CelLynx 10K 2009 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K


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

For the fiscal year ended September 30, 2009


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 number: 000-27147

CELLYNX GROUP, INC.

(Exact name of registrant as specified in its charter)


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

25910 Acero, Suite 370 Mission Viejo, California		92691
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number: (949) 305-5290

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

At March 31, 2009, the end of our second fiscal quarter, the aggregate market value of common stock held by non-affiliates of the registrant was approximately $10,363,442 based on the closing price of $0.15 as reported on the Over-the-Counter Bulletin Board.

Number of shares of common stock outstanding as of January 13, 2010: 159,448,988.

TABLE OF CONTENTS

TO ANNUAL REPORT ON FORM 10-K

FOR YEAR ENDED SEPTEMBER 30, 2009

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of Security Holders	15

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6.	Selected Financial Data	16
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Disagreements With Accountants on Accounting and Financial Disclosure	23
Item 9A.	Controls and Procedures	24
Item 9B.	Other Information	25

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	25
Item 11.	Executive Compensation	30
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
Item 13.	Certain Relationships and Related Transactions, and Director Independence	36
Item 14.	Principal Accounting Fees and Services	38

PART IV
Item 15.	Exhibits, Financial Statement Schedules	38

Signatures

FORWARD LOOKING STATEMENTS AND CERTAIN TERMINOLOGY

Some of the statements made by us in this Annual Report on Form 10-K are forward-looking in nature, including but not limited to, statements relating to our future revenue, product development, demand, acceptance and market share, gross margins, levels of research and development, our management's plans and objectives for our current and future operations, and other statements that are not historical facts. Forward-looking statements include, but are not limited to, statements that are not historical facts, and statements including forms of the words "intend", "believe", "will", "may", "could", "expect", "anticipate", "plan", "possible", and similar terms. Actual results could differ materially from the results implied by the forward looking statements due to a variety of factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release any revisions to these forward-looking statements that may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by us include, but are not limited to:

● our limited operational history;

● our ability to finance our activities and maintain our financial liquidity;

● our ability to attract and retain qualified, knowledgeable employees;

● the impact of general economic conditions on our business;

● the ability to bring our technology to commercialization;

● market acceptance of our products;

● dependence on suppliers, third party manufacturers and other key vendors;

● our ability to design and market new products successfully;

● our failure to acquire new customers in the future;

● continued enforceability of patent and trademark rights;

● deterioration of business and economic conditions in our markets;

● intensely competitive industry conditions with increasing price competition; and

● the rate of growth in the cellular amplifier market.

In this document, the words "we," "our," "ours," "us," “CelLynx” and “Company” refer to CelLynx Group, Inc., and our subsidiary.

PART I

ITEM 1. BUSINESS

Corporate Background

CelLynx Group, Inc. (“CelLynx” or the “Company”) was originally incorporated under the laws of the State of Minnesota on April 1, 1998, under the name “Cool Can Technologies, Inc.” Effective July 12, 2004, the Company merged (the “Merger”) with NorPac Technologies, Inc., its wholly owned subsidiary (“Nevada Sub”), for the purpose of reincorporating the Company in Nevada. The Merger was completed effective July 12, 2004, with Nevada Sub as the surviving corporation. Upon completion of the Merger, the Company’s name was changed to NorPac Technologies, Inc. (“NorPac”).

The Company had originally been in the business of developing and marketing a proprietary technology for self-chilling beverage containers (the “Cool Can Technology”). However, the Company’s patents for the Cool Can Technology expired, and, as a result, the Company’s management decided to abandon the development of the Cool Can Technology and seek alternative business opportunities. To that end, as more fully explained below, on July 24, 2008, the Company closed a transaction with shareholders of CelLynx, Inc., a California corporation ("CelLynx-California"), by which it newly issued shares to the CelLynx-California shareholders in exchange for all outstanding shares of CelLynx-California. Through this transaction, the Company acquired a cellular amplifier business as its wholly owned subsidiary. This transaction has been considered a "reverse take-over" for accounting purposes.

Effective August 5, 2008, the Company changed its name to CelLynx Group, Inc. by merging another wholly owned subsidiary, CelLynx Group, Inc., a Nevada corporation, into the Company and assuming the subsidiary’s name. On October 27, 2008, the CelLynx’s Board of Directors approved a change of the Company’s fiscal year. CelLynx’s new fiscal year will begin on October 1 and end on September 30 of each year, and the change was applicable with the year ending September 30, 2008. The Company previously had a June 30 fiscal year end. The September 30 fiscal year end is also the fiscal year end of CelLynx-California.

The Reverse Take-Over

On July 24, 2008, the Company closed a reverse take-over transaction by which it acquired a cellular amplifier business pursuant to a Share Exchange Agreement, as amended (the “Exchange Agreement”), by and among the Company, CelLynx, Inc., a California corporation (“ CelLynx-California ”), and twenty-three (23) CelLynx-California shareholders who, immediately prior to the closing of the transactions contemplated by the Exchange Agreement, collectively held 100% of CelLynx-California’s issued and outstanding shares of capital stock (the “CelLynx Owners”).

Prior to the closing, on July 23, 2008, the Company entered into a Regulation S Subscription Agreement (the “Subscription Agreement”) pursuant to which the Company agreed to issue and sell 10,500,000 shares of its common stock and warrants to purchase 10,500,000 shares of common stock at an exercise price of $0.20 per share to non-U.S. persons (the “Investors”) for an aggregate purchase price of $1,575,000 (the “Financing”).

Prior to the closing, on July 22, 2008, CelLynx-California entered into a Master Global Marketing and Distribution Agreement (the “Distribution Agreement”) with Dollardex Group Corp., a company organized under the laws of Panama (“Dollardex”), whereby Dollardex shall act as CelLynx-California’s exclusive distributor of CelLynx-California’s products and related accessories in the following regions: Canada, South America, Europe, Middle East, China, India, Australia, Africa and South East Asia.

Immediately following the closing, on July 24, 2008, two of the new officers and directors, one of the new employees and one of the new non-officer directors of the Company entered into a Lock-Up Agreement (the “Lock-Up Agreement”) whereby they agreed not to transfer their Company shares for a period of 24 months following the closing of the reverse take-over transaction.

As a result of the closing of the reverse take-over transaction, the CelLynx Owners became our controlling shareholders, CelLynx-California became our wholly-owned subsidiary, and CelLynx-California’s business became our business.

The following is a brief description of the terms and conditions of the Exchange Agreement, Subscription Agreement and Distribution Agreement, and the transactions contemplated thereunder that are material to the Company.

Share Exchange

Under the Exchange Agreement, the Company was to acquire all of the equity interests of CelLynx-California in exchange for issuing restricted common stock to the CelLynx Owners in an aggregate amount equal to approximately 70% of the total issued and outstanding shares of common stock immediately after the closing of the reverse take-over, taking into account certain derivative shares held by certain CelLynx Owners and a CelLynx-California noteholder, but exclusive of the shares issued in the Financing and to certain CelLynx-California investors. As a result, the CelLynx Owners were to receive 77,970,956 shares of the Company’s common stock in exchange for 100% of CelLynx’s common stock. However, the Company had only 41,402,110 authorized, unissued and unreserved shares of common stock available, after taking into account the shares of common stock issued and reserved in the Financing described below. Pursuant to the Exchange Agreement, in the event that there were an insufficient number of authorized but unissued and unreserved common stock to complete the transaction, the Company was to issue all of the available authorized but unissued and unreserved common stock to the CelLynx Owners in a pro rata manner and then establish a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”) and issue that number of shares of Series A Preferred Stock such that the common stock underlying the Series A Preferred Stock plus the common stock actually issued to the CelLynx Owners would equal the total number of shares of common stock due to the CelLynx Owners under the Exchange Agreement. As a result, the Company issued to the CelLynx Owners an aggregate of 32,454,922 shares of common stock and 45,516,034 shares of Series A Preferred Stock. The Series A Preferred Stock automatically converts into common stock on a one-to-one ratio upon the authorized capital stock of the Company being increased to include not less than 150,000,000 shares of common stock.

On September 22, 2008, shareholders owning in the aggregate 26,441,554 shares of the Company’s common stock and 40,411,544 shares of the Company’s Series A Preferred Stock, outstanding as of September 10, 2008 (the “Record Date”), consented in writing to amend the Company’s articles of incorporation to increase the number of shares of the Company’s authorized common stock from 100,000,000 to 400,000,000. On October 8, 2008, the Company filed and mailed a Definitive Information Statement notifying its shareholders of this action and on November 7, 2008, the Company filed a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of the State of Nevada to increase the number of authorized shares common stock of the Company from 100,000,000 to 400,000,000. As a result of filing the Amendment, the 45,516,034 shares of Series A Preferred Stock were automatically converted into 45,516,034 shares of common stock.

The Exchange Agreement also provided that all options, warrants and convertible notes to purchase or acquire shares of CelLynx-California be converted into options, warrants or convertible notes to purchase or acquire shares of the Company in the same proportion at which the CelLynx-California shares were converted into Company shares (the “Conversion Ratio”) under the Exchange Agreement. The exercise or conversion price for such options, warrants or convertible notes shall be the exercise price or conversion price of the CelLynx-California options, warrants or convertible notes divided by the Conversion Ratio. As a result, 750,000 CelLynx-California options with an exercise price of $0.018 per share were converted into 943,447 Company options with an exercise price of $0.014 per share; 375,000 CelLynx-California options with an exercise price of $0.02 per share were converted into 471,723 Company options with an exercise price of $0.016 per share; 23,394,133 CelLynx-California options with an exercise price of $0.09 per share were converted into 29,428,166 Company options at an exercise price of approximately $0.0715 per share; 18,330,544 CelLynx-California options with an exercise price of $0.099 per share were converted into 23,058,527 Company options with an exercise price of approximately $0.0787 per share, and, with the exception of the Palomar Note described below, $40,000 of CelLynx-California convertible notes with a conversion price of $0.01 per share were converted into $40,000 of Company convertible notes with a conversion price of approximately $0.0079 per share, and $20,000 of CelLynx-California convertible notes with a conversion price of $0.10 per share were converted into $20,000 of Company convertible notes with a conversion price of approximately $0.0795 per share. There were no CelLynx-California warrants issued and outstanding at the time of the closing of the Exchange Agreement.

In connection with the reverse take-over transaction, Palomar Ventures III, L.P. (“Palomar”), holder of a certain amended and restated convertible promissory note dated November 10, 2007 (the “Palomar Note”) executed by CelLynx-California in the principal amount of $262,356.16, is entitled to convert the Palomar Note into that number of shares of common stock of CelLynx-California such that immediately following the closing of the reverse take-over transaction, the Palomar Note would be convertible into 4.8% of the issued and outstanding common stock of the Company, exclusive of unvested options. As a result, the Palomar Note is convertible into 6,340,029 shares of the Company's common stock.

As a condition to closing the Exchange Agreement, John P. Thornton resigned as the Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer, and the following officers were appointed:

	§	Daniel R. Ash, President, Chief Executive Officer, Chief Operating Officer and Secretary;
	§	Kevin Pickard, Chief Financial Officer and Treasurer, and
	§	Tareq Risheq, Chief Strategy Officer.

In addition, Mr. Thornton agreed to resign as a director of the Company and Mr. Ash, Mr. Risheq, Norman W. Collins, and Robert J. Legendre were appointed directors of the Company. Mr. Ash’s appointment was effective immediately. The appointment of the other directors became effective on August 14, 2008, upon the Company’s compliance with the provisions of Section 14(f) of the Securities Act of 1933, as amended, and Rule 14(f)-1 thereunder.

On November 17, 2008, the Board of Directors of the Company appointed Mr. Legendre Executive Chairman of the Board to assist the Company’s Chief Executive Officer with strategy and execution of the Company’s manufacturing and supply chain operations, corporate development, capital markets and investor relations. Mr. Legendre subsequently resigned on May 4, 2009.

On December 12, 2008, Mr. Risheq resigned as the Company’s Chief Strategy Officer but remains a director.

$1,575,000 Financing

Under the Subscription Agreement, the Company issued 10,500,000 shares of its common stock and warrants (the “Warrants”) to purchase 10,500,000 shares of common stock at an exercise price of $0.20 per share to the Investors for an aggregate purchase price of $1,575,000, or $0.15 per share, payable in cash and through the cancellation of debt. The proceeds from the Financing were allocated as follows: $100,000 to pay current obligations of NorPac, $225,000 as cancellation of current debt of NorPac and the remaining $1,250,000 for working capital. The Warrants expire on July 22, 2010 except in the event that at any time CelLynx has manufactured 25 or more of its mobile or home repeater units, then the Company may, at its option, accelerate the expiry of the Warrants by giving notice (“Notice of Acceleration”) to the holder thereof. If the holder does not exercise the Warrant within 30 days of the giving of the Notice of Acceleration, the Warrants will expire and the holder will have no further rights to acquire any shares of the Company under the Warrants.

Dollardex Distribution Agreement

Under the Distribution Agreement, Dollardex shall act as CelLynx’s exclusive distributor of the CelLynx’s 5BARz™ products and related accessories (the “Products”) in the following nine regions: Canada, South America, Europe, Middle East, China, India, Australia, Africa, and South East Asia (the “Territory”). The Distribution Agreement supersedes a prior Joint Venture Agreement, as amended, dated January 3, 2008 entered into between the parties.

In accordance with the terms of the Distribution Agreement, Dollardex will sell and distribute the Products directly to resellers (whether wholesales or retailers) or end users of the Products in the Territory as well as sell and distribute the Products to its agents in the Territory (the “Dealers”). The Dealers will be located and appointed by Dollardex but their appointment will be subject to CelLynx’s approval.

In accordance with the terms of the Distribution Agreement, CelLynx also granted Dollardex an exclusive non-transferrable license to use the tradenames, trademark, logos, and designations in or associated with the Products during the term of the Distribution Agreement in connection with the promotion and distribution of the Products in the Territory. The Distribution Agreement is otherwise subject to customary intellectual property protections, including, without limitation, all of the processes, know-how, and related material proprietary of CelLynx to manufacture the Products.

The term of the Distribution Agreement is perpetual though the Distribution Agreement may be terminated, in the event of, among other events, a material breach, upon a change of control of Dollardex, or by mutual agreement of the parties. The Distribution Agreement further provides that CelLynx shall have the exclusive right of first refusal to acquire Dollardex in the event that Dollardex considers such transaction. In addition, effective December 31, 2011, CelLynx shall have the option to acquire Dollardex in accordance with a certain appraisal method as further described in the Distribution Agreement.

