California, theoperatingentity. EachCelLynx-California shareholder received 1.2579292sharesof stockin the Companyfor eachshareof CelLynx- California capitalstock.All sharesand per-shareinformation have been retroactively restatedforallperiodspresented toreflect thereverse 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.

On March 23, 2012, theCompanyamendedtheArticlesof Incorporation to increasethenumber of authorized shares to 1,000,000,000. On May 7, 2012 the CompanyamendedtheArticlesof Incorporation to increasethenumber of authorized shares to 2,000,000,000.

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

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

GoingConcernandExiting Development Stage

These consolidated financialstatements have been preparedona going concernbasis, which impliestheCompany willcontinuetorealize its assets and discharge its liabilities in the normal course of business. The Company is unlikely to pay dividends or generate significant earnings in theimmediate orforeseeable future.Thecontinuation oftheCompany asa going concernisdependent upon thecontinued financialsupport from itsstockholders, theability oftheCompanyto obtain necessaryequity anddebtfinancingto continueoperations andto generate sustainablerevenue. There isnoguarantee that the Company will beabletoraiseadequate equity ordebtfinancing orgenerate profitable operations. Forthe threeand nine months ended June 30, 2012, theCompany incurred a net income (loss)of$3,723,163 and ($845,221), respectively. AsofJune 30, 2012, theCompany had an accumulateddeficit of $17,472,300.Further, as of June 30, 2012 and September 30, 2011, the Company had negative working capital of $4,292,572 and $2,376,878, respectively, and had negativecash flows from operations of $102,033 and $643,802for the nine months ended June 30, 2012 and2011, respectively. These consolidated financialstatementsdo notinclude anyadjustments to therecoverability 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 toraise additionalfunds through equity ordebt financingand togeneratecash from the sale ofthe Company’s products and from license fees as further described below.

TheCompany wasinthedevelopment stage throughJune 30,2009. InJuly2009, theCompany receivedthefirst220units oftheCompany’s cellularnetworkextender, The Road Warrior, from itsmanufacturer. AsofJuly 2009, theCompany was fully operational and assuch was longer considered a developmentstage company.During the period that the Companywas considered a developmentstage company,the Company incurred accumulated losses of approximately $10,948,625.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 2–Summary ofSignificantAccountingPolicies

BasisofPresentation

The accompanying consolidated financial statements have been prepared in accordance withaccounting principlesgenerally acceptedintheUnited States ofAmerica. The accompanying consolidated financial statements include the accounts ofCelLynx Group,Inc., and its 100%wholly-owned subsidiary, CelLynx, Inc. Allintercompanyaccountsand transactions havebeeneliminated inconsolidation.

Cash

Cash and cash equivalents include cash in hand and cash in time deposits, certificates ofdeposit and all highly liquiddebt instruments withoriginal maturitiesofthree months orless.

Inventory

Inventory consists of finished goods ready for sale and is valued at the lower of cost (determined onafirst-in,first-out basis)ormarket. The Company reviews its reserves for slowmoving 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 foraccountsreceivable. Management reviewsthecomposition ofaccountsreceivable and analyzes historical bad debts,customerconcentrations, customercreditworthiness, currenteconomic trendsand changesincustomerpaymentpatterns to evaluate the adequacy ofthesereserves. Reserves are recorded based onthe Company’shistorical collection history. Receivablesarewrittenoff when they aredetermined tobeuncollectible. AsofJune 30,2012 and September 30,2011,theCompany determined thatallowance forbad debt was notnecessary.

Use ofEstimates

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 ofcontingent assetsand liabilities at the dateofthe financial statements and the reported amounts ofrevenues and expenses duringthe reportingperiod.Actualresultscould differfrom thoseestimates.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Concentration of Credit Risk

Cash includes deposits in accounts maintained at financial institutions. Certain financialinstruments, whichsubjecttheCompany toconcentration of credit risk,consist ofcash. The Company maintains balancesat financialinstitutions which, from timetotime, may exceed Federal DepositInsurance Corporation insured limits for the bankslocated in the UnitedStates. AsofJune 30, 2012 and September 30, 2011, the Company didnothaveany deposits inexcessoffederally-insured limits. Todate, theCompany hasnotexperiencedany losses insuchaccounts.

Equipment

Equipment is recorded at historical cost and is depreciated using the straight-line method over their estimated usefullives. The usefullifeand depreciation methodare reviewedperiodically to ensurethatthe depreciation methodand period are consistent with theanticipated pattern offuture economic benefits. Expenditures for maintenance and repairs are charged to operations as incurred whilerenewals and betterments arecapitalized. Gainsand losses on disposalsareincludedintheresultsofoperations.The usefullifeoftheequipment is beingdepreciatedoverthree years.

Intangible Assets

Acquired patents, licensing rights and trademarks are capitalized at their acquisition cost orfairvalue. The legal costs,patentregistrationfees, and models and drawings required for filing patent applications are capitalized if they relatetocommerciallyviabletechnologies.Commercially viable technologies are those technologies thatare projected to generate future positive cashflowsinthenearterm. Legalcosts associated withapplications thatare notdetermined to be commercially viableareexpensed asincurred.Allresearch and development costs incurred indevelopingthepatentable ideaare expensed asincurred. Legal fees from the costs incurred in successful defense to theextentofanevident increaseinthevalueofthepatents arecapitalized.

