Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Mar. 31, 2013 |
Notes to Financial Statements | ' |
Basis of Presentation | ' |
Basis of Presentation |
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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2013. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K filed on January 15, 2013 for the fiscal year ended September 30, 2012. |
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The accompanying consolidated financial statements include the accounts of CelLynx Group, Inc., and its 100% wholly -owned subsidiary, CelLynx, Inc. All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | ' |
Use of Estimates |
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The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include impairment analysis for long lived assets, income taxes, litigation and valuation of derivative instruments. Actual results could differ from those estimates. |
Intangible Assets | ' |
Intangible Assets |
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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. |
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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. Based on its review, the Company believes that as of March 31, 2013 and September 30, 2012, there was no significant impairment of its intangible assets |
Fair Value of Financial Instruments | ' |
Fair value of financial instruments |
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The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities, approximate fair value due to the short-term nature of these instruments. |
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Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows: |
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| • | Level 1. Quoted prices in active markets for identical assets or liabilities. | | | | | | | | | | | | | | |
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| • | Level 2. Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. | | | | | | | | | | | | | | |
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| • | Level 3. Significant unobservable inputs that cannot be corroborated by market data. | | | | | | | | | | | | | | |
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The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the assets that are measured at fair value on a recurring basis. |
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| | Consolidated | | Quoted Prices in Active Markets for Identical Assets or Liabilities | | Quoted Prices for Similar Assets or Liabilities in Active Markets | | Significant |
Balance Sheet | (Level 1) | (Level 2) | Unobservable |
| | | Inputs |
| | | (Level 3) |
Derivative Liabilities: | | | | | | | | |
Conversion option liability | | $ | 2,420,225 | | | $ | — | | | $ | — | | | $ | 2,420,225 | |
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The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis: |
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| | 31-Mar-13 | | | | | | | | | | | | |
Beginning balance – October 1, 2012 | | $ | 1,487,568 | | | | | | | | | | | | | |
Change in fair value of derivative liabilities | | | 992,832 | | | | | | | | | | | | | |
Write down of derivative liabilities on default of securities | | | (51,613 | ) | | | | | | | | | | | | |
Change in accounting treatment of option and warrant liability | | | (8,562 | ) | | | | | | | | | | | | |
Ending balance – March 31, 2013 | | $ | 2,420,225 | | | | | | | | | | | | | |
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Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivate liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department with support from the Company’s consultants and which are approved by the Chief Financial Officer. |
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Level 3 financial liabilities consist of the derivative liabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. |
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As of March 31, 2013 there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. |
Derivative Instruments | ' |
Derivative instruments |
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The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date. |
Net Loss Per Share | ' |
Net loss per share |
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The Company reports loss per share in accordance with the ASC Topic 260, “Earnings Per Share.”, which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period plus the issuance of common shares, if dilutive, that could result from the exercise of outstanding stock options and warrants. These potentially dilutive securities were not included in the calculation of loss per common share for the three and six months ended March 31, 2013 or 2012 because their effect would be anti-dilutive. |
Stock - Based Compensation | ' |
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Stock Based Compensation |
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The Company reports stock-based compensation under ASC 718 “Compensation – Stock Compensation”. ASC 718 requires all share-based payments to employees, including grants of employee stock options, warrants to be recognized in the consolidated financial statements based on their fair values. The Company accounts for equity instruments issued to non-employees as compensation in accordance with the provisions of ASC 718, which require that each such equity instrument be recorded at its fair value on the measurement date, which is typically the date the services are performed. The Black-Scholes option valuation model is used to estimate the fair value of the warrants or options granted. The model includes subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating the fair value of traded options or warrants. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the warrants or options granted. |
Reclassifications | ' |
Reclassifications |
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Certain reclassifications have been made in the financial statements at March 31, 2012 and for the three and six months then ended to conform to the March 31, 2013 presentation. The reclassifications had no effect on net loss. |
Recent Accounting Pronouncements | ' |
Recent accounting pronouncements |
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In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment." This ASU simplifies how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, early adoption is permitted. The adoption of this guidance did not have a material effect on the condensed consolidated financial statements. |
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FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of March 31, 2013 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2013 or 2012, and it does not believe that any of those pronouncements will have a significant impact on our consolidated financial statements at the time they become effective. |