In accordance with the terms of the Distribution Agreement, CelLynx and Dollardex, prior to Dollardex entering into a contractual relationship with a Dealer or commencing distribution of the Product in a given Territory, will develop a business plan for deployment of the distribution and marketing of the Products in the specific Territory. CelLynx will have approval rights over the business plan and Dollardex is obligated to conduct business and ensure that Dealers conduct their business substantially in accordance with the terms of the business plan.

As consideration for the rights granted under the Distribution Agreement, Dollardex will provide funding to the Company as follows: (i) $1,000,000 due and payable after the pilot production run for the first commercial Product is completed (the “Initial Roll Out”); (ii) $4,000,000 due and payable 90 days from the commencement of the Initial Roll Out; and (iii) $5,000,000 due and payable 180 days from the commencement of the Initial Roll Out. In addition, the parties agreed that the Company will sell products to Dollardex at 10% over cost of goods sold and Dollardex will pay the Company 50.1% of its Net Earning (as defined in the Distribution Agreement) on a quarterly basis with payments to be made within 45 days following the end of each quarter. The Company has not received any payment under the agreement and we are currently re-negotiating the agreement with Dollardex.

Lock-Up Agreement

Under the Lock-Up Agreement, Robert J. Legendre, Executive Chairman of the Board of Directors of the Company, Daniel R. Ash, Chief Executive Officer and a director of the Company, Tareq Risheq, Chief Strategy Officer and a director of the Company, and Anthony DeMarco, a senior employee of the Company, agreed not to transfer, sell, assign, pledge, hypothecate, give, create a security interest in or lien on, place in trust (voting trust or otherwise), or in any other way encumber or dispose of, directly or indirectly and whether or not voluntarily, without express prior written consent of the Company, any common stock or options to purchase common stock of the Company for a period of 24 months.

FY 2009 Events

On November 7, 2008, CelLynx filed a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of the State of Nevada after shareholders approved a proposal to increase the number of authorized shares of common stock of the Company from 100,000,000 to 400,000,000 by written consent in lieu of a special meeting of shareholders. As a result of filing the Amendment, 45,516,034 shares of the Company’s Series A Preferred Stock automatically converted into 45,516,034 shares of the Company’s common stock. The Company now has 126,068,846 shares of common stock and no shares of Series A Preferred Stock issued and outstanding.

On November 17, 2008, CelLynx’s Board of Directors appointed Robert J. Legendre Executive Chairman of the Board to assist the Company’s Chief Executive Officer with strategy and execution of the Company’s manufacturing and supply chain operations, corporate development, capital markets and investor relations.

On November 24, 2008, CelLynx announced that it had successfully reached a key commercialization milestone with its manufacturing of the newly enhanced 5BARz™ Universal Unit. Initially envisioned as a plug-and-play mobile unit to be used in vehicles, this product has also proven highly effective for single-room coverage in a home or office. Accordingly, CelLynx plans to introduce the Universal Unit with a 110 volt power cord for indoor use, as well as with an accessory portable battery pack that can be used virtually anywhere a weak cellular signal exists. The Universal Unit contrasts with CelLynx’s 5BARz™ SOHO stationary table top unit which is designed to cover a 2,000 square foot home or office space.

On December 12, 2008, Tareq Risheq resigned as CelLynx’s Chief Strategy Officer. There were no disagreements between Mr. Risheq and CelLynx regarding any matter relating to CelLynx’s operations, policies, practices or otherwise. Mr. Risheq remains a director of CelLynx.

Recent Events

Ingram Micro Agreement

In November 2009, we signed an agreement with Ingram Micro Inc. to distribute the line of mobile phone boosters. This agreement accelerates CelLynx Group’s go-to-market channel strategy and expands the reach of its product distribution to include all 50 states, D.C., U.S. Territories & Possessions, as well as Military Bases and U.S. embassies abroad. Ingram Micro Inc. is the world’s largest technology distributor and a leading technology sales, marketing and logistics company. It offers a broad array of solutions and services to more than 170,000 resellers by distributing and marketing hundreds of thousands of IT products worldwide from more than 1,500 vendors. We expect to distribute our product through online distributors and traditional retailers.

Changes in Directors

On May 4, 2009, Robert Legendre, the Company’s Executive Chairman of the Board resigned as a member of our board of directors to devote his full time to other career responsibilities. There were no disagreements between Mr. Legendre and any of our officers or directors.

Effective May 8, 2009, the Company’s Board of Directors appointed Donald A. Wright, as Chairman of the Board of Directors of the Company. Additionally, effective December 19, 2009, the Company’s Board of Directors appointed Dwayne Yaretz as a Director of the Company. More information is provided about Messrs. Wright and Yaretz below in the section “Directors, Executive Officers, and Corporate Governance.”

Securities Issuance Agreement

On May 4, 2009, the Company entered into a Securities Issuance Agreement, dated as of April 23, 2009 (the "Agreement"), with Dollardex Group Corp., a Panamian corporation (the "Purchaser") and Robert Legendre (“Mr. Legendre”) and Tareq Risheq (“Mr. Risheq”). Pursuant to the Agreement, the Purchaser agreed to invest $278,500 in the Company and would receive 2,785,000 shares of its common stock (“Shares”) and warrants to purchase 2,785,000 Shares at an exercise price of $0.10 per share. The warrants have a term of 36 months after the issue date of May 5, 2009.

Under the Agreement, we accepted the resignation of Mr. Legendre as Executive Chairman of the Board of Directors of the Company (discussed above). The Company agreed that all of Mr. Legendre’s options would be immediately cancelled. As full compensation for his services to the Company to date, he would receive 2,000,000 Shares of common stock. The Company agreed that all of Mr. Risheq’s options would be immediately cancelled. As full compensation for his services to the Company to date, he would receive 1,500,000 Shares of common stock. As discussed above, on December 12, 2008, Mr. Risheq had resigned as the Company’s Chief Strategy Officer but remains a Director of the Company.

Overview of CelLynx

CelLynx develops and markets the next generation of cell phone boosters (also known as repeaters or amplifiers) for the small office, home office (“SOHO”) and vehicle. This next generation product, CelLynx 5BARz™, is the first consumer-friendly, single-piece unit that strengthens weak cellular signals to deliver higher quality signals for voice, data and video reception on cell phones being used indoors or in vehicles. CelLynx plans to develop its products for use in North America, Europe and Asia. The CelLynx product line is intended to be manufactured by contract manufacturers located in South East Asia. These manufacturers will allow CelLynx 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 in-house incorporating a multi-channel strategy that includes distribution partners, wireless service providers, retail outlets and international joint ventures.

The CelLynx Solution

Most SOHO cellular amplifiers 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. CelLynx’s patent pending technology eliminates the need to distance the receiving and transmitting towers, allowing the two towers to be placed directly inside the booster, 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.

CelLynx has recently completed a prototype of the 5BARz SOHO Unit which delivers 45 decibel (dB) of gain in a Single Band PCS environment providing up to 1,500 square feet of indoor coverage. This 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. In order to optimize marketability, CelLynx is developing an improved model which it expects to operate in a dual band, PCS and Cellular, environment delivering 65 dB of gain thereby allowing for coverage of 2,000 to 3,000 square feet. This dual band unit would work with all current wireless carriers in the U.S. and Canada 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 is confident that all of the critical functions required for this dual band unit have been identified and that their engineering team has the capability to accomplish development leading to commercialization.

We believe the CelLynx 5BARz product line, when commercialized, will also offer an advantage over other amplifiers such as the Femtocell architecture being developed by wireless service providers such as AT&T and Verizon. This Femtocell technology requires a small cellular base station which connects to the service provider’s network via a broadband such as DSL or cable. As such, Femtocell will be carrier specific and subject to a monthly subscription fee. CelLynx products, on the other hand, will be compatible with all wireless carriers in the U.S. and Canada (except Nextel), and will not require a broadband internet connection and will not entail a monthly service fee.

CelLynx has also developed a mobile 5BARz Universal Unit designed primarily for use in vehicles, or for single-room coverage in the home or office. In November, 2008, the Company announced it had manufactured 25 5BARz Universal Unit production samples, reaching a key commercialization milestone. The 5BARz Universal Unit is an adaptation of the 5BARz SOHO Unit described above. The unit will produce up to 45 dB of gain offering higher performance than the competition within the interior of a vehicle cabin or single room, while minimizing the signal degrading effects of cabling.

Initially envisioned as a plug ‘n play mobile unit to be used in vehicles with a 12 volt cigarette lighter power adapter, the 5BARz Universal Unit has also proven highly effective for single-room coverage in a home or office. Accordingly, the Company plans to introduce the 5BARz Universal Unit with a 110 volt power cord for indoor single-room use, as well as with an accessory portable battery pack that can be used virtually anywhere a weak signal exists. Using the 5BARz Universal Unit with Bluetooth® extends the effective coverage range to that of the Bluetooth® signal.

Our first product, The Road Warrior, has passed FCC Certification and in July 2009, we ordered 220 units from our manufacturer in the Philippines. We used 66 of the units as demo units and started selling the remainder. Due to cash flow issues, we recently placed an order for an additional 1,000 units and have received the first 250 units in November 2009.

History and Development of CelLynx

CelLynx assembled a veteran engineering team with extensive cellular radio frequency (RF) experience headquartered in Sacramento, California. Within eight months, this team, with more than 80 years of combined experience in building RF products, developed working prototypes of an affordable consumer friendly single piece plug ‘n play booster with a minimum of 45dB of gain in both up and down paths. By late 2007, a pre-production prototype had been developed. At that time, CelLynx entered into a merger agreement with NorPac Technologies, Inc., a Nevada corporation trading on the Over The Counter Bulletin Board (OTC BB).

Since the closing of the reverse take-over July 24, 2008, CelLynx has continued the development of the 5BARz product line with both the 5BARz Universal Unit and 5BARz SOHO Unit on similar but separate development tracks. Concurrently, management is focusing on the manufacturing process and implementation of a sales and marketing plan to ensure the delivery of a quality low-cost product into the market place. In 2008, the Company has raised $2 million in equity capital, added executives to its board of directors and management team, and opened a new corporate headquarters in Mission Viejo, California while maintaining its R&D facility in El Dorado Hills, California.

The CelLynx 5BARz™ Product Line

5BARz SOHO Unit

The 5BARz SOHO Unit (small office, home office) is designed to eliminate cell phone weak spots in an area similar to the size of a single family home (2,000 to 3,000 square feet). Expected to retail at a competitive price of about $299, the 5BARz SOHO Unit is lightweight, aesthetically pleasing and designed to sit on a table near a window in the direction of the nearest cell tower. There is an indicator light to determine the best placement. This product requires no assembly: simply place the unit on a table and plug in the power chord. Product introduction has occurred in July 2009 for the North American model. The European and Asian models are expected to be introduced in mid 2010.

5BARz Universal Unit

The 5BARz Universal Unit is designed to eliminate cell phone weak spots primarily while in a vehicle --moving or stationary -- as well as for single-room coverage in home, office or hotel.

For vehicles, simply place the unit on the dashboard and plug in the cigarette lighter power adapter/cradle for handheld cell phone use, or place the cell phone into the cradle for hands-free or Bluetooth® operation. This unit includes a Bluetooth® speaker phone with caller ID. CelLynx technology is designed to be superior to current vehicle solutions that require complex installation including roof top mounting of the antenna and, in some cases, a direct connection between the cell phone and the roof top antenna.

For single-room home, office, or hotel room coverage, simply place the unit near a window in the building, plug in the powerline and extend the antenna line for handheld cell phone operation. Place the cell phone in the cradle for best hands-free or Bluetooth® performance; use of a Bluetooth® device extends the effective coverage to that of the Bluetooth® range.

The Bluetooth® speaker phone with caller ID will offer the user the convenience of hands free phone conversation while driving, which is mandated by law in many areas including California, the nation’s largest automobile market. This product is also expected to retail at a competitive price of about $299 and to be introduced in North American in the first half of 2010. The European and Asian models are expected to be introduced mid-year 2010.

5BARz Product Launch

The 5BARz product launch schedule is coordinated with the marketing plan to first introduce the 5BARz SOHO Unit and 5BARz Universal Unit in the United States and Canada, operating at the Cellular and PCS frequencies (800/1900MHz). To allow for the marketing of the 5BARz products in Europe and Asia, new models will be subsequently launched that are designed to operate at the ETSI defined frequencies for GSM (900/1800MHz). The development requirement for the new models is primarily limited to the tuning of the U.S. based units for the change of frequency assignments, including replacement of frequency sensitive components such as band pass filters and antennas.

Industry Overview

Given the nature of the CelLynx product line, CelLynx is within the overall cellular telephone market as well as two sub-segments of that market, i.e. the in-building wireless systems marketplace and the vehicle amplifier marketplace.

The overall cellular telephone marketplace

Statistics from the 3GSM World Congress in Barcelona, Spain this year indicate that the number of worldwide mobile subscribers has surpassed the two billion mark and is predicted to reach three billion by the end of this year and four billion by 2011. Demand for cellular applications beyond voice, such as video, SMS, email and internet access have created a multi-billion dollar market for accessorial cellular network products such as CelLynx amplifiers. “Certain user segments have an almost insatiable appetite for connectivity and enhanced access to critical productivity applications while at work, at home and on the move,” according to Cliff Raskind, Strategy Analytics’ director of Wireless Strategies. These early adopters are already driving the market for products that will improve connectivity. Business users are twice as likely to carry a mobile phone as a notebook when away from their desk and are keenly interested in expanding email and internet access to the phone. This increase in bandwidth demand on the cellular network decreases signal strength and increases the need for CelLynx’s 5BARz products.

In spite of the overall proliferation of cell phones, the carriers themselves are suffering from a high rate of customer defections sometimes referred to as churn. According to CITA, The Wireless Association, 40% of those customers switching networks are searching for a better signal. Considering that it costs the average carrier almost $400 to acquire a new subscriber, this global churn rate is the most serious problem affecting the cellular industry and CelLynx is directly addressing this problem through improving indoor and vehicle coverage while diminishing interference. It is also noteworthy that according to First Research, a D & B Company providing Industry Intelligence, 85% of the U.S. Wireless industry revenues are generated by the four major wireless companies, AT&T, Verizon, Sprint and T-Mobile. In the U.S. market, CelLynx will concentrate on adapting its products to the frequencies being used by those carriers, in particular the Dual Band 850/1900MHz. In the International market, CelLynx will focus on the Dual Band 900/1800MHz being used in Europe, Africa, Asia, Australia, New Zealand and most of South America.

CelLynx believes that all of the above market conditions indicate the potential for the success of the CelLynx 5BARz product line within the general cell phone market. The CelLynx products will seek to attract virtually all cell phone users including those who will come by the product through their cellular and Wi-MAX carriers, enterprise employers, government agencies or military service organizations.