Capitalized costs for patentsare amortized onastraight-line basis over the remaining twenty-year legal life ofeach patentafter the costs havebeen incurred. Once each patentortrademark is issued,capitalized costs are amortized onastraight-linebasis overaperiod nottoexceed 20 yearsand 10 years,respectively. The licensingrightis amortized on astraight-linebasis overaperiod of10 years.

Impairment orDisposalofLong- lived Assets

The Company applies the provisions of Accounting Standards Codification (“ASC”) Topic360,“Property,Plant,and Equipment,” whichaddresses financial accounting and reportingfor the impairmentordisposal oflong-lived assets. ASC 360requiresimpairmentlosses to be recordedon long - lived assetsused in operations when indicators ofimpairmentare present and the undiscounted cash flows estimated tobegenerated by thoseassets are lessthan the assets’ carrying amounts. Inthatevent, aloss is recognized basedon theamountby whichthecarrying amountexceeds thefairvalue ofthe long-lived assets. Lossonlong-lived assetsto bedisposedofis determined inasimilar manner, exceptthatfairvalues arereduced forthecost ofdisposal. Basedonits review, the Company believes thatasofJune 30, 2012 and September 30, 2011, there was nosignificant impairmentofits long-lived assets.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Revenue Recognition

The Company's revenue recognition policies are in compliance with ASC Topic605,“Revenue Recognition.” Revenue is recognized at thedateof shipmentto customers, and when the price is fixedordeterminable, the delivery is completed, noothersignificant obligations oftheCompany exist and collectability is reasonably assured.

The gain on sale of intangibles is fully reflected as income in the period of sale as the sale proceeds were fully paid at the date of sale, March 29, 2012.

Fair Value of Financial Instruments

ASC Topic820,“FairValue Measurements and Disclosures,” requiresdisclosure ofthefair valueoffinancialinstruments held by theCompany. ASC Topic825,“Financial Instruments,” defines fairvalue, and establishesathree-level valuation hierarchyfordisclosuresoffairvaluemeasurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balancesheetsforcash, accounts receivable, accounts payable, and other current liabilities each qualify as financial instruments and are a reasonable estimate oftheirfair values because of the short period of time between the origination of such instruments and their expected realization and theircurrentmarket rateof interest. The three levelsofthevaluation hierarchyaredefined asfollows:

●	Level 1	inputs tothevaluation methodologyarequotedprices foridenticalassetsorliabilities inactive markets.
●	Level 2	inputs tothevaluation methodologyinclude quotedprices forsimilar assetsand liabilities inactive markets, and inputsthatare observable fortheasset orliability, eitherdirectlyorindirectly, forsubstantially thefulltermofthefinancialinstrument.
●	Level 3	inputs tothevaluation methodologyareunobservable and significant tothefair valuemeasurement.

The Company’swarrant & optionliability is carried at fairvaluetotaling $8,562 and $6,160,asofJune 30, 2012 and September 30,2011,respectively. The Company’s conversion option liability is carried at fair value totaling $1,988,238 and $96,126 as of June 30, 2012 and September 30,2011, respectively. The Company used Level 2 inputs for its valuation methodology for the warrantliability and conversion option liability astheirfair values were determined by usingtheBlack-Scholes option pricingmodelusingthefollowing assumptions:

June 30, 2012
Annual dividend yield	—
Expected life (years)	0.55 – 5.0
Risk-free interest rate	0.01% - 0.81%
Expected volatility	183%

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Expected volatilityisbasedprimarily on historical volatility.Historical volatilitywascomputed using dailypricingobservations forrecent periodsthat correspond to the term ofthe warrants and conversion options.Webelieve this methodproducesanestimate thatis representative ofourexpectations offuture volatility over the expected term ofthesewarrants and conversion options.We haveno reasontobelieve future volatilityovertheexpected remaining life ofthesewarrantsis likelytodiffermaterially from historical volatility. The expected lifeis basedon theremaining termofthewarrants and conversion options.The risk-free interest rateis based onU.S.Treasury securitieswithmaturity termssimilar totheexpected remaining termof thewarrantsand conversion options.

At June 30, 2012,theCompany identified thefollowing assetsand liabilities thatarerequired tobepresented on thebalancesheetat fairvalue:

		Fair Value As of June 30, 2012	Fair Value Measurements at June 30,2012 Using Fair Value Hierarchy
Liabilities		Level 1		Level 2	Level 3
Warrant & option liability	$	8,562	$	8,562
Conversion option liability	$	1,988,238	$	1,988,238
Total accrued derivative liabilities	$	1,996,800	$	1,996,800

For the three and nine months ended June 30, 2012, the Company recognized a gain (loss) of$2,718 and ($2,402) forthechangeinthefairvalueof accrued option and warrant liability and the Company recognized a gain (loss) of $3,916,435 and ($1,704,593) respectively for the change in fair value of accruedbeneficialconversion liability, respectively.