The ‘In Building’ wireless systems marketplace

According to ABI Research, ‘In-building wireless systems, forecasted to exceed $15 billion in revenues in 2013, are a key enabler for delivering on the potential of cellular mobile services.’ Total Telecom, a leading communications periodical, reports that the role of the traditional office is no longer essential for day-to-day productivity as people increasingly work wherever the technology is available, generally at home if not in the office. The U.S. Department of Labor reports that over 20 million workers work at home and this does not include those who work out of a home office to conduct personal business or those who work at home to finish uncompleted tasks from their regular employment or use their home office for outside or after hours employment. More and more workers are adopting the trend toward work-life balance that results in them spending more time at home. These factors reinforce the need for improved signal in the Small Office Home Office. That need is expected to be met by the CelLynx 5BARz SOHO Unit.

The ‘In-Vehicle’ wireless systems marketplace

Three trends are noteworthy when discussing this sub sector: the growth of the number of motor vehicles on the road, the trend indicating the increased number of mobile workers and the trend toward legislation requiring hands free cell phone operation while driving.

According to Plunkett Research, Ltd. there were 806 million automobiles and light trucks on the roads of the world in 2007. That number is expected to increase to one billion by the year 2020. Not so surprisingly, predictions by Analyst House IDC indicate that the number of mobile workers is set to reach one billion by 2011. It is reasonable to assume that as the number of vehicles increase and the number of cell phones increase that the number of drivers using cell phones will also increase.

The National Council of Legislators estimate that 73 % of drivers use their cell phones in the car. That being the case, twenty states and dozens of municipalities have passed legislation requiring hands free cell phone usage while driving. Anticipating the continuation of this legislative trend, the CelLynx vehicular 5BARz Universal Unit is equipped with Bluetooth® for hands free, safe driving.

All of the above trends suggest the need for quality voice, data and media solutions in the mobile environment, and that the market for user friendly boosters such as the CelLynx 5BARz Universal Unit will follow these trends in both growth and application.

Sales and Marketing Strategy

In the US, CelLynx will deploy a multi-channel sales strategy seeking to include: Distribution Partners such as Celluphone, QDI or Advantage; Stocking Partners such as Tesco, Hutton & Brightstar; Cellular Carriers such as AT&T & Verizon; Corporate Accounts such as Accenture, IBM, Remax, Roadway & Hertz; Retail Outlets such as Radio Shack, Comp USA & Best Buy and Web based direct sales.

CelLynx will address the international market place through a Master Global Marketing, Distribution and Service Agreement between CelLynx and Dollardex Group Corp. (“DGC”). DGC intends to build an international marketing and distribution dealer network through its existing relationships in its licensed territories.

In November 2009, we signed an agreement with Ingram Micro Inc. to distribute the line of mobile phone boosters. This agreement accelerates CelLynx Group’s go-to-market channel strategy and expands the reach of its product distribution to include all 50 states, the District of Columbia, U.S. Territories and Possessions, as well as Military Bases and U.S. embassies abroad. Ingram Micro Inc. is the world’s largest technology distributor and a leading technology sales, marketing and logistics company. It offers a broad array of solutions and services to more than 170,000 resellers by distributing and marketing hundreds of thousands of IT products worldwide from more than 1,500 vendors. We expect to distribute our product through online distributors and traditional retailers.

Operating and Manufacturing Strategy

CelLynx’s management and engineering teams have extensive experience working with top-tier off shore manufacturers. In fact, this collective team has successfully launched over 150 complex RF products in the past seven years using off shore manufacturers.

Given their expertise in this area they have become acutely aware of the advantages of partnering with a reputable contract manufacturer (CM). In this case, CelLynx will immediately leverage manufacturing practices at minimal cost. In fact, the team has identified several CM candidates in Southeast Asia. Once a CM is selected, CelLynx will immediately benefit from 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.

CelLynx has selected a CM in the Philippines which produced the first 220 units in coordination with the Company’s engineering team. The first initial mass production units were used for UL testing, product demonstrations, and remaining FCC approved units were sold as initial sales.

Competition by Market Segment

The SOHO or residential wireless amplifier competitors; Most of the companies in this industry do not offer plug ‘n play single-unit solutions such as CelLynx. In fact, companies such as Wilson, Wi-Ex and CellAntenna, offer two-piece, ‘cable connected amplifier-to-antenna’ solutions requiring complex installation enabled only by tech savvy users or professional installers and at considerably higher prices than CelLynx.

The mobile vehicle market competitors; A few companies such as Digital Antenna and Richardson (Call Capture) are focused on the vehicle market and others such as Wilson are entering that market. Again, however, these vehicle solutions require complex installation including roof top mounting of antenna and, in some cases, a direct connection between the cell phone and the roof top antenna.

The Wireless enterprise solution providers as competitors; While the equipment manufacturers in the enterprise market such as Wilson, EMS Wireless and Radioframe Networks are attempting to enter the SOHO/residential market, their products are engineered for commercial enterprises requiring complex installation and as a result are expensive as compared to the CelLynx solution.

While each of the above competitors has solutions for certain market segments such as large buildings and warehouses, there is no dominant market leader in the SOHO and Vehicle segments of the Market. CelLynx believes that the total indoor and vehicle cell signal amplification market, now exceeding $300 million annually, could experience continued growth through the commercialization of products such as those being offered by CelLynx. As compared to the current products in the marketplace, CelLynx’s key sustainable competitive advantage is in its patent pending technology providing for compact, plug ‘n play, consumer friendly and affordable product lines. An overview of the competition is shown below.

Competitive Matrix	Wi-Ex	CellAntenna	JD TECK	Wilson	CelLynx
Competitive Matrix	YX500-PCS	CAE50PCS	JD 55-PR	PCS 60dB	CelLynx
Claimed Coverage	2,500 sq. ft	3,000 sq ft	1,200 sq ft	2,500 sq ft	2,500 sq ft
Claimed Coverage	Open area	3,000 sq ft	Open area	2,500 sq ft	2,500 sq ft
Adaptive/AGC	Yes	No	No	Yes	Yes
Freq./Carrier Specific	No	No	No	No	No
Maximum System Gain	55dB	50dB	55dB	60dB	70dB
Cable Length/Type	35’ RG6	33’ RG6	33’ RG6	Buy separately	None Required
Market	Consumer	Industrial	Industrial	Industrial	Consumer
Distribution	Direct	Direct	Direct	Distributors	Direct
	Master VAR	(Online (3rd Party)	Master VAR	Master VAR	Distributors
	Retail			Online (3rd Party)	Online
	Online (3rd Party)
Price (MSRP)	$299.99	$499.99	$395.00	$699.95	$299.00
Installation:	Recommended	Yes	Yes	Yes	None Required
Price	$150.00	>$300	$250	>$300	None Required
External Antennae	1	2	2	2	0

Intellectual Property

CelLynx has trademark protection for the brand name “5BARz” and has applied for trademark protection for its sales slogan, “Turning Weak Spots into Sweet Spots.” CelLynx has the following patent applications pending:

Matter ID	Title	Matter Type	Serial Number	Status
101710.0001 P CT	Cell Phone Signal Booster	Patent – P CT	P CT/US07/060827	Pending
101710.0001 US	Cell Phone Signal Booster	Patent – US	11/625331	Pending
101710.0001 US2	Dual Cancellation Loop Wireless Repeater	Patent – US	12/106468	Pending
101710.0002 PRO	Method to Remotely Enable and Disable the Operation of a Wireless Repeater	Patent – Provisional	61/018765	Pending
101710.0003 PRO	Method to Integrate a Wireless Repeater into the Wireless System for Control and Monitoring	Patent – Provisional	61/018892	Pending
101710.0004 PRO	Method for a Wireless System Home Base Station	Patent – Provisional	61/019097	Pending
101710.0005 PRO	Dual Loop Active and Passive Repeater Antenna Isolation Improvement	Patent – Provisional	61/045662	Pending

The CelLynx Technology

The plug ‘n play aspects of the CelLynx cellular booster demanded complex algorithms and intuitive interfaces. Further complicating the challenge, the booster required a full duplex linear amplifier providing up to 45db of gain in both RX and TX paths and directional antennae with one inch of separation and 70db of isolation between them. It further required an active feed-forward cancellation in both the RX and TX links with real time correction and an active Automatic Gain Control for both links running in sync with the active feed-forward cancellation. Typically, a repeater simply boosts off the air cell phone signals so operating performance of a repeater can be related to the amount of boost reliability delivered by the repeater.

System gain is the measure of boost in decibels or dB. The major obstacles to reliable gain in a repeater are isolation and linearity. Linearity is a function of the amplification in the active portion of the repeater. Generally, the amplifiers in a repeater are designed to operate class A and the usable output power is de-rated from the maximum output power by 10dB or 90% below the saturated output of the amplifier. Isolation is the measure of separation of the input from the output of the repeater. If the separation is less than the system gain, the result will be similar to the feedback screech heard when a microphone is placed too close to a loud speaker. In practice, isolation has proven to be the Achilles heel of repeaters because unlike linearity, improvements in isolation have proven to be costly and unmanageable.

Traditionally the low tech approaches to achieving the isolation necessary for adequate repeater performance includes vertical and horizontal spacing of the two antennae, as with a speaker and microphone. In most cases this horizontal spacing requires approximately ten times the distance of vertical spacing. CelLynx has used a high tech approach to deal with the real world environment resulting in a superior product delivering high performance. Not only did the team meet the challenge, but in the process they developed a user friendly, affordable unit that is protected by five pending patents.

Government Regulation and Probability of Affecting Business

Our products are subject to Federal Communications Commission (FCC) and Underwriter Laboratories (UL) certifications. We will submit samples of our products to both agencies according to our product development process. We do not anticipate any difficulty in obtaining these certifications for our products.

In addition, because we plan to market and sell our products in other countries, importation and exportation regulations may impact our activities. A breach of these laws or regulations may result in the imposition of penalties or fines, suspension or revocation of licenses. We are not currently involved in any such judicial or administrative proceedings and believe that we are in compliance with all applicable regulations. Although it is impossible to predict with certainty the effect that additional importation and exportation requirements and other regulations may have on future earnings and operations, we are presently unaware of any future regulations that may have a material effect on our financial position, but cannot rule out the possibility.

Compliance with Environmental Laws

CelLynx is not required to comply with any environmental laws that are particular to the cellular amplifier industry. However, it is Company policy to be environmentally conscience in every aspect of its operations.

Employees

CelLynx has approximately six (6) full-time employees. In addition, we have hired several consultants to assist with development of our cellular amplifier units. CelLynx is not affiliated with any union or collective bargaining agreement. There have been no adverse labor incidents or work stoppages in the history of CelLynx. Management believes that its relationship with its employees is good.

Corporate Information

CelLynx’s principal executive offices are located at 25910 Acero, Suite 370, Mission Viejo, California 92691. CelLynx’s main telephone number is (949) 305-5290, and our website address is www.CelLynx.com. Information provided on our website, however, is not part of this report and is not incorporated herein.

ITEM 1A. RISK FACTORS

CelLynx is a “smaller reporting company” as that term is defined in Rule 12b-2 of the Securities Exchange Act, and, accordingly, is not required to provide the information required by this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

CelLynx is a “smaller reporting company” as that term is defined in Rule 12b-2 of the Securities Exchange Act, and, accordingly, is not required to provide the information required by this item.

ITEM 2. PROPERTIES

We lease office space in Mission Viejo, California at 25910 Acero, Suite 370, Mission Viejo, California 92691. The facility is our primary operating offices and headquarters. The facility is approximately 2,120 square feet. The lease has a one-and-half year term that expires March 31, 2010 and the monthly base rent is $4,664.

We also lease office space in El Dorado Hills, California at 5047 Robert J Mathews Parkway, Suite 400, El Dorado Hills, California 95762. This facility is used for research, development and engineering. The facility is approximately 1,570 square feet. The lease has a one-year term that expires March 31, 2010 and the monthly base rent is $2,198.

We believe that the foregoing facilities are sufficient for our operational needs.

We do not anticipate investing in real estate or interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities. We currently have no formal investment policy, and we do not intend to undertake investments in real estate as a part of our normal operations.

ITEM 3. LEGAL PROCEEDINGS

We are not currently involved in any material legal proceedings, nor have we been involved in any such proceedings that have had or may have a significant effect on the Company. We are not aware of any other material legal proceedings pending against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s common stock, par value $0.001 per share, is traded on the Over-The-Counter Bulletin Board ("OTCBB") under the symbol "CYNX." The following table sets forth, for each quarter within the last two fiscal years, the reported high and low bid quotations for the Company’s common stock as reported on the OTCBB. The bid prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.

QUARTER	HIGH ($)	LOW ($)
1st Quarter 2008	$0.23	$0.12
2nd Quarter 2008	$0.35	$0.18
3rd Quarter 2008	$0.28	$0.18
4th Quarter 2008	$0.26	$0.12
1st Quarter 2009	$0.22	$0.15
2nd Quarter 2009	$0.17	$0.09
3rd Quarter 2009	$0.33	$0.09
4th Quarter 2009	$0.27	$0.17

Holders

As of January 12, 2010, there were approximately 177 shareholders of record of our common stock based upon the shareholder list provided by our transfer agent. Our transfer agent is Signature Stock Transfer located at 2632 Coachlight Court, Plano, Texas 75093, and their telephone number is (972) 612-4120.

Dividends

We have not declared any dividends on our common stock since our inception. Our current policy is to retain any earnings in order to finance the expansion of our operations. Our board of directors will determine future declaration and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with applicable corporate law. There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation or Bylaws. Chapter 78 of the Nevada Revised Statutes (the “NRS”), does provide certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:

(a)	we would not be able to pay our debts as they become due in the usual course of business; or

(b)	except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution.

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

Sales of Unregistered Securities

During the three months ended September 30, 2009, the Company issued 3,060,000 shares of the Company’s common stock for proceeds of $334,500. The Company also issued 298,181 shares for services rendered to the Company valued at $45,599.

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

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management’s Discussion and Analysis or Plan of Operation.

FORWARD LOOKING STATEMENTS

The following discussion and analysis of our results of operations and financial condition for the years ended September 30, 2009 and 2008 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

Overview

On July 24, 2008, we acquired all of the outstanding shares of CelLynx-California in exchange for the issuance by us of 32,454,922 restricted shares of our common stock to the CelLynx Owners, which represented approximately 40.3% of our-issued and outstanding common stock (including the shares issued in the Financing), and 45,516,034 restricted shares of our Preferred Stock, which automatically convert into 45,516,034 shares of our common stock upon the filing of a Certificate of Amendment to the our Articles of Incorporation increasing the number of authorized common stock to at least 150,000,000 shares. As a result of this reverse merger transaction, CelLynx-California became our wholly owned subsidiary, and then we acquired the business and operations of CelLynx-California.

Just prior to the closing of the share exchange transaction, on July 23, 2008, we raised $1,575,000 in a private placement by issuing 10,500,000 shares of our common stock and warrants to purchase 10,500,000 shares of our common stock at an exercise price of $0.20 per share to investors. See Item 1.01 of our Form 8-K filed on July 30, 2008 for additional details regarding this equity financing.

We are a producer of the next generation of cell phone boosters (also known as repeaters or amplifiers) for the small office, home office (SOHO) and vehicle. 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 ordered 220 units from our manufacturer in the Philippines. We used 66 of the units as demo units and started selling the remainder. Due to cash flow issues, we just recently placed an order for an additional 1,000 units and have received the first 250 units in November 2009.

We have recently completed a prototype SOHO Unit which delivers 45 decibel (dB) of gain in a Single Band PCS environment providing up to 1,500 square feet of indoor coverage. We plan to commercialize this technology, with production and distribution scheduled to begin, in the first quarter of 2010. This 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 SOHO cellular amplifiers 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 patent pending 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 is confident that all of the critical functions required for this dual-band unit have been identified and that their engineering team has the capability to complete development leading to commercialization.

Our product line is being manufactured by contract manufacturers located in 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 in house incorporating a multi-channel strategy that includes distribution partners, wireless service providers, retail outlets and international joint ventures.

We have financed our operations primarily through proceeds from the issuance of common stock, and we will need to raise additional capital in order to finance our working capital requirements as we continue to increase our sales. If we are unable to raise additional capital, we will be required to severely reduce, or even cease, our operations.

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 attached hereto as Exhibit 99.1, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis:

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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 areas requiring the use of management estimates relate to the determination of depreciation rates for equipment, reserves for slow moving and obsolete inventory, future tax rates used to determine future income taxes, and the carrying values of goodwill and accrued derivative liabilities. Actual results could differ from these estimates upon which the carrying values were based.

Fair Value Measurements

For certain of our financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. In addition, we have long-term debt with financial institutions. The carrying amounts of the line of credit and other long-term liabilities approximate their fair values based on current rates of interest for instruments with similar characteristics.

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

●

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

●

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

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

We analyze all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

Income Taxes

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

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

Stock-based Compensation

We record 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, our volatility is based on the historical volatility of our 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.

Shares Issued for Services

From time to time, we issued stock for services. The shares were valued based upon the fair market value of the Company’s shares determined as the closing stock price as reported by the OTCBB at the dates of issuance.

Intangible Assets

Acquired patents 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 cost 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. Licensing right is amortized on a straight-line basis over a period of 10 years.

Results of Operations

Comparison of the Years Ended September 30, 2009 and 2008

	Year ended September 30
	2009			2008			$ Change			% Change
REVENUE	$	10,373		$	-			10,373			100.0%

COST OF REVENUE		7,554			-			7,554			100.0%

GROSS PROFIT		2,819			-			2,819			100.0%

OPERATING EXPENSES		3,635,153			4,706,037			(1,070,884	)		-22.8%

OTHER INCOME (EXPENSE)		(346,428	)		(1,952,499	)		1,606,071			-82.3%

NET LOSS	$	(3,978,762	)	$	(6,658,536	)	$	2,679,774			-40.2%

Revenue and Cost of Revenue

During the year ended September 30, 2009, we generated $10,373 in revenue that arose from the initial sale of our 5Barz units which became sellable in July 2009. Cost of revenues were $7,554 resulting in a gross profit of $2,819. During the same period of 2008, we were in development stage and did not recognize any revenues, cost of revenues, and gross profit.

Operating Expenses

Total operating expenses incurred for the year ended September 30, 2009 was $3,635,153 compared to $4,706,037 for the year ended September 30, 2008, which decreased by $1,070,884. The significant decrease was due to a significant decrease in share based compensation. During the year ended September 30, 2008, we recognized $2,625,106 of share based compensation expense compared to $690,353 for the year ended September 30, 2009, for a decrease of $1,934,753 or 73.7%. The decrease is due to the cancellation of 35,734,111 options during the year and only granted 9,546,081 options. We also had an increase in consulting fees of $411,715 from $563,151 for the year ended September 30, 2008 to $974,866 for the year ended September 30, 2009, for a 73.1% increase. We incurred additional operating expenses as we continued to build our infrastructure.

Non Operating Income and Expenses

Total non-operating income expenses incurred for the year ended September 30, 2009 was $346,428 compared to $1,952,499 for the year ended September 30, 2008 which was a decrease of $1,606,071. The difference was due to a beneficial conversion liability which was expensed in the year ended September 30, 2008 offset by increased fair value of warrants for the year ended September 30, 2009 which were issued in 2008.

Liquidity and Capital Resources

Financial Condition

As of September 30, 2009, we had cash of $6,776 and we had a working capital deficit of $1,024,034, compared to cash of $599,024 and a working capital deficit of $5,301,132 as of September 30, 2008 The decrease in working capital deficit is due to the reclassification of the share-based compensation liability, accrued beneficial conversion liability and accrued warrant liability to additional paid-in capital on November 7, 2008 as we increased our authorized shares to 400,000,000, which provided sufficient shares to cover the potential conversion of the options, warrants and the convertible promissory notes.

During the year ended September 30, 2009, cash used in operating activities was $1,421,759. Cash used in operating activities consisted of a net loss of $3,978,762 and change in fair value of beneficial conversion liability of $251,410, offset by non cash expenses of $798,599 for stock issued for services, $690,353 for stock based compensation, $419,571 for the change in fair value of accrued warrant liability and an increase of $641,163 for change in accounts payable and accrued expenses.

We used $26,489 for the purchase of intangible assets and equipment for the year ended September 30, 2009 compared to $53,551 for the year ended September 30, 2008.

Cash provided by financing activities was $856,000 for the year ended September 30, 2009 compared to $753,884 for the year ended September 30, 2008. We received $143,000 from promissory notes and $713,000 from the issuance of common stock for the year ended September 30, 2009 compared to $7,600 from stockholders notes and $746,284 from the issuance of common stock for the year ended September 30, 2008. We have financed our operations primarily through proceeds from the issuance of common stock. We anticipate raising an additional $3 million during the next four to six months through private equity offerings.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our financial position, results of operations, and cash flows.

The following table summarizes our contractual obligations as of September 30, 2009, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Contractual obligation	Total		Less than 1 year		1-3 years

Note Payable		362,356		-		362,356
Stockholder notes		103,000		103,000		-
Operating lease		41,200		41,200		-
		506,556		144,200		362,356

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity 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.

Recent Pronouncements

On January 1, 2009, we adopted ASC sub-topic 810-10 (formerly SFAS No. 160, “Accounting and Reporting on Non-controlling Interest in Consolidated Financial Statements, an Amendment of ARB 51”). ASC 810-10 states that accounting and reporting for minority interests are to be recharacterized as noncontrolling interests and classified as a component of equity. The calculation of earnings per share continues to be based on income amounts attributable to the parent. ASC 810-10 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but affects only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The adoption of ASC 810-10 did not have a material impact on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements are listed in the Index to Financial Statements on page F-1.

ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

As previously reported by the Company in a Current Report on Form 8-K filed on January 7, 2010, On January 4, 2010, the Company was notified that, effective January 1, 2010, certain partners of Moore Stephens Wurth Frazer and Torbet, LLP (“MSWFT”) and Frost, PLLC (“Frost”) formed Frazer Frost, LLP (“Frazer Frost”), a new partnership. Pursuant to the terms of a combination agreement by and among MSWFT, Frazer Frost and Frost (the “Combination Agreement”), each of MSWFT and Frost contributed all of their assets and certain of their liabilities to Frazer Frost, resulting in Frazer Frost assuming MSWFT’s engagement letter with the Company and becoming the Company’s new independent accounting firm. Frazer Frost is registered with the Public Company Accounting and Oversight Board (PCAOB).

The Company had engaged MSWFT on October 29, 2008. The audit report of MSWFT on the Company’s financial statements for the fiscal year ended September 30, 2008, did not contain an adverse opinion or a disclaimer of opinion, other than for a going concern, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

Since the engagement of MSWFT on October 29, 2008, and through January 1, 2010, the Company did not consult with Frazer Frost on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company’s financial statements, and Frazer Frost did not provide either a written report or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

Since the engagement of MSWFT on October 29, 2008, and through the date of this Current Report, there were: (i) no disagreements between the Company and MSWFT on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of MSWFT, would have caused MSWFT to make reference to the subject matter of the disagreement in their reports on the Company’s financial statements for such years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

The Company’s Board of Directors approved the engagement of Frazer Frost as the Company’s independent auditor.

The Company provided MSWFT a copy of the disclosures in the Form 8-K and requested that MSWFT furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not MSWFT agrees with the Company’s statements in this Item 4.01(a). A copy of the letter dated January 7, 2010, furnished by MSWFT in response to that request was filed as Exhibit 16.1 to the January 7, 2010, Form 8-K.

ITEM 9A(T). 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 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 controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure; and

(ii) our disclosure controls and procedures were effective as of the date of the evaluation.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such terms are defined in Rules 13(a) – 15(f) promulgated under the Securities Exchange Act of 1934, as amended. The purpose of an internal control system is to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

An internal control material weakness is a significant deficiency, or aggregation of deficiencies, that does not reduce to a relatively low level the risk that material misstatements in financial statements will be prevented or detected on a timely basis by employees in the normal course of their work. An internal control significant deficiency, or aggregation of deficiencies, is one that could result in a misstatement of the financial statements that is more than consequential.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2009, and this assessment identified the following material weaknesses in the company’s internal control over financial reporting:

o	A system of internal controls (including policies and procedures) has neither been designed nor implemented.

o	A formal, internal accounting system has not been implemented.

o	Appropriate technology systems to ensure reliability of information and record-keeping have not been acquired.

o	Segregation of duties in the handling of cash, cash receipts, and cash disbursements is not formalized.

It is Management’s opinion that the above weaknesses exist due to the small size of operating staff and the current R&D phase of operations (e.g., no current sales activity).

In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Because of the material weaknesses described in the preceding paragraph, Management believes that, as of September 30, 2009, the Company’s internal control over financial reporting was not effective based on those criteria.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Controls

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 year ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors

Our current directors and executive officers, their ages, their respective offices and positions, and their respective dates of election or appointment are as follows:

Name	Age	Position	Date of Appointment
Daniel R. Ash	48	President, Chief Executive Officer, Chief Operating Officer, Secretary and Director	July 24, 2008
Kevin Pickard	46	Chief Financial Officer and Treasurer (2)	July 24, 2008
Tareq Risheq (1)	45	Director	July 24, 2008
Norman W. Collins	69	Director	July 24, 2008
Don Wright	58	Chairman of the Board	May 8, 2009
Dwayne Yaretz	49	Director	December 19, 2009

(1)	Tareq Risheq resigned as Chief Strategy Officer on December 12, 2008. Mr. Risheq remains a director of the Company.

(2)	Mr. Pickard is an outside consultant providing services commonly provided by a Chief Financial Officer and Treasurer.

Daniel R. Ash – President, Chief Executive Officer, Chief Operating Officer, Secretary and Director

Daniel R. Ash currently serves as a Director, President and Chief Executive Officer. Since July of 2006 he has devoted his full time efforts to the development of CelLynx and its products. Mr. Ash has more than 20 years experience in the wireless industry with senior management roles in new product development, engineering, off-shore manufacturing and global operations.

From 1999 to 2006 Mr. Ash held senior positions at Powerwave Technologies, a manufacturer of RF amplifiers and antennae, and was instrumental in its growth from $200M to more than $800M annual revenues. From 1991 to 1999, Mr. Ash held senior positions with Hewlett Packard and was responsible for the transfer of RF cell phone amplifier modules to high volume production in Malaysia ramping production to over one million amplifiers per month.

Early in his career, Mr. Ash worked in the electronic defense industry for Teledyne Microwave and Narda Microwave. He worked on several missile projects and was considered by many to be one of the industry experts in millimeter wave electronics.

Tareq Risheq – Director

Tareq Risheq currently serves as a Director and formerly served as the Company’s Chief Strategy Officer. He has over 20 years experience in the Consumer Electronics and Information Technology industries. Mr. Risheq founded Simpliciti Corporation, where, from 2002 to 2004, he took a PDA product from concept to volume manufacturing and nationwide distribution to major retailers. Simpliciti was featured in the Wall Street Journal as well as most of the other national media outlets. Mr. Risheq also established a direct sales organization in Saudi Arabia and grew that firm to $30M in revenues within three years. He holds a Bachelor of Science degree in Business/Management from Bradley University. Mr. Risheq resigned as Chief Strategy Officer on December 12, 2008. Mr. Risheq remains a director.

Kevin Pickard – Chief Financial Officer and Treasurer(Outside Consultant)

Since 1998, Mr. Pickard has been a principal officer and owner of Pickard & Green CPAs (formerly Pickard & Company, CPAs, P.C.), an accounting firm formed by Mr. Pickard that specializes in providing SEC accounting and other management consulting services for small to medium sized companies, including preparing required SEC filings for public companies, due diligence on potential acquisitions, preparing projections and business plans, assisting with restructuring of companies, and positioning companies for initial public offerings. Mr. Pickard was a Partner with Singer Lewak Greenbaum & Goldstein, LLP, from 1996 to 1998, where he co-managed the firm’s securities practice group. Mr. Pickard also spent over nine years with Coopers & Lybrand, L.L.P. (currently PricewaterhouseCoopers, LLP), where he focused on the auditing companies in the insurance, high-tech and manufacturing industries. Mr. Pickard holds Bachelors of Science and Masters degrees in Accounting from Brigham Young University.

Norman W. Collins – Director

Norman W. Collins, Sr. is an independent Director who was appointed upon the completion of the merger between CelLynx, Inc. and NorPac. Since June of 2003, Mr. Collins has been Director and President of Collins & Associates, a Delaware corporation providing consulting services to corporations as well as legal services in the form of Mediation and Arbitration of corporate disputes. He is admitted to the Tennessee Bar and is a Certified Mediator and Arbitrator in Georgia and a Certified Mediator in North Carolina and the District of Columbia. Between 2003 and 2007 Mr. Collins also served as the Executive Director of the Living Memorial Tree Foundation, a New York non-profit organization dedicated to the creation of a memorial to the victims of 9/11. Since May of 2006, Mr. Collins has also served as Director and CEO of Upgrade International, a Washington technology corporation. Prior positions include Director and CEO of several non-reporting companies either in the development stage or with revenues exceeding $30 Million.