The Company didnotidentify any othernon-recurring assetsand liabilities thatarerequired tobepresented intheconsolidated balancesheetsat fair valueinaccordance withASC 825.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” ASC 740requiresacompanytousetheasset and liability method of accounting for income taxes, whereby deferredtax assets are recognized fordeductibletemporary differences, and deferred tax liabilities are recognizedfor taxable temporarydifferences. Temporary differences are the differences betweenthe reported amounts ofassetsand liabilities and their tax bases. Deferred tax assetsare reduced by avaluation allowance when, intheopinion ofmanagement, itis morelikelythan not thatsome portion, orallof,the deferred taxassetswillnotberealized. Deferred taxassetsand liabilities areadjusted fortheeffects ofchangesintax lawsand rateson thedateofenactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that thetaxpositionwouldbesustained inatax examination, with a tax examination being presumed to occur. The amount recognized is thelargestamountoftaxbenefit thatis greater than 50% likely ofbeing realized onexamination. For tax positions notmeetingthe “morelikelythan not” test,no taxbenefit is recorded. The adoptionhad no effect onthe Company’s consolidated financial statements. Penalties and interest incurred related to underpayment ofincome taxareclassifiedas income tax expensein the period incurred. No significant penalties orinterest relating to income taxeshavebeenincurred duringthethree and nine months ended June 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 weightedaveragenumberofcommonsharesoutstanding. Dilutedearnings-per-shareis basedon theassumptionthatall dilutive convertible sharesand stock warrants were converted orexercised. Dilutednet loss-per-share is computed bydividing the net loss for the period bythe weightedaverage number ofcommon shares outstanding duringthe period,plusthe potential dilutive effect ofcommon sharesissuableupon exerciseorconversion of outstanding stock options and warrants duringthe period. Duetothenetloss forthethree and nine months ended June 30,2012 and 2011, none ofthe potential dilutive securities havebeenincluded in the calculation ofdilutive earningpersharebecause theireffect wouldbeanti-dilutive.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Stock - Based Compensation

The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation – StockCompensation.” ASC 718requires companies to measure compensation cost for stock-based employee compensation at fair value at the grantdateand recognize the expenseoverthe employee’s requisite service period. Under ASC 718, the Company’s volatility is based onthe historical volatility of the Company’s stockorthe expected volatility of similar companies. The expected life assumption is primarily basedon historical exercisepatterns and employee post-vesting terminationbehavior. The risk-free interest ratefor the expected term ofthe option is based onthe U.S. Treasury yield curveineffect at thetimeof grant.

The Company uses the Black-Scholes option-pricing model which was developed for use in estimating the fair value ofoptions.Option-pricing models requirethe input ofhighly complex and subjective variables including theexpected lifeofoptions granted and theCompany’sexpected stock price volatility over aperiod equal to orgreater than the expected life ofthe options.Because changesin the subjective assumptions canmaterially affect the estimated valueoftheCompany’semployee stockoptions,itis management’s opinion thattheBlack-Scholes option-pricing modelmay not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair valueofemployee stockoptions is determined in accordance with ASC 718 using an option-pricing model, that value may not be indicative of the fair value observedinawilling buyer/sellermarket transaction.

The Company recognizes in the statement of operations the grant-date fair value of stock options and otherequity-based compensation issuedto employees and non-employees.

Recent AccountingPronouncements

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.

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.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

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 ofthefollowing at June 30,2012 and September 30,2011:

	June 30, 2012		September 30, 2011
Office furniture and equipment	$	9,879	$	9,879
Computer equipment				8,930
	$	9,879	$	18,809
Accumulated depreciation		(8,143)		(15,909)
Equipment, net	$	1,736	$	2,900

The Company recorded depreciation expense of $377 and $1,164 for the three and nine months ended June 30, 2012, respectively, and $987 and $2,392 for the three and nine months ended June 30, 2011, respectively.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 4 – Intangible Assets

The Company incurred legal costs inacquiringpatentand trademark rights. These costs areprojected togeneratefuture positive cashflowsinthenear term and havebeencapitalized tointangibleassetsintheperiod incurred.Onceeachpatentortrademark is issued,capitalized costs areamortized on a straight-linebasis overaperiod nottoexceed 20 yearsand 10 years,respectively. On March 29, 2012, the Company sold a 60% interest in their patents to 5Barz International Inc. The balances below reflect the residual balance at cost.

Intangible assetsconsist ofthefollowing:

	June 30, 2012		September 30, 2011
Patents	$	44,530	$	49,586
Trademarks		4,994		6,243
Licensingrights		4,214		4,214
		53,738		60,043
Accumulated Amortization		(7,122)		(6,076)
Intangibles, net	$	46,616	$	53,967

Amortization on patents will be calculated from the date that the patents are issued and that the Company commences its initial substantive revenue based upon those intangible assets.