Mr. Collins holds a Bachelor of Science degree in Business Administration from Trine University and a Juris Doctor degree from Michigan State University, College of Law.

Don Wright – Chairman of the Board

Mr. Wright is currently the CEO of Confluence Capital Group, a firm that provides business consulting services to institutional investors and companies including: raising capital, capital restructuring, business and marketing plans, reporting systems and metrics for stakeholders and management. He also serves on the board of International Stem Cell Corporation (OTCBB: ISCO). Mr. Wright was Chief Executive Officer and President of Pacific Aerospace & Electronics, Inc., an engineering and manufacturing company that he helped to found and that designs, manufactures and sells components primarily for the aerospace, defense and transportation industries, from 1995 until 2006.

Dwayne Yaretz – Director

Mr. Yaretz been involved with numerous privately held companies in various industry sectors to capitalize, manage growth strategies and operate as going concerns in North America over the past 26 years. Internationally, Mr. Yaretz has acted as Vice-President for Asia Power Engineering and China Power Corporation, both Honk Kong based companies specializing in design, construction and operations in the energy co-generation sector in the Peoples’ Republic of China. Since 1996 Mr. Yaretz has acted for several public companies in various capacities. Mr. Yaretz has served as a Director, Corporate Secretary, CFO as well a President and CEO of several private and public companies, including two Capital Pool Companies that have successfully completed Qualifying Transactions by way of an IPO. Currently, Mr. Yaretz in President of Griffin Corporate Concepts, a consulting firm focused on partnering with companies that are positioned for high growth potential in international markets. Mr. Yaretz is currently a Director of Cantronic Systems Inc., a Tier 1 TSX.V listed company and Benzai Capital Ltd., a Capital Pool Company listed on the TSX.V. In addition, Mr. Yaretz is also a Director of PAKIT Inc., a technology company and leading designer, developer and supplier of cellulose fiber moulding equipment to the packaging industry.

Family Relationships

There are no family relationships among our directors and executive officers.

Involvement in Certain Legal Proceedings

Except as provided below, none of our directors or executive officers has, during the past five years:

(a) Has had a petition under the federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(b) Been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(c) Been the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

●

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

●

Engaging in any type of business practice; or

●

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

(d) Been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph I(i) above, or to be associated with persons engaged in any such activity;

(e) Been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; and

(f) Been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

In January 2008, Mr. Pickard became interim President of Universal Guardian Holding, Inc. (“UGH”) to assist the Board of Directors in disposing of UGH’s assets to repay UGH’s bondholders. UGH was not successful in selling its assets and on June 23, 2008, the Board of Directors elected to voluntarily file for Chapter 7 bankruptcy protection.

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of the copies of such forms furnished to the Company, or written representations that no reports were required, we believe that for the fiscal year ended September 30, 2009, beneficial owners complied with Section 16(a) filing requirements applicable to them.

Code of Ethics

We have not adopted a code of ethics, but we plan on adopting a code of ethics that applies to all directors, officers, and employees, including our Chief Executive Officer and Chief Financial Officer, and members of the board of directors in the near future.

Material Changes to the Procedures by which Security Holders May Recommend Nominees to the Board of Directors

There have been no material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

Board Committees; Director Independence

In November 2008, our board of directors appointed Norman W. Collins to serve as a member of our audit committee, although he does not qualify as an “audit committee financial expert.” Our board of directors has yet to appoint a compensation committee. The functions ordinarily handled by a compensation committee are currently handled by our entire board of directors. Our board of directors intends, however, to review our governance structure and institute board committees as necessary and advisable in the future to facilitate the management of our business.

Our board of directors consists of one independent director, Mr. Norman W. Collins, and four non-independent directors. We have determined independence in accordance with definitions and criteria applicable under the NASDAQ rules.

Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between our board of directors and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

ITEM 11. EXECUTIVE COMPENSATION

Summary of Compensation

Executive Compensation

The following summary compensation table reflects all compensation for fiscal years 2007 and 2008 received by our predecessor’s principal executive officer and two most highly compensated executive officers whose salary exceeded $100,000.

Summary Compensation Table – Predecessor

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
John P. Thornton, Former President, CEO, CFO, Secretary and Treasurer	2009	--	--	--	--	--	--	--	--
	2008	12,000	--	--	--	--	--	--	12,000

The following summary compensation table reflects all compensation for fiscal years 2007 and 2008 received by CelLynx’s principal executive officer and two most highly compensated executive officers whose salary exceeded $100,000.

Summary Compensation Table – CelLynx

Name and Principal Position	Year	Salary ($)		Bonus ($)	Stock Awards ( $)	Option Awards ($)		Non-Equity Incentive Plan Compensation ($)	Non-qualified Deferred Compensation Earnings ($)	All Other Compensation ( $)	Total ($)
Daniel R. Ash, President, Chief Executive Officer, Chief Operating Officer Secretary and Director	2009		170,000	--	--	--		--	--	--	170,000
	2008		170,000	--	--	217,671	(2)	--	--	--	387,671

Tareq Risheq, Chief Strategy Officer and Director (3)	2009		--	--	--	--		--	--	--	--
	2008		108,000	--	--	159,330	(2)	--	--	--	267,330

(1) The value of the stock award was determined based on the fair market value of the services performed.

(2) The Company used the Black-Scholes option-pricing model to value the options. The assumptions used in calculating the fair value of options granted are as follows:

Expected life (years): 2.5 – 3.5

Risk-free interest rate: 2.37% -- 4.05%

Expected volatility: 100%

Expected dividend yield: 0%

(3) Mr. Risheq resigned as Chief Strategy Officer on December 12, 2008.

Outstanding Equity Awards

The following table sets forth certain information concerning stock and granted to our named executive officers.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

OPTION AWARDS								STOCK AWARDS
Name	Number of securities underlying unexercised options (#) Exercisable		Number of securities underlying unexercised options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities underlying unexercised unearned options (#)	Option exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)	Market value of shares or units of stock that have not vested ($)	Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Daniel R. Ash (1)		2,920,469	1,667,510	—	$	0.0787	10/01/2012
Daniel R. Ash (2)		349,426	—	—	$	0.0787	04/21/2013
Daniel R. Ash (1)		3,598,027	4,877,206	—	$	0.0787	05/20/2013

_______________________

(1)

Option vests 33.3% after one year, with the remaining 66.7% to vest evenly over the remaining months.

(2)

Option fully vested after 90 days of the grant date of April 21, 2008.

Retirement Plans

We currently have no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans.

Potential Payments upon Termination or Change-in-Control

Except as described below under “Employment Agreements,” we currently have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to a named executive officer at, following, or in connection with any termination, including without limitation resignation, severance, retirement or a constructive termination of a named executive officer, or a change in control of the registrant or a change in the named executive officer’s responsibilities, with respect to each named executive officer.

Employment Agreements

On October 1, 2007, the Board of Directors of CelLynx-California approved the following compensation packages for Daniel R. Ash and Tareq Risheq:

	Annual Base Salary:	$200,000

	Bonus Plan:	Participation in the CelLynx Bonus Plan can amount up to 30% of the annual base salary, but is conditioned upon achievement of the goals and objectives of the then current plan, including those related to overall company performance.

Fringe Benefits:

Fifteen paid vacation days per year. Ten paid holidays per year. Health insurance with hospital coverage.

Stock Options:

3% of the current outstanding common stock based the fair market value on the date of hire of $0.10 per share. The options vest over three years with 33.3% vesting after the first year and monthly vesting thereafter of 1/24 th of the remaining 66.6%.

Severance:

If employment is terminated without cause, Mr. Ash will receive six months pay.

Acquisition:

If CelLynx-California is acquired, all outstanding stock options will become fully vested.

The Board of Directors of CelLynx-California amended this compensation package on May 20, 2008, to provide for an annual salary of $170,000 for Mr. Ash and $108,000 for Mr. Risheq. Mr. Risheq resigned as Chief Strategy Officer on December 12, 2008, and as of that date was no longer entitled to this compensation.

On July 22, 2008, CelLynx-California entered into a consulting agreement (the “Consulting Agreement”) with Kevin Pickard whereby Mr. Pickard agreed to serve as the Company’s interim Chief Financial Officer for a period beginning on the date of the Consulting Agreement and ending on the earlier of (i) the date that the Company retains a permanent Chief Financial Officer, (ii) the 90th day after the closing of the reverse take-over transaction contemplated by the Exchange Agreement, or (iii) the date which the Company notifies Mr. Pickard that he has been terminated in writing, and which notification may occur at any time for any reason. As an inducement to enter into the Consulting Agreement, CelLynx-California granted Mr. Pickard 100,000 shares of CelLynx-California common stock and $5,000 in cash. The CelLynx-California common shares were converted into 62,896 shares of the Company's common stock and 62,897 shares of the Company's Series A Preferred Stock upon the closing of the reverse take-over transaction. The Series A Preferred Stock automatically converted into 62,897 shares of the Company’s common stock upon the filing of a Certificate of Amendment to the Company’s Articles of Incorporation increasing the number of authorized common stock from 100,000,000 to 400,000,000 on November 7, 2008. On November 1, 2008, the Company entered into an updated agreement with Mr. Pickard’s accounting firm that provides for monthly cash compensation of $5,000 per month and the issuance of 350,000 shares of the Company’s common stock.

Director Compensation

On July 15, 2008, CelLynx-California entered into an agreement with Mr. Norman W. Collins that granted Mr. Collins a stock option to purchase 610,000 shares of CelLynx-California’s common stock at an exercise price of $0.09 per share that vests 25% per year so long as Mr. Collins remains a director of CelLynx. Upon the closing of the Exchange Agreement, this option was exchanged for an option to purchase 767,337 shares of the Company's common stock at an exercise price of $0.0715 per share.

Other than as described above, we do not pay any compensation to members of our board of directors for their service on the board. However, we intend to review and consider future proposals regarding board compensation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance under Equity Compensation Plans

Set forth in the table below is information regarding awards made through compensation plans or arrangements through September 30, 2009, the most recently completed fiscal year.

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options,warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	--	$	--	--
Equity compensation plans not approved by security holders	27,713,833	$	$0.102	47,286,167
Total	27,713,833			47,286,167

Security Ownership of Certain Beneficial Owners and Management

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Unless otherwise indicated in the table, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name. Unless otherwise indicated, the address of each beneficial owner listed below is 25910 Acero, Suite 370, Mission Viejo, California 92691. The percentage of class beneficially owned set forth below is based on 146,418,791 shares outstanding as of December 31, 2009.

Name and Position	Number of Shares of Common Stock Beneficially Owned (1)		Percent of Shares of Common Stock Beneficially Owned (2)
Daniel R. Ash, President, Chief Executive Officer, Chief Operating Officer, Secretary and Director (3)		37,855,024		24.3%
Kevin Pickard, Chief Financial Officer and Treasurer (4)		382,970		*
Tareq Risheq, Director (5)		32,487,103		21.8%
Don Wright, Chairman of the Board (6)		878,101		*
Norman W. Collins, Director (7)		213,383		*
Dwayne Yaretz, Director		-		*
All Executive Officers and Directors as a Group (6 persons)		71,816,581		44.0%

________________

* Less than 1%

(1)

Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding.

(2)	Percentage based upon 146,418,791 issued and outstanding shares of the Company’s capital stock.

(3)

Includes 28,345,452 shares of common stock, options to purchase 6,867,921 shares of common stock at an exercise price of $0.0787 per share, a $20,000 note convertible into 2,515,858 shares of common stock at a conversion price of $0.0079 per share and a $10,000 note convertible into 125,793 shares of common stock at a conversion price of $0.0795 per share.

(4)

Mr. Pickard is an outside consultant providing services commonly provided by a Chief Financial Officer and Treasurer. This figure does not include 400,000 shares owned of record by Pickard & Green, CPAs, an entity in which Mr. Pickard is a partner. Mr. Pickard disclaims beneficial ownership of such 400,000 shares.

(5)

Includes 29,845,452 shares of common stock, a $20,000 note convertible into 2,515,858 shares of common stock at a conversion price of $0.0079 per share and a $10,000 note convertible into 125,793 shares of common stock at a conversion price of $0.0795 per share. Mr. Risheq resigned as Chief Strategy Officer on December 12, 2008 but remains a director of the Company.

(6)	Consisting of options to purchase 878,101 shares of the Company’s common stock.

(7)	Consisting of options to purchase 213,383 shares of the Company’s common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Share Exchange Agreement

On July 24, 2008, in a reverse take-over transaction, we acquired a cellular amplifier business based in California by executing the Exchange Agreement by and among the Company, CelLynx-California, and the CelLynx Owners.

Under the Exchange Agreement, on the Closing Date, we acquired all of the issued and outstanding shares of CelLynx-California through the issuance of 32,454,922 restricted shares of our common stock and 45,516,034 restricted shares of our Series A Preferred Stock to the CelLynx Owners. Immediately prior to the exchange transaction, we had 37,597,890 shares of common stock issued and outstanding and no shares of Series A Preferred Stock issued and outstanding. Immediately after the issuance of the shares to the CelLynx Owners, we had 80,552,812 shares of common stock issued and outstanding (including the shares issued in the Financing) and 45,516,034 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock automatically converted into common stock upon the filing of a Certificate of Amendment to our Articles of Incorporation increasing the number of authorized common stock from 100,000,000 to 400,000,000. As a result of this exchange transaction, the CelLynx Owners became our controlling shareholders and CelLynx-California became our wholly owned subsidiary. In connection with CelLynx-California becoming our wholly owned subsidiary, we acquired the business and operations of CelLynx-California, which has become our principal business.

Related Party Transactions of CelLynx

On October 1, 2007, CelLynx-California granted to Robert J. Legendre, the Company’s former Executive Chairman of the Board, options to purchase 9,725,991 shares of CelLynx-California’s common stock at an exercise price of $0.09 per share in exchange for executive management services rendered as a consultant. Upon the closing of the Exchange Agreement, this option was exchanged for an option to purchase 12,234,608 shares of the Company’s common stock at an exercise price of $0.0715 per share. Mr. Legendre resigned from the Company on May 4, 2009.

On March 27, 2007, CelLynx-California entered into a two-year convertible promissory note with Daniel R. Ash, the Company’s current Chief Executive Officer and a director, and Tareq Risheq, currently a director of the Company, in the amount of $20,000 each in exchange for cash leant to CelLynx-California. The unpaid principal balance accrues interest at a rate of 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. The note and accrued interest is convertible into CelLynx-California common stock at a conversion rate of $0.01 per share. Upon the closing of the Exchange Agreement, these notes were exchanged for notes of the Company at a conversion rate $0.0079 per share.