Note 5–Convertible PromissoryNotes

Convertible PromissoryNote Issued February22,2011

On February 22, 2011, the Company entered into aSecurities Purchase Agreement (the “SPA”)withan unrelated entity (the “Holder”), inconnection withthepurchase by the Holder ofaConvertible PromissoryNote (the “February 2011Note”).

Pursuant to the February 2011 Note, the Holder loaned to the Company the principal amount of$40,000. The February2011 Note bears interest at arateof8%, and was due on November 17,2011. The Holder may convert principal and unpaidinterest on thenote into sharesoftheCompany’s common stock,with the number ofshares issuabledetermined bydividing theamounttobeconvertedby theconversion price whichis equalto63% of the average of the three lowest tradingprices of the Company’scommon stockover the ten tradingdayspriortothe date of the conversion. The Company recordeda$23,492 debt discount related tothebeneficialconversion feature. The loan was fully repaid by November 17, 2011 by way of conversion of the note and accrued interest into common stock.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Convertible PromissoryNote Issued March10,2011

On March 10, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”)withan unrelated entity (the “Holder”), inconnection withthepurchase by the Holder ofaConvertible PromissoryNote (the “March 2011Note”).

Pursuant to theMarch2011 Note,the Holder loanedtotheCompany theprincipal amountof$42,500. The March2011 Note bearsinterest at arateof8%, and was due onDecember 7, 2011. Subject to a revision of that note agreement dated January 6, 2012, the Holder may convertprincipal and unpaidinterest onthenote into sharesoftheCompany’scommon 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 bydividing the amount to be convertedby theconversion price whichis equalto25%ofthe average of the three lowest trading prices of the Company’s common stock over the ten trading days prior tothedateoftheconversion. The Holder is prohibited under the March 2011 Note from converting amounts if principal and interest thatwouldresultinThe Holder receiving shares,which when combined with shares ofthe Company’scommon stockheld by The Holder,wouldresultinThe Holder holding morethan 4.99%oftheCompany’sthen- outstanding common stock. No registration rights were granted in connection with the purchase of theMarch2011 Note,and thesharesof commonstock,if any,issuedupon conversion,will berestricted securitiesasdefined pursuanttothetermsofRule144. The loan was repaid in full via conversion by April 12, 2012.

Convertible PromissoryNote Issued May18,2011

On May 18, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, inconnection withthepurchase by Holder ofaConvertible PromissoryNote in the principle amount of $32,500. The May2011 Note bearsinterest at a rate of 8%, and is due onFebruary 23, 2012. Pursuant to the terms of a January 6, 2012 amendment agreement between the Company and holder, the note may be converted into sharesoftheCompany’scommon 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 bydividing the amount to be convertedby theconversion price whichis equalto25%ofthe average of the three lowest trading prices of the Company’s common stock over the ten trading days prior tothedateoftheconversion. Asher is prohibited under the Asher May 2011 Note from converting amounts if principal and interest thatwouldresultinAsher receiving shares,whichwhen combined with shares of the Company’s common stock held byAsher, would result in Asher holding more than 4.99% of theCompany’sthen- outstanding common stock. No registration rights were granted in connection with the purchase of the Asher May 2011 Note, and thesharesof commonstock,if any,issuedupon conversion,will berestricted securitiesasdefined pursuanttothetermsofRule144. The loan along with accrued interest was repaid by way of the issuance of common stock by May 4, 2012.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Convertible PromissoryNote Issued January 10,2012

On January 10, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, inconnection withthepurchase by Holder ofaConvertible PromissoryNote in the principle amount of $15,000. The January 2012 note bearsinterest at a rate of 8%, and is due on October 10, 2012. Pursuant to the terms of the note, the principle and accrued interest may be converted into sharesoftheCompany’scommon 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 bydividing the amount to be convertedby theconversion price whichis equalto25%ofthe average of the three lowest trading prices of the Company’s common stock over the ten trading days prior tothedateoftheconversion. The Holder is prohibited under the note from converting amounts if principal and interest thatwouldresultinHolder receiving shares,whichwhen combined with shares of the Company’s common stock held at the time, would result in Holder owning more than 4.99% of theCompany’sthen- outstanding common stock.

Pursuant to the terms ofthe Note, while there remains any unpaidamounts owing onthe Note, the Company may notincuradditional debt without Holder’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informedholder;(ii) indebtedness totrade creditorsorfinancialinstitutions intheordinary courseofbusiness;(c)debt whichintheaggregate doesnotexceed $250,000; or (d)debt theproceeds ofwhichareusedtorepaytheNote.

The Company has the right to pre-pay the Note during the first 180 days following the date of the Note bypaying to Holder 150% ofthethen- outstanding principal amountand any accruedand unpaidinterest,penalties, orotheramounts owing. On July 9, 2012, subsequent to the balance sheet date, the Company paid $31,582 in full settlement of the note principle, accrued interest and prepayment penalty.

Convertible PromissoryNote Issued April5,2011 –RelatedParty

On April 5, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”)withone ofitsdirectors, Mr. Dwayne Yaretz (“Holder”), in connection withthepurchase ofaConvertible PromissoryNote (the Note).

Pursuant to the Note, the Company received the principal amountof$50,000. The Note bearsinterest at arateof8%,and is due on January 5,2012. Holdermayconvert principal and unpaidintereston thenoteintosharesof theCompany’s common stock,with thenumber of shares issuabledetermined bydividing the amountto be converted bythe conversion price whichis equal to 63% ofthe averageofthethree lowest trading prices of the Company’s common stock over the ten trading days prior to thedateoftheconversion. Holder is prohibited undertheNote from converting amounts if principal and interest that would result in Holder receiving shares, which when combined withsharesofthe Company’scommon stock held,would result in Holder owning morethan 4.99% ofthe Company’sthen-outstanding common stock. No registration rights were grantedin connection with the purchase ofthe Note, and thesharesofcommonstock,if any,issuedupon conversion, will berestricted securitiesasdefined pursuanttothetermsofRule144.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Pursuant to the terms ofthe Note, while there remains any unpaidamounts owing onthe Note,theCompany may notincuradditional debt without Holder’s approval except for (i) debt that was owed or committed as ofthedateoftheSPAand ofwhichtheCompany had informed Holder; (ii) indebtedness to trade creditors orfinancial institutions in theordinary courseofbusiness;(c)debt whichintheaggregate doesnotexceed $250,000; or(d)debt theproceeds ofwhichareusedtorepaythe Note.

The Company determined thatthe Note contained abeneficial conversion feature because theconversion ratewas lessthan theshareprice at thedateofissuance.

Convertible PromissoryNote Issued January5,2012 –RelatedParty

On January 5, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”)withitsformer CFO, in the name of Pickard & Green, CPA’s (“Holder”), in connection withthepurchase ofaConvertible PromissoryNote (the Note).

Pursuant to the Note, the Company received the principal amountof$50,000, by way of settlement of certain debts owed by the Company to Holder. The Note bearsinterest at arateof8%,and is due on July 3,2012. Holdermayconvert principal and unpaidintereston thenoteintosharesof theCompany’s common stock,with thenumber of shares issuabledetermined to be the amount obtained bydividing the amountto be converted bythe conversion price whichis the lesser of $0.0013 per share or 63% ofthe averageofthethree lowest trading prices of the Company’s common stock over the ten trading days prior to thedateoftheconversion. Holder is prohibited undertheNote from converting amounts if principal and interest that would result in Holder receiving shares, which when combined withsharesofthe Company’scommon stock held,would result in Holder owning morethan 4.99% ofthe Company’sthen-outstanding common stock. No registration rights were grantedin connection with the purchase ofthe Note, and thesharesofcommonstock,if any,issuedupon conversion, will berestricted securitiesasdefined pursuanttothetermsofRule144.

Pursuant to the terms ofthe Note, while there remains any unpaidamounts owing onthe Note,theCompany may notincuradditional debt without Holder’s approval except for (i) debt that was owed or committed as ofthedateoftheSPAand ofwhichtheCompany had informed Holder; (ii) indebtedness to trade creditors orfinancial institutions in theordinary courseofbusiness;(c)debt whichintheaggregate doesnotexceed $250,000; or(d)debt theproceeds ofwhichareusedtorepaythe Note.

The Company determined thatthe Note contained abeneficial conversion feature because theconversion ratewas lessthan theshareprice at thedateofissuance.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Convertible PromissoryNote Issued May 24,2012

On May 24, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, inconnection withthepurchase by Holder ofaConvertible PromissoryNote in the principle amount of $37,500. The May 2012 note bearsinterest at a rate of 8%, and is due on February 7, 2013. Pursuant to the terms of the note, the principle and accrued interest may be converted into sharesoftheCompany’scommon stock, with the number of shares issuable calculated at a variable rate calculated bydividing the amount to be convertedby theconversion price whichis equalto51%ofthe average of the three lowest trading prices of the Company’s common stock over the ten trading days prior tothedateoftheconversion. The Holder is prohibited under the note from converting amounts if principal and interest thatwouldresultinHolder receiving shares,whichwhen combined with shares of the Company’s common stock held at the time, would result in Holder owning more than 4.99% of theCompany’sthen- outstanding common stock.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Convertible promissory notes

The Company recorded interest expense relating to the convertible promissory notes of $5,636 and $16,519 for the three and nine months ended June 30, 2012, respectively and $2,616 and $25,214 for the three and nine months ended June, 2011, respectively.

The Company amortized $35,606 and $83,592 of the debt discount for the three and nine months ended June 30, 2012 respectively and $27,684 and $70,445 of the debt discount for the three and nine months ended June 30, 2011, respectively.

The following table summarizes theconvertible promissory notesat June 30,2012 and September 30,2011:

	June 30,			September 30,
	2012			2011

Issued August 2006, amended November 2007	$	262,356		$	262,356
Issued July 22, 2010		-			-
Less: Debt discount		-			-
Issued July 2010 through June 2012		422,500			220,000
Less amounts converted		(273,000	)		(73,000	)
Less: Debt discount		(27,475	)		(29,533	)
Convertible promissory notes, net	$	384,381		$	379,823

Note 6–LicenseAgreement

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 $105 and $315 for the three and nine months ended June 30, 2012, and $105 and $526 for the three and nine months ended June 30, 2011, respectively.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 7 - 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 warrants expire December 1, 2012.