On October 25, 2007, CelLynx-California entered into a two-year convertible promissory note with Mssrs. Ash and Risheq in the amount of $10,000 each in exchange for cash leant to CelLynx-California. The unpaid principal balance accrues interest at a rate of 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. The note and accrued interest is convertible into CelLynx-California common stock at a conversion rate of $0.10 per share. Upon the closing of the Exchange Agreement, these notes were exchanged for notes of the Company at a conversion rate $0.0795 per share.

On February 12, 2008, CelLynx-California entered into a Stock Purchase Agreement with Norman Collins, currently a director of the Company, under which CelLynx-California issued an aggregate of 1,111,111 shares of common stock in exchange for an investment of $100,000. Pursuant to the Stock Purchase Agreement, 100,000 shares were delivered to Mr. Collins and 1,011,111 shares were held in escrow and automatically cancelled upon the closing of the Exchange Agreement. The remaining 100,000 shares were converted into 125,793 shares of the Company.

On July 15, 2008, CelLynx-California entered into an agreement with Mr. Collins that granted Mr. Collins a stock option to purchase 610,000 shares of CelLynx-California’s common stock at an exercise price of $0.09 per share that vests 25% per year so long as Mr. Collins remains a director of CelLynx. Upon the closing of the Exchange Agreement, this option was exchanged for an option to purchase 767,337 shares of the Company’s common stock at an exercise price of $0.0715 per share.

Other than the transactions described above, there were no transactions or proposed transactions since the beginning of CelLynx’s last fiscal year in which CelLynx was or is to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of CelLynx’s total assets at year-end for the last three completed fiscal years, and in which any related person had or will have a direct or indirect material interest.

Director Independence

One of our directors – Norman W. Collins – is an independent director as that term is defined under NASDAQ Rules and Regulations.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The aggregate fees billed for the two most recently completed fiscal years ended September 30, 2009 and 2008 for professional services rendered by the principal accountant for the audit of the Corporation’s annual financial statements and review of the financial statements included our quarterly reports and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

	Year Ended September 30, 2009		Year Ended September 30, 2008
Audit Fees	$	36,000	$	35,000
Audit Related Fees	$	45,000		-
Tax Fees		-		-
All Other Fees		-		-
Total	$	81,000	$	35,000

Fees for audit services include fees associated with the annual audit and the review of documents filed with the Securities and Exchange Commission. Audit-related fees principally include fees reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees. Tax fees included tax compliance, tax advice and tax planning work.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements

A list of the financial statements of the Company filed as part of this Report can be found in the Index to Financial Statements on page F-1.

Exhibits

INDEX TO EXHIBITS

Exhibit Number		Description

2.1		Share Exchange Agreement by and among the Company, CelLynx-California and the CelLynx Owners dated January 3, 2008 (1)

2.2		Amendment Agreement to Share Exchange Agreement between the Company and CelLynx-California dated May 20, 2008 (2)

2.3		Waiver of Conditions Precedent *

3.1		Articles of Incorporation of CelLynx Group, Inc. (3)

3.2		Articles of Merger of CelLynx Group, Inc. (4)

3.3		Bylaws of CelLynx Group, Inc. (4)

3.4		Certificate of Designation of CelLynx Group, Inc. (5)

3.5		Articles of Merger of CelLynx Group, Inc. (8)

3.6		Certificate of Amendment to Articles of Incorporation of CelLynx Group, Inc. (9)

10.1		Form of Subscription Agreement dated July 23, 2008 (6)

10.2		Form of Warrant dated July 23, 2008 (6)

10.3		Master Global Marketing and Distribution Agreement between CelLynx and Dollardex Group Corp. dated July 22, 2008 (7)

10.4		Palomar Ventures III, LP Amended and Restated Subordinated Convertible Promissory Note dated November 10, 2007 (7)

10.5		Lease Agreement between CelLynx-California and CSS Properties, LLC dated February 21, 2008 (7)

10.6		CelLynx-California 2007 Stock Incentive Plan (7)

10.7		Amendment No. 1 to CelLynx-California 2007 Stock Incentive Plan (7)

10.8		Form of Lock-Up Agreement dated July 22, 2008 (7)

10.9		Norman W. Collins Offer Letter dated July 15, 2008 (7)

10.10		Kevin Pickard Consulting Agreement dated July 22, 2008 (7)

10.11		Convertible Promissory Note between CelLynx-California and Daniel Ash dated March 27, 2007 (7)

10.12		Convertible Promissory Note between CelLynx-California and Tareq Risheq dated March 27, 2007 (7)

10.13		Convertible Promissory Note between CelLynx-California and Daniel Ash dated October 25, 2007 (7)

10.14		Convertible Promissory Note between CelLynx-California and Tareq Risheq dated October 25, 2007 (7)

10.15		Incentive Stock Option Agreement between CelLynx-California and Daniel Ash dated October 1, 2007 (7)

10.16		Incentive Stock Option Agreement between CelLynx-California and Tareq Risheq dated October 1, 2007 (7)

10.17		Incentive Stock Option Agreement between CelLynx-California and Robert Legendre dated October 1, 2007 (7)

10.18		Non-Qualified Stock Option Agreement between CelLynx-California and Daniel Ash dated October 1, 2007 (7)

10.19		Non-Qualified Option Agreement between CelLynx-California and Tareq Risheq dated October 1, 2007 (7)

10.20		Non-Qualified Stock Option Agreement between CelLynx-California and Robert Legendre dated October 1, 2007 (7)

10.21		Non-Qualified Stock Option Agreement between CelLynx-California and Daniel Ash dated April 21, 2008 (7)

10.22		Non-Qualified Option Agreement between CelLynx-California and Tareq Risheq dated April 21, 2008 (7)

10.23		Non-Qualified Stock Option Agreement between CelLynx-California and Daniel Ash dated May 20, 2008 (7)

10.24		Non-Qualified Option Agreement between CelLynx-California and Tareq Risheq dated May 20, 2008 (7)

10.25		Non-Qualified Option Agreement between CelLynx-California and Norman Collins dated July 20, 2008 (7)

10.26		Stock Purchase Agreement between CelLynx-California and Norman Collins dated February 12, 2008 (7)

10.27		Lease Agreement between CelLynx and Dolphinshire, L.P. dated August 26, 2008 (11)

10.28		Securities Issuance Agreement executed on May 4, 2009 by and among the Registrant, Dollardex Group Corp. and the other parties listed therein (10)

17.1		Letter of Resignation from John P. Thornton to the Board of Directors (7)

21.1		List of Subsidiaries (7)

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

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

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

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

__________________

* Filed Herewith.

(1)	Filed on January 9, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(2)	Filed on May 27, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(3)	Filed as an exhibit to our Registration Statement on Form 10SB originally filed on August 26, 1999, as amended, an incorporated herein by reference.
(4)	Filed as an exhibit to our Quarterly Report on Form 10-QSB for the fiscal period ended September 30, 2003, and incorporated herein by reference.
(5)	Filed on July 15, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(6)	Filed on July 23, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(7)	Filed on July 30, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(8)	Filed on August 8, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(9)	Filed on November 21, 2008 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(10)	Filed on May 8, 2009, as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.
(11)	Filed on October 14, 2008, as an exhibit to our Annual Report on Form 10-K, and incorporated herein by reference.

CelLynx Group, Inc.

Consolidated Financial Statements

Contents

	Page

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as of September 30, 2009 and 2008	F-3

Consolidated Statements of Operations for the Years Ended September 30, 2009 and 2008	F-4

Consolidated Statements Of Stockholders’ Deficit for the Years Ended September 30, 2009 and 2008	F-5

Consolidated Statements of Cash Flows for the Years Ended September 30, 2009 and 2008	F-6

Notes To Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

CelLynx Group, Inc.

Mission Viejo, California

We have audited the accompanying consolidated balance sheets of CelLynx Group, Inc. (formerly Norpac Technologies, Inc.) as of September 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CelLynx Group, Inc as of September 30, 2009 and 2008, and the results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has net operating cash flow deficits and a deficit accumulated during the development stage. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Frazer Frost, LLP

(Successor entity of Moore Stephens Wurth Frazer and Torbet, LLP, see Form 8-K filed on January 7, 2010)

Brea, California

January 13, 2010

F-2

CELLYNX GROUP, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND 2008


	2009			2008

ASSETS
CURRENT ASSETS:
Cash	$	6,776		$	599,024
Inventory		16,316			-
Other current assets		15,750			6,862
TOTAL CURRENT ASSETS		38,842			605,886

EQUIPMENT, net		11,359			9,658
INTANGIBLE ASSETS, net		97,180			70,776
OTHER ASSETS		16,190			11,526
TOTAL ASSETS	$	163,571		$	697,846

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	832,634		$	206,298
Accrued interest		28,334			12,507
Accrued derivative liabilities		-			5,677,156
Convertible stockholder notes, net of debt discount of $1,092 and $28,943
as of September 30, 2009 and 2008, respectively		101,908			11,057
Convertible promissory notes, current portion		100,000			-
TOTAL CURRENT LIABILITIES		1,062,876			5,907,018

LONG TERM LIABILITIES:
Convertible promissory note, net of debt discount of $126,795 and $241,067
as of September 30, 2009 and 2008, respectively		135,561			21,289
Convertible stockholder notes, net of debt discount of $0 and $17,031		-			2,969
TOTAL LIABILITIES	$	1,198,437		$	5,931,276

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
Series A Preferred Stock, $0.001 par value;100,000,000 shares authorized;
nil and 45,516,034 shares issued and outstanding
as of September 30, 2009 and 2008, respectively		-			45,516
Common stock, $0.001 par value, 400,000,000 authorized; 137,379,397 and
80,552,812 shares issued and outstanding as of
September 30, 2009 and 2008, respectively		137,379			80,553
Additional paid-in capital		10,501,965			2,335,949
Accumulateed deficit		(11,674,210	)		(7,695,448	)
Total stockholders' deficit		(1,034,866	)		(5,233,430	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	163,571		$	697,846

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

F-3

CELLYNX GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008


	For the Years Ended September 30,
	2009			2008

Net Revenue	$	10,373		$	-

Cost of Revenue		7,554			-

Gross profit		2,819			-

Operating expenses
Research and development		340,995			308,906
General and administrative		3,294,158			4,397,131

Total operating expenses		3,635,153			4,706,037

Loss from operations	$	(3,632,334	)	$	(4,706,037	)

Non-operating income (expense):
Interest income		961			4,198
Interest and financing costs		(179,228	)		(932,393	)
Change in fair value of accrued beneficial conversion liability		251,410			(1,151,992	)
Change in fair value of accrued warrant liability		(419,571	)		127,688

Total non-operating expense		(346,428	)		(1,952,499	)

Loss before provision for income taxes		(3,978,762	)		(6,658,536	)

Provision for income taxes		-			-

Net loss	$	(3,978,762	)	$	(6,658,536	)



Weighted average shares outstanding - Basic and Diluted:		125,094,999			40,407,479


Earnings per share - Basic and Diluted:	$	(0.03	)	$	(0.16	)

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

F-4

CELLYNX GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008


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

Balance, September 30, 2007		41,107,396		$	41,107			27,153,988	$	27,154	$	648,022		$	(1,036,912	)	$	(320,629	)

Shares issued for cash		-			-			938,897		939		745,345			-			746,284
Shares issued for services		4,408,638			4,409			4,362,037		4,362		563,231			-			572,002
Fair value of stock options reclassified to share-based compensation liability		-			-			-		-		(89,618	)		-			(89,618	)
Shares issued in merger with Norpac Technologies, Inc.		-			-			48,097,890		48,098		1,200,650						1,248,748
Fair value of warrants transferred to liability		-			-			-		-		(731,681	)		-			(731,681	)
Net loss		-			-			-		-		-			(6,658,536	)		(6,658,536	)

Balance, September 30, 2008		45,516,034		$	45,516			80,552,812	$	80,553	$	2,335,949		$	(7,695,448	)	$	(5,233,430	)

Conversion of preferred stock to common stock upon the increase of authorized shares		(45,516,034	)		(45,516	)		45,516,034		45,516		-			-			-
Reclassification of share based compensation liability to equity		-			-			-		-		2,701,572			-			2,701,572
Fair value of share based compensation for employees and consultants		-			-			-		-		690,353			-			690,353
Reclassification of beneficial conversion liability to equity		-			-			-		-		2,120,181			-			2,120,181
Reclassification of warrant liability to equity		-			-			-		-		1,023,564			-			1,023,564
Issuance of common stock for the purchase of licensing rights		-			-			57,143		57		7,372			-			7,429
Issuance of common stock for promissory note		-			-			37,500		38		4,208			-			4,246
Issuance of warrants for consulting services		-			-			-		-		118,382			-			118,382
Issuance of common stock for accounting services		-			-			400,000		400		71,600			-			72,000
Issuance of common stock for consulting services		-			-			3,970,908		3,971		722,628			-			726,599
Issuance of common stock for cash		-			-			6,845,000		6,844		706,156			-			713,000
Net loss		-			-			-		-		-			(3,978,762	)		(3,978,762	)

Balance, September 30, 2009		-		$	-			137,379,397	$	137,379	$	10,501,965		$	(11,674,210	)	$	(1,034,866	)

Effective July 24, 2008, the Company effected a 1.2579 for 1 forward stock split of the authorized, issued and outstanding common stock, without change to par value. All share amounts have been retroactively adjusted for all periods presented.

Effective July 24, 2008, the Company issued Series A Preferred Stock on a pro rata basis to the shareholders of CelLynx, Inc. All share amounts have been retroactively adjusted for all periods presented.

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

F-5

CELLYNX GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008


	For the Years Ended September 30,
	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,978,762	)	$	(6,658,536	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,813			2,278
Warrants issued for services		118,382			-
Stock issued for services		798,599			572,002
Stock compensation expense for options issued to employees and consultants		690,353			2,625,106
Change in fair value of accrued beneficial conversion liability		(251,410	)		1,151,992
Change in fair value of accrued warrant liability		419,571			(127,688	)
Non cash financing costs		-			833,321
Amortization of debt discount		163,400			86,085
Changes in operating assets and liabilities:
Change in inventory		(16,316	)		-
Change in other assets		(13,552	)		(18,388	)
Change in accounts payable, accrued expenses and accrued interest		641,163			180,034
Net cash used in operating activities	$	(1,421,759	)	$	(1,353,794	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(6,663	)		(10,572	)
Purchase of intangible assets		(19,826	)		(42,979	)
Net cash acquired in merger with Norpac Technologies, Inc.		-			1,250,114
Net cash (used in) provided by investing activities	$	(26,489	)	$	1,196,563

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible promissory notes		75,000			-
Proceeds from related parties		68,000			-
Proceeds from issuance of common stock		713,000			746,284
Proceeds from stockholders notes		-			7,600

Net cash provided by financing activities	$	856,000		$	753,884

NET (DECREASE) INCREASE IN CASH		(592,248	)		596,653

CASH, BEGINNING OF PERIOD		599,024			2,371

CASH, END OF PERIOD	$	6,776		$	599,024

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


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING:
Issuance of stock for licensing agreement	$	7,429		$	-
Increase in convertible promissory note for interest payable	$	-		$	12,356
Reclassification of share-based compensation liability to additional paid-in capital	$	2,701,572		$	-
Reclassification of accrued beneficial conversion liability to additional paid-in capital	$	2,120,181		$	-
Reclassification of accrued warrant liability to additional paid-in capital	$	1,023,564		$	-

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

F-6

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Note 1 - Organization and Basis of Presentation

Organization and Line of Business

CelLynx Group, Inc., formerly known as NorPac Technologies, Inc. (hereinafter referred to as “CelLynx” or 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 the Share Exchange Agreement (described below), the Company entered into a Regulation S Subscription Agreement pursuant to which the Company issued 10,500,000 shares of its common stock and warrants to purchase 10,500,000 shares of common stock at an exercise price of $0.20 per share to non-U.S. persons for an aggregate purchase price of $1,575,000.

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

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

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

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

F-7

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

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 agree with the fiscal year of CelLynx-California. The fiscal year end change was effective for the year ended September 30, 2008.

The Company develops and manufactures a cell phone signal amplifier.

Development Stage Company and Going Concern

The Company was in the development stage through June 30, 2009. In July 2009, the Company received the first 220 units from its manufacturer. The Company used 66 of the units as demo units and began selling the remainder. The Company is fully operational and as such is no longer considered a development stage company. During the period that the Company was considered a development stage company, the Company incurred accumulated losses of approximately $10,948,625.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the ability of the Company to obtain necessary equity and debt financing to continue operations and to generate sustainable revenue. There is no guarantee that the Company will be able to raise adequate equity or debt financing or generate profitable operations. For the year ended September 30, 2009, the Company incurred a net loss of $3,978,762. As of September 30, 2009, the Company has an accumulated deficit of $11,674,210. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management intends to raise additional funds through equity or debt financing and to generate cash from the sale of its product.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

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

Use of Estimates

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

F-8

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Concentration of Credit Risk

Cash includes deposits in accounts maintained in the United States. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits. As of September 30, 2009 and 2008, the Company had deposits in excess of federally-insured limits totaling $0 and $399,204. The Company has not experienced any losses in such accounts.

Cash and Cash Equivalents

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

Inventory

Inventory consists of finished goods ready for sale and is valued at the lower of cost (determined on a first-in, first-out basis) or market.

Equipment

Equipment is stated at cost, less accumulated depreciation. Major renewals are charged directly to the equipment accounts, while replacements, maintenance, and repairs which do not improve or extend the respective lives of the assets are expensed currently. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are reviewed periodically to ensure that the depreciation method and period are consistent with the anticipated pattern of future economic benefits. Gains and losses on disposals are included in the results of operations. The useful life of the equipment being depreciated is between three and five years.

Intangible Assets

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

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

Impairment or Disposal of 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 September 30, 2009 and 2008, there was no significant impairment of its long-lived assets.

F-9

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Revenue Recognition

The Company's revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (SAB) 104. Revenue is recognized at the date of shipment to customers, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.

Accrued Warrant Liability and Accrued Beneficial Conversion Liability

Pursuant to ASC Topic 815, “Derivatives and Hedging,” the Company recorded the fair value of all outstanding options, warrants, and beneficial conversion features as accrued liabilities at September 30, 2008, since the Company did not have enough authorized shares to satisfy the exercise of its outstanding, options, warrants, and the conversion of the convertible promissory notes. The Company reclassified the liabilities into additional paid-in capital on November 7, 2008, when the Company increased the number of authorized shares to 400,000,000.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. In addition, the Company has long-term debt with financial institutions. The carrying amounts of the line of credit and other long-term liabilities approximate their fair values based on current rates of interest for instruments with similar characteristics.

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

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

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

As of September 30, 2009, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

F-10

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Income Taxes

Earnings Per Share

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

Stock-Based Compensation

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

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

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

F-11

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Recent Accounting Pronouncements

In June 2008, FASB issued ASC Topic 815, “Derivatives and Hedging,” which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception in ASC 815-10-15-74. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2008. This standard triggers liability accounting on all instruments and embedded features exercisable at strike prices denominated in any currency other than the functional currency of the operating. The Company does not believe that the adoption of this pronouncement will have an impact on the Company’s consolidated financial statements.

On January 1, 2009, the Company adopted ASC sub-topic 810-10 (formerly SFAS No. 160, “Accounting and Reporting on Non-controlling Interest in Consolidated Financial Statements, an Amendment of ARB 51”). ASC 810-10 states that accounting and reporting for minority interests are to be recharacterized as noncontrolling interests and classified as a component of equity. The calculation of earnings per share continues to be based on income amounts attributable to the parent. ASC 810-10 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but affects only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The adoption of ASC 810-10 did not have a material impact on the Company’s consolidated financial statements.

During the second quarter of 2009, the Company adopted guidance issued by the Financial Accounting Standards Board (“FASB”) in April 2009 that is intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities and guidance that expanded the fair value disclosures required for all financial instruments within the scope of ASC Topic 825 “Financial Instruments” to interim periods. The adoption of this guidance did not materially impact the consolidated financial statements.

In April 2009, the FASB issued an accounting standard to make the other-than-temporary impairments guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. This standard will replace the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the intent to sell the security, and it is more likely than not it will not have to sell the security before recovery of its cost basis. This standard provides increased disclosure about the credit and noncredit components of impaired debt securities that are not expected to be sold and also requires increased and more frequent disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. Although this standard does not result in a change in the carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related to a credit loss for a held-to-maturity security be recognized in a new category of other comprehensive income and be amortized over the remaining life of the debt security as an increase in the carrying value of the security. This standard became effective for interim and annual periods ending after June 15, 2009. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard that requires disclosures about fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this accounting standard, fair values for these assets and liabilities were only disclosed annually. This standard applies to all financial instruments within its scope and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This standard does not require disclosures for earlier periods presented for comparative purposes at initial adoption, but in periods after the initial adoption, this standard requires comparative disclosures only for periods ending after initial adoption. The adoption of this standard did not have a material impact on the disclosures related to its consolidated financial statements.

In June 2009, the FASB issued an accounting standard amending the accounting and disclosure requirements for transfers of financial assets. This accounting standard requires greater transparency and additional disclosures for transfers of financial assets and the entity’s continuing involvement with them and changes the requirements for derecognizing financial assets. In addition, it eliminates the concept of a qualifying special-purpose entity (“QSPE”). This accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2009. The Company has not completed the assessment of the impact this new standard will have on the Company’s financial condition, results of operations or cash flows.

F-12

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

In June 2009, the FASB issued guidance which amends certain ASC concepts related to consolidation of variable interest entities (formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”). This guidance is effective for fiscal years beginning after November 15, 2009. The Company is currently evaluating the impact the adoption of this guidance will have on the consolidated financial statements.

In August 2009, the FASB issued an Accounting Standards Update (“ASU”) regarding measuring liabilities at fair value. This ASU provides additional guidance clarifying the measurement of liabilities at fair value in circumstances in which a quoted price in an active market for the identical liability is not available; under those circumstances, a reporting entity is required to measure fair value using one or more of the valuation techniques, as defined. This ASU is effective for the first reporting period, including interim periods, beginning after the issuance of this ASU. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued an ASU regarding accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing. This ASU requires that at the date of issuance of the shares in a share-lending arrangement entered into in contemplation of a convertible debt offering or other financing, the shares issued shall be measured at fair value and be recognized as an issuance cost, with an offset to additional paid-in capital. Further, loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings-per-share calculation. This ASU is effective for fiscal years beginning on or after December 15, 2009, and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

Note 3 - Equipment

Equipment consists of the following:

	September 30,			September 30,
	2009			2008
Office furniture & equipment	$	9,879		$	4,211
Computer equipment		8,930			7,935
		18,809			12,146
Less: accumulated depreciation		(7,450	)		(2,488	)
Equipment, net	$	11,359		$	9,658

The Company recorded depreciation expense of $ 4,962, and $1,669 for the years ended September 30, 2009 and 2008, respectively.

Note 4 - Intangible Assets

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

F-13

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

	September 30,			September 30,
	2009			2008
Patents	$	78,724		$	59,198
Trademarks		12,487			12,187
License rights		8,429			-
		99,640			71,385
Less: accumulated amortization		(2,460	)		(609	)
Intangibles, net	$	97,180		$	70,776

The Company recorded amortization expense related to trademarks of $1,851 and $609 for the years ended September 30, 2009 and 2008, respectively. No amortization has been recorded for the patents as of September 30, 2009, as the patents have not been issued to the Company.

The following table summarizes the amortization over the next 5 years:

Years ended September 30,	Amount
2010	$	4,209
2011		4,209
2012		4,209
2013		4,209
2014		4,209

F-14

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Note 5 - Convertible Promissory Notes

Convertible Promissory Note Issued August 15, 2006

On August 15, 2006, the Company issued a secured promissory note (the “August 2006 Note”) for $250,000 to an unrelated entity (the “Holder”). On November 10, 2007, the August 2006 Note was amended (the “Amended Note”). At the date of the amendment, the Company was obligated to pay to the Holder $262,356 which represented the principal and accrued interest, and the Holder was entitled to purchase shares of the Company’s securities pursuant to a Warrant to Purchase Common Stock dated August 15, 2006 (“August 2006 Warrant”). In contemplation of the completion of the reverse merger, the Company and the Holder reached an agreement whereby this Amended Note superseded the August 2006 Note and canceled the August 2006 Warrant. The principal amount of the Amended Note is $262,356, is unsecured and is convertible into 6,340,029 shares of common stock of the Company and bears interest at 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. All unpaid principal, together with the accrued but unpaid interest, shall be due and payable upon the earlier of (i) November 9, 2010, at the written request of the holder to the Company, or (ii) the occurrence of an event of default. At the date of conversion, the Company determined that the Amended note had a beneficial conversion feature with a fair value of $767,047. The Company recorded a debt discount of $262,356 and expensed as financing costs the $504,691 of the beneficial conversion feature that exceeded the principal balance.

Convertible Promissory Note Issued February 19, 2009

On February 18, 2009, the Company issued to an unrelated third party, (1) an unsecured convertible promissory note for an aggregate principal balance of $75,000 with a conversion price of $0.20 per share, and (2) 37,500 shares of the Company’s restricted common stock. The interest rate on the note is 4.0% per annum and had an original maturity date of March 31, 2009, which was subsequently amended to May 31, 2009. The Company determined the relative fair value of the convertible promissory note and the stock on the date of issuance. The fair value of the stock was $4,246 which was recorded as a debt discount and was amortized over the original maturity date and included in financing expenses in the accompanying consolidated financial statements. As of September 30, 2009, the promissory note was in default for non-payment; however on January 12, 2010, the Company and the note holder agreed to settle the principal and accrued interest due for a cash payment of $25,000 and 765,625 shares of the Company’s common stock.

Convertible Promissory Note Issued March 3, 2009

On March 3, 2009, the Company issued an unsecured convertible promissory note to an unrelated third party for an aggregate principal balance of $25,000 with a conversion price of $0.20. The convertible promissory note was due on April 30, 2009 and is non-interest bearing. However, the note was subsequently amended to extend the due date to May 31, 2009. As of September 30, 2009, the promissory note was in default for non-payment; however, the Company and the note holder have verbally agreed to settle the principal and accrued interest due for a cash payment of $12,500 and 156,250 shares of the Company’s common stock.

The Company recorded interest expense relating to the convertible promissory notes of $12,327 and $10,056 for the years ended September 30, 2009 and 2008, respectively.

The Company amortized $114,272 and $21,289 of the debt discount for the years ended September 30, 2009 and 2008, respectively. The unamortized discount as of September 30, 2009 and 2008, was $126,795 and $241,067, respectively.

F-15

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

The following table summarizes the convertible promissory notes:

Description	Balance
Balance, September 30, 2008, net	$	21,289
Issue convertible note, February 19, 2009		75,000
Issue convertible note, March 3, 2009		25,000
Additional debt discounts		(4,245	)
Amortization of debt discounts		118,517
Balance, September 30, 2009, net		235,561
Less, current portion		(100,000	)
Convertible note, long term	$	135,561

Note 6 - Convertible Stockholder Notes

Stockholder Notes Issued March 27, 2007

On March 27, 2007, the Company issued convertible promissory notes to two stockholders of the Company. The principal amount of each convertible promissory note was $20,000 for a combined total of $40,000. The convertible promissory notes bear interest at 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days, and were scheduled to mature on March 27, 2009; however, the maturity dates were extended to July 31, 2009. As of September 30, 2009, the convertible notes were in default for non-payment; however on December 3, 2009, the note holder agreed to convert the notes into shares of the Company’s common stock in accordance with the conversion option provided for by the notes. All or a portion of the outstanding principal amount and accrued interest was originally convertible at the option of the note holder at $0.01 per share (adjusted to reflect subsequent stock dividends, stock splits into common stock of the Company, combinations or recapitalizations). All unpaid principal, together with any then unpaid and accrued interest and any other amounts payable thereunder, is due and payable on the earlier of (i) that date which is two years after the issue date listed above, or (ii) when, upon or after the occurrence of an Event of Default as defined in the promissory note.

Subsequent to issuing this convertible promissory note and prior to September 30, 2007, the two stockholders advanced the Company an additional $6,200 each for a combined total of $12,400. The amount due under all notes to these stockholders at September 30, 2007, was $52,400.

On October 25, 2007, the Company issued convertible promissory notes to the above stockholders. Each note was for $10,000 which included the $6,200 that was previously advanced and an additional $3,800. The combined total for the two convertible promissory notes was $20,000. The promissory notes bear interest at 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days, and mature on October 25, 2009. On December 3, 2009, the note holder agreed to extend the maturity date until such time as the Company has sufficient cash to repay these notes.