The exercise prices of the warrants are as follows:

Number of Warrants Issued		Exercise 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 8–5BARz International, Inc. Agreement

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.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

On March 29, 2012, the Company and 5BARz International, Inc. 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)	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.
(v)	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 $710,776 has been advanced as of June 30, 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, 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. As a result, Cellynx became a consolidated subsidiary of 5Barz International Inc., on March 29, 2012.
(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.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 9 – Stockholder’s Equity

On December 14, 2011, the Board of Directors approved the cancellation of 13,412,638 options that were previously granted to Daniel Ash, the former CEO and Director of the Company, and agreed instead to issue Mr. Ash 13,412,638 shares of the Company's common stock.

On January 31, 2011, the Company issued 534,759 shares of common stock pursuant to the conversion of $10,000 principal of convertible notes payable. The conversion rate was $.0187.

On February 8, 2011, the Company issued 662,983 shares of common stock pursuant to the conversion of $12,000 principal of convertible notes payable. The conversion rate was $.0181.

On February 22, 2011, the Company issued 609,756 shares of common stock pursuant to the conversion of $10,000 principal of convertible notes payable. The conversion rate was $.0164.

On March 2, 2011, the Company issued 921,986 shares of common stock pursuant to the conversion of $13,000 principal of convertible notes payable. The conversion rate was $.0141.

On March 10, 2011, the Company issued 1,034,483 shares of common stock pursuant to the conversion of $10,000 principal and $2,000 accrued interest o the Asher Note. The conversion rate was $.0097.

On March 24, 2011, the Company issued 633,333 shares of common stock to a consultant for services rendered. The shares were valued at $13,933 which was the fair market value of the shares on the date of grant.

On August 23, 2011, the Company issued 1,666,667 shares of common stock pursuant to the conversion of $8,000 principal of convertible notes payable. The conversion rate was $.0048.

During the three months ended December 31, 2011, the Company issued 33,506,911 shares of common stock pursuant to the conversion of $34,500 principal of convertible notes payable. The conversion rate was $.00103.

During the three months ended March 31, 2012, the Company issued 110,666,666 shares of common stock pursuant to the conversion of $16,600 principal of convertible notes payable. The conversion rate was $. 0.00015.

On March 29, 2012, the Company issued 350,000,000 shares on conversion of $78,500 of debt, at a price of $0.00022 per share to 5BARz International Inc. representing a 60% acquisition of control of the Company.

During the three month period ended June 30, 2012, the Company issued 314,000,000 shares of common stock pursuant to the conversion of $16,600 principal of the Convertible Notes payable. The conversion rate was $. 0.00015.

During the three month period ended June 30, 2012 the Company issued 441,333,333 common shares on conversion of $66,200 of debt due to 5Barz International Inc. at a price of $0.00015 per share. These conversions of debt maintained the 5Barz International Inc. investment in the Company at approximately 60%.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Stock Options

On December 3, 2007, the Board of Directors adopted the 2007 Stock Incentive Plan (the “Plan”) of CelLynx, Inc. All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock awards, or other stock-based awardsunder the Plan. The Plan is administered by the Board. The Board has authority to grant awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. Subject to certain adjustments, awards may be made under the Plan for up to 25,000,000 shares of common stock of the Company. The Board shall establish the exercise price at the time each option is granted. In July 2008, the Company amended the Plan to increase the number of awards available under the Plan from 25,000,000 to 75,000,000.

On June 20, 2012, the Company granted 12,500,000 options to the Chairman of the Board of Directors and two acting Directors of the Company. The options vest immediately, are convertible at $0.0006 per share and expire on June 20, 2017. The Company calculated the value of the options using the Black-Scholes model using the following assumptions:

June 30,2012
Expected life(years)	5.00
Risk-freeinterest rate	2.08
Expected volatility	183%
Expected dividendyield	0%

The weighted average grant-date fair value was $0.015 per option.

The Company calculated a fair value of $7,197 utilizing the Black Scholes model and recorded asanexpenseinthe accompanying consolidated statement ofoperations.

The following table summarizes information withrespecttooptions outstanding underthePlanand outside thePlan.

	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Life	Aggregate Intrinsic Value
Outstanding at September. 30, 2011	3,022,337	$	0.017-0.13	3
Granted	12,500,000		0.0006	5
Cancelled	-		-
Exercised
Outstanding at June 30, 2012	15,522,337	$	0.007	4	$	0
Exercisable at June 30, 2012	15,522,337	$	0.007	4	$	0

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

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

Options outstanding
						Weighted
				Weighted		Average
		Number		Average		Remaining
Range of		Outstanding as of		Exercise		Contractual Life
Exercise Price		June 30, 2012		Price		(Years)
$	$.0006	12,500,000		.0006		5
$	0.014 - 0.05		1,000,000		0.018		3.93
$	0.06 - 0.100		767,337		0.074		.96
$	0.110 - 0.150		1,255,000		0.125		2.86
			15,522,337

Warrants:

The following table summarizes the warrant activity:

	Number of Warrants	Weighted Average Exercise Price		Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at September 30, 2011	36,114,757	$	0.12
Granted	—		—
Exercised	—		—
Expired	10,060,000		—
Outstanding at June 30, 2012	26,054,757	$	0.765	.55	$	0
Exercisable at June 30, 2012	26,054,757	$	0.765	.55	$	0

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 10 –CommitmentsandContingencies

Litigation

As earlier reported in the Company’s Form 10K and 10Q, the Company was a Defendant in an action brought by Dophinshire 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 Nevadacorporation andDoes 1-10, Superior Court of California, Orange County, CaseNo. 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 Companyhas engaged in settlementnegotiationswith the plaintiff and managementexpected 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.

Asimilar action for past due rent has beenfiledas toits facility inEl 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. OnOctober 12,2011, plaintiff brought suit against theCompany forunlawful detainer ofoffices 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 hadbeen previously reported in the Company’s Form 10K and 10Q, theCompany was facingclaimsforback wagesbysome ofitsformer employees. Someof thoseclaims havebeenpartially paid and others wereexpected tobe paid inthe normal course of business or weretobe otherwise defended. Those claims havenow beenincorporated into California Labor Commission awards infavorof thoseformer 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 Companyhas received a Cease Trading Orderfromthe British Columbia Securities Commission (BCSC) alleging that the Companyis 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.

CELLYNX GROUP, INC.

NOTES TO CONSOLIDATED STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 11 –Subsequent Events

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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ForwardLookingStatements

Certain statements in the Management’s Discussion and Analysis (“MD&A”), other than purely historical information, includingestimates, projections, statements relating to our business plans, objectives and expectedoperating results, and theassumptions upon which those statements are based, are “forward -looking statements” within themeaning of thePrivate SecuritiesLitigationReform Act of 1995,Section27Aof theSecuritiesAct of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generallyare identifiedby thewords “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,”“will continue,” “will likely result,” 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 differmaterially from theforward-looking statements. We undertake no obligation to update orrevise publicly any forward-looking statements, whether asaresult of newinformation, future events, orotherwise.

As used in this Form 10-Q, unless the context requires 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™, 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 have completed the first prototype of the @Home units 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 development and 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 pending approval of COFETEL, The Mexican Federal Telecommunications Commission on the following schedule: The first 4,000 of those units will be shipped within 90 days of approval and the remaining 12,000 units will be shipped within 180 days thereafter. The production and completion of this order is pending working capital to complete.

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 a rooftop, and a transmitting tower or antenna to be placed at least 35 feet from the other antenna with each connected to the amplifier by cable. Our patented technology is designed to 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 for coverage of 2,500 to 3,000 square feet. This dual-band unit would work with all current wireless carriers except Nextel, which operates on its own frequency. The PCS network is generally used by the older carriers such as AT&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 in the 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 trained and 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 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; 5BARzInternational, Inc.

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”.

(iv) 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.

(v) 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 $710,776 has been advanced as of June 30, 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, 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. As a result, Cellynx became a consolidated subsidiary of 5Barz International Inc., on March 29, 2012.

(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 PromissoryNote Issued February22,2011

Convertible PromissoryNote Issued March10,2011

Convertible PromissoryNote Issued May18,2011

Convertible PromissoryNote Issued January 10,2012

Convertible PromissoryNote Issued April5,2011 –RelatedParty

Pursuant to the terms ofthe Note, while there remains any unpaidamounts owing onthe Note,theCompany may notincuradditional debt without Holder’s approval except for (i) debt that was owed or committed as ofthedateoftheSPAand ofwhichtheCompany had informed Holder; (ii) indebtedness to trade creditors orfinancial institutions in theordinary courseofbusiness;(c)debt whichintheaggregate doesnotexceed $250,000; or(d)debt theproceeds ofwhichareusedtorepaythe Note.

The Company determined thatthe Note contained abeneficial conversion feature because theconversion ratewas lessthan theshareprice at thedateofissuance.

Convertible PromissoryNote Issued January5,2012 –RelatedParty

Pursuant to the terms ofthe Note, while there remains any unpaidamounts owing onthe Note,theCompany may notincuradditional debt without Holder’s approval except for (i) debt that was owed or committed as ofthedateoftheSPAand ofwhichtheCompany had informed Holder; (ii) indebtedness to trade creditors orfinancial institutions in theordinary courseofbusiness;(c)debt whichintheaggregate doesnotexceed $250,000; or(d)debt theproceeds ofwhichareusedtorepaythe Note.

The Company determined thatthe Note contained abeneficial conversion feature because theconversion ratewas lessthan theshareprice at thedateofissuance.

Convertible PromissoryNote Issued May 24,2012

In the above transactions, the Notes were issued to accredited investors 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.

The status of this transaction remains the same as of the date of this filing.