Pursuant to the reverse merger transaction, $40,000 (see above) of CelLynx-California convertible notes with a conversion price of $0.01 per share were converted into $40,000 of the Company’s convertible notes with a conversion price of approximately $0.0079 per share, and $20,000 (see above) of CelLynx-California convertible notes with a conversion price of $0.10 per share were converted into $20,000 of the Company’s convertible notes with a conversion price of approximately $0.0795 per share. With the conversion of the notes, the Company expensed the unamortized debt discount at July 24, 2008. The fair value of the conversion liability at July 24, 2008 was $743,163. The change in value of the convertible promissory notes before the merger and at the merger date was $397,177, which was allocated $60,000 to discount on notes and $337,177 as change in the conversion liability.

F-16

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

Stockholder Note Issued February 4, 2009

On February 4, 2009, the Company issued an unsecured convertible promissory note to a related party for an aggregate principal amount of $43,000. The convertible promissory note has a conversion price of $0.20. The convertible promissory note was due on March 31, 2009, and was non-interest bearing. However, the note was subsequently amended to extend the due date to May 31, 2009, and to accrue interest from the inception of the note at a rate of 4.0%. As of September 30, 2009, the promissory note was in default for non-payment; however on January 5, 2010, the Company and the note holder agreed to settle the principal and accrued interest due for a cash payment of $25,000 and 305,625 shares of the Company’s common stock.

The Company recorded interest expense related to the notes of $3,502 for the year ended September 30, 2009.

The Company amortized $44,882 and $64,796 of the debt discount for the years ended September 30, 2009 and 2008, respectively. The unamortized discount as of September 30, 2009 and 2008, was $1,092 and $45,974, respectively.

The following table summarizes the stockholder convertible promissory notes:

Description	Balance
Balance, September 30, 2008, net	$	14,026
Issue convertible note, February 4, 2009		43,000
Amortization of debt discounts		44,882
Balance, September 30, 2009, net	$	101,908

Note 7 - License Agreement

On January 12, 2009, the Company entered into a License Agreement with an unrelated party. The License Agreement gives the Company the right to manufacture, have manufactured, use, import, and offer to sell, lease, distribute or otherwise exploit the 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 sheets and is being amortized over ten years.

The Company recorded amortization expense related to the licensing agreement of $633 and $0 for the years ended September 30, 2009 and 2008, respectively.

Note 8 - Consulting Agreement

On March 31, 2009, the Company entered into a Consulting Agreement with an outside third party. In connection with this Consulting Agreement, the Company issued warrants to purchase 2,000,000 shares of its Common Stock. The exercise price for the warrants is as follows:

Number of
warrants issued		Exercise Price

300,000		$0.10 per share
500,000		$0.15 per share
600,000		$0.20 per share
600,000		$0.25 per share
2,000,000

F-17

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

The vesting schedule is as follows:

Number of
warrants issued	Exercise Price	Vesting dates

300,000	$0.10 per share	Immediately
500,000	$0.15 per share	Immediately
50,000	$0.20 per share	Immediately
550,000	$0.20 per share	At time of extension
600,000	$0.25 per share	12 months after the execution of consulting agreement
2,000,000

On March 31, 2009, the date of issuance, the fair value of the 850,000 vested warrants was $88,037. The fair value was computed using the Black-Scholes option pricing model under the following assumptions: (1) expected life of 3 years; (2) volatility of 110%; (3) risk free interest of 2.22% and (4) dividend rate of 0%. The Company recorded $88,037 as consulting expense on the consolidated financial statements.

At September 30, 2009, the Company determined the fair value of the 600,000 warrants to be $60,690. The fair value was computed using the Black-Scholes option pricing model under the following assumptions: (1) expected life of 2.50 years; (2) volatility of 110%; (3) risk free interest of 2.22% and (4) dividend rate of 0%. The shares vest at 12 months after the execution of the consulting agreement; therefore, the Company will amortize the expense over the vesting period of one year. The Company recorded $30,345 as consulting expense for the year ended September 30, 2009 which represents 50% of the fair value at September 30, 2009. Each quarter, the Company will determine the fair value of the warrants and record the expense related to the vested warrants.

Note 9 - Stockholders’ Equity

On January 13, 2009, the Company issued 57,143 to obtain a licensing right from an un-related party.

On February 18, 2009, the Company issued 37,500 shares of common stock to an unrelated third party in connection to an issuance of a convertible promissory note agreement.

On March 16, 2009, the Company entered into a six-month consulting agreement with an unrelated party. As compensation for the consulting services, the Company will issue 50,000 shares per month. On May 28, 2009, the consulting agreement was amended to obtain additional work for six months. The Company will pay $5,000 and issue an additional 22,727 shares per month for six months. The Company can terminate the consulting agreement upon a thirty-day written notice to the unrelated party.

The Company issued an additional 3,530,000 common stock for consulting services during the third and fourth quarters of 2009.

On April 23, 2009, the Company entered into a Securities Issuance Agreement (“Securities Agreement”) with four related parties (the “Investors”). Pursuant to the Securities Agreement, the Company agreed to sell and issue to the Investors 2,785,000 shares of its common stock and warrants to purchase 2,785,000 shares of common stock at $0.10 per share for an aggregate purchase price of $278,500. In addition, the company agreed to sell additional common stock and warrants at $0.10 per share up to 2 million shares. As of September 30, 2009 the Company sold 3,785,000 shares of common stock and warrants. The Company determined the fair value of the 3,785,000 warrants to be $512,920. The fair value was computed using the Black-Scholes option pricing model under the following assumptions: (1) expected life of 3 years; (2) volatility of 110%; (3) risk free interest of 1.16% - 1.97% and (4) dividend rate of 0%. The warrants are exercisable immediately and have an exercise price based on the share price at the date of grant.

F-18

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

On May 1, 2009, as part of the Securities Agreement, the Company accepted the resignations of Mr. Legendre as Executive Chairman of the Board of Directors of the Company, and of Mr. Risheq as an officer of the Company. The Company agreed that all of Mr. Legendre’s 12,234,608 options would be immediately canceled. As full compensation for his services to the Company to date, he would receive 2,000,000 shares of common stock. In addition, the Company agreed that all of Mr. Risheq’s 9,645,889 options would be immediately canceled. As full compensation for his services to the Company to date, he would receive 1,500,000 shares of common stock.

On May 6, 2009, the Company entered into a one year agreement with its new Executive Chairman that provides for monthly payments of $10,000 and the issuance of 100,000 options to purchase shares of the Company’s common stock for $0.16 per share.

As of September 30, 2009 the Company issued 400,000 shares of common stock for accounting services.

During the fourth quarter, the Company entered into stock subscription agreements and issued a total of 3,060,000 shares of common stock for $334,500.

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 awards under the Plan. The Plan is administered by the Board. The Board shall have 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 to increase the number of awards from 25,000,000 to 75,000,000.

F-19

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

The following table summarizes information with respect to options issuable under the Plan and outside the Plan.

	Number of Shares			Weighted Average Exercise Price			Aggregate Intrinisic Value
Outstanding, October 11, 2005 (date of inception)		-
Granted		5,660,682		$	0.015
Forfeited		(4,245,512	)
Exercised		-
Outstanding, September 30, 2006		1,415,170		$	0.015
Granted		-
Canceled		-
Exercised		-
Outstanding at September 30, 2007		1,415,170		$	0.015
Granted		52,486,693		$	0.075
Canceled		-
Exercised		-
Outstanding at September 30, 2008		53,901,863		$	0.072
Granted		9,546,081		$	0.158
Canceled		(35,734,111	)	$	0.074
Exercised		-
Outstanding at September 30, 2009		27,713,833		$	0.102	$	2,227,543
Exercisable at September 30, 2009		10,502,335		$	0.075	$	1,109,850

F-20

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

The number and weighted average exercise prices of all options outstanding as of September 30, 2009, are as follows:

Options outstanding
Range of Exercise Price		Number Outstanding September 30, 2009		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)

$	0.014		943,447	$	0.014		6.08
$	0.016		471,723	$	0.016		6.25
$	0.072		3,339,944	$	0.072		3.71
$	0.079		13,412,638	$	0.079		3.42
$	0.110		1,414,960	$	0.110		4.35
$	0.120		2,032,520	$	0.120		4.29
$	0.160		1,408,961	$	0.160		4.60
$	0.170		2,900,000	$	0.170		4.98
$	0.180		48,000	$	0.180		4.20
$	0.210		1,500,000	$	0.210		4.85
$	0.260		241,640	$	0.260		4.68
			27,713,833

F-21

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

The number and weighted average exercise prices of all options exercisable as of September 30, 2009, are as follows:

Options outstanding
Range of Exercise Price		Options exercisable September 30, 2009		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)

$	0.014		943,447	$	0.014		6.08
$	0.016		471,723	$	0.016		6.25
$	0.072		1,451,490	$	0.072		3.68
$	0.079		6,867,921	$	0.079		3.36
$	0.110		267,540	$	0.110		4.40
$	0.120		20,054	$	0.120		4.43
$	0.160		276,161	$	0.160		4.60
$	0.180		48,000	$	0.180		4.20
$	0.210		28,295	$	0.210		4.85
$	0.260		127,704	$	0.260		4.68
			10,502,335

The assumptions used in calculating the fair values of options granted using the Black-Scholes option-pricing model are as follows:

	September 30, 2009	September 30, 2008
Expected life (years)	2.63 to 6.16	2.6 to 4.0
Risk-free interest rate	.56% to 4.57%	1.9% to 4.1%
Expected volatility	110%	100%
Expected dividend yield	0%	0%

The weighted average grant-date fair value for the options granted during the year ended September 30, 2009 and 2008, was $0.076 and $0.06, respectively.

The compensation expense related to the unvested options as of September 30, 2009, was $1,359,254, which will be recognized over the weighted average period of 2.26 years. Stock-based compensation expense to employees and non employees for the years ended September 30, 2009 and 2008, was $690,353 and $2,625,106, respectively.

Warrants

On July 23, 2008, the Company issued warrants to purchase 10,500,000 shares of its common stock at an exercise price of $0.20. The Warrants expire on July 22, 2010, except in the event that at any time the Company has manufactured 25 or more of its mobile or home repeater units, then the Company may, at its option, accelerate the expiration of the warrants by giving notice to the holder. If the holder does not exercise the warrant within 30 days of the giving of the notice of acceleration, the warrants will expire and the holder will have no further rights to acquire any shares of the company under the warrants. The Company gave notice of acceleration on February 27, 2009. The Company canceled the 10,500,000 warrants as none of them had been exercised within the required 30 days.

F-22

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

The following table summarizes the warrant activity for the year ended September 30, 2009:

	Number of warrants issued
Outstanding, September 30, 2008		10,500,000
Granted		5,785,000
Cancelled		(10,500,000	)
Exercised		-
Outstanding, September 30,2009		5,785,000

Note 10 - Commitments and Contingencies

Operating Leases

On February 21, 2008, the Company entered into a one-year lease for office space for its El Dorado Hills, California, office, which was subsequently amended to extend the lease term to March 31, 2010. The lease requires monthly payments of $2,198. On August 26, 2008, the Company entered into an eighteen-month lease for office space for its Mission Viejo, California, office beginning on October 1, 2008 and expiring on March 31, 2010. The lease requires monthly payments of $4,664.

The Company recorded rent expense of $77,780 and $13,188 for years ended September 30, 2009 and 2008, respectively.

The Company expects to pay approximately $41,200 during the year ended September 30, 2010 for the two leases.

Litigation

The Company is subject to various legal matters in the ordinary course of business. After taking into consideration the Company’s legal counsels’ evaluation of these matters, the Company has determined that the resolution of these matters will not have a material adverse effect on the Company’s consolidated financial statements.

Note 11 – Taxes

We have provided no current income taxes due to the losses incurred from October 11, 2005 (date of inception), through September 30, 2009. Net operating losses of approximately $3,877,145 at September 30, 2009, are available for carryover. The net operating losses will expire from 2022 through 2024. We have provided a 100% valuation allowance for the deferred tax benefit resulting from the net operating loss carryover due to our limited operating history. In addressing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. When we demonstrate a history of profitable operation, we will reduce our valuation allowance at that time.

F-23

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

A reconciliation of the statutory Federal income tax rate and the effective income tax rate for the years ended September 30, 2009 and 2008, follows:

	September 30,			September 30,
	2009			2008
Statutory federal income tax rate		(0.34	)		(0.34	)
State income taxes (benefit), net of federal taxes		(0.06	)		(0.06	)
Equity instruments issued for compensation/services		0.15			0.19
Change in derivative liabilities		0.02			0.06
Non-cash financing costs		-			0.05
Valuation allowance		0.23			0.10
Effective income tax rate		-			-

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

	September 30,			September 30,
	2009			2008
Deferred tax assets:
Net operating loss carryforwards	$	1,694,205		$	836,646
Valuation allowance		(1,694,205	)		(836,646	)
Net deferred tax assets	$	-		$	-

Note 12 - Subsequent Events

On October 13, 2009, the Company received $50,000 from an unrelated party for a subscription agreement at $0.10 per share for a total of 500,000 shares.

On October 22, 2009, the Company received $140,000 from an unrelated party for a subscription agreement at $0.10 per share for a total of 1,400,000 shares.

On November 12, 2009, the Company received $10,000 from an unrelated party for a subscription agreement at $0.10 per share for a total of 100,000 shares.

On December 4, 2009, the Company received $110,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 1,833,333 shares. The Company also issued warrants to purchase up to an additional 1,833,333 shares.

On December 7, 2009, the Company received $105,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 1,750,000 shares. The Company also issued warrants to purchase up to an additional 1,750,000 shares.

On December 9, 2009, the Company received $110,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 1,833,333 shares. The Company also issued warrants to purchase up to an additional 1,833,333 shares.

F-24

CELLYNX GROUP, INC

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2009 and 2008

On December 9, 2009, the Company received $55,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 916,667 shares. The Company also issued warrants to purchase up to an additional 966,667 shares.

On December 15, 2009, the Company received $18,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 300,000 shares. The Company also issued warrants to purchase up to an additional 300,000 shares.

On December 15, 2009, the Company received $10,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 166,667 shares. The Company also issued warrants to purchase up to an additional 166,667 shares.

On December 28, 2009, the Company received $10,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 166,667 shares. The Company also issued warrants to purchase up to an additional 166,667 shares.

On January 7, 2010, the Company received $5,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 83,335 shares. The Company also issued warrants to purchase up to an additional 83,335 shares.

On January 8, 2010, the Company received $250,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 4,166,667 shares. The Company also issued warrants to purchase up to an additional 4,166,667 shares.

On January 12, 2010, the Company received $450,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 7,500,000 shares. The Company also issued warrants to purchase up to an additional 7,500,000 shares.

On January 12, 2010, the Company received $60,000 from an unrelated party