Resultsof Operations

Comparison of thethree months ended June 30,2012 and 2011

Three months ended June 30,
		2012		2011	$ Change	% Change
REVENUE	$		$
COST OF REVENUE
GROSS PROFIT
OPERATING EXPENSES		32,229		235,842	(203,613)	86.33	%
NON OPERATING INCOME (EXPENSES)		3,755,392		447,239	3,308,153	739.6	%
NET LOSS	$	(3,723,163)	$	211,397	3,511,766	1661.2	%

Operating Expenses

Total operating expenses incurred for the three and nine months ended June 30, 2012 were $32,229 and $405,467, respectively, compared to $235,842 and $1,365,526 for the three and nine months ended June 30, 2011, which decreased by $203,613 and $960,059. The decrease was due to a significant decrease in salaries and wages and the shift of several operations into 5Barz International Inc. and the rationalization of redundant expenses between the Companies.

NonOperating Income and Expenses

Total non-operating income (expenses) incurred for the three and nine months ended June 30, 2012 was $3,755,392 and ($439,754), respectively; compared to $447,239 and $235,748, for the three and nine months ended June 30, 2011 which was an increase of $3,308,153 and ($675,502), respectively. The differences arise from the variations in the Beneficial Conversion Factor calculations related to the Companies variable convertible debt position and substantive market fluctuations over the nine months ended March 31, 2011.

Liquidity and Capital Resources

Financial Condition

As of June 30, 2012, the Company had no cash resources, and we had a working capital deficit of $4,292,572 compared to cash of $178 and a working capital deficit of $2,376,878 as of September 30, 2011, which was a decrease in working capital of $1,915,694. This decrease is comprised of the accrued derivative liability which reflects the intrinsic value of convertible debt issued by the Company.

During the nine months ended June 30, 2012, cash used in operating activities was $102,033 compared to $643,802 in the corresponding period of 2011. This decrease in cash burn rate reflects the rationalization of expenses in Cellynx after the acquisition by 5Barz International Inc.

The Company received $101,500 from financing activities for the nine months ended June 30, 2012, comprised of advances from 5BARz International Inc. of $49,000 and proceeds from other convertible debt in the amount of $52,500.

Going Concern

In our Annual Report on Form 10-K for the year ended September 30, 2011, our independent auditors included an explanatory paragraph in its report relating to our consolidated financial statements for the years ended 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 continue as 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 normal course of business. As of June 30, 2012, we had an accumulated deficit of $17,472,300, 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 stock and warrants in private placements; borrowings from related parties and other investors; and revenue provided by the sales of our 5Barz unit. The further 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 on a 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 the sale 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 SheetArrangements

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 or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have 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.

Critical Accounting 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 the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on 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 from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe that the 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 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 orDisposalof Long- lived Assets

The Company applies the provisions of 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 June 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.

The revenue earned on the sale of intangibles is realized at the time that proceeds are paid in full for that intellectual property comprised of shares in the capital stock of 5Barz International, Inc.

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. Penalties and interest incurred relate to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the three and nine months ended June 30, 2012 and 2011.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 (the "Exchange Act") require public companies to maintain "disclosure controls and procedures," which are defined to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Our Chief Executive Officer ("CEO") and a consultant providing services commonly provided by a Chief Financial Officer ("CFO") carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations, as of the Evaluation Date, our CEO and CFO believe that:

(i)

our disclosure controlsand procedures are designed to ensure thatinformationrequired tobedisclosed by us inthe reports wefileunder the Securities Exchange Act of 1934 is recorded,processed,summarized and reported withinthe time periodsspecified in the SEC's rulesand forms and thatsuch informationis accumulated and communicatedtoourmanagement, including the CEO and CFO,as appropriate, toallow timely decisions regarding required disclosure; and

(ii)

disclosure controls and procedures were effective as of the date of the evaluation

Changesin InternalControl over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II–OTHERINFORMATION

ITEM 1. LEGAL PROCEEDINGS

As earlier reported in the Company’s Form 10K and 10Q, the Company was a Defendant in an action brought by Dophinshire L.P. regarding its office space in Mission Viejo, CA. That action has since been dismissed. However, a new action is in process and is currently being negotiated. Management expects to settle this action.

A similar action for past due rent has been filed as to its facility in El Dorado Hills, CA. This action too is being negotiated and Management expects to settle this action as well.

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.

With the exception of the actions reported above, we know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our company.

ITEM2. UNREGISTERED SALES OFEQUITY SECURITIES AND USE OFPROCEEDS

None.

ITEM3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM4.

(REMOVED AND RESERVED)

ITEM5. OTHERINFORMATION

None.

ITEM 6. EXHIBITS

EXHIBIT INDEX

Exhibit Number	Description
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 *

Exhibit Number	Description
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Label Linkbase Document
101.LAB	XBRL Presentation Linkbase Document
101.PRE	XBRL Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CelLynx Group, Inc.
	(Registrant)

Date:August 18, 2012
	By:/s/Norman W. Collins, Sr.
	Norman W. Collins, Sr.
	Chief Executive Officer

(

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	8th grade V bad

CelLynx Inactive 10-Q2012 Q3 Quarterly report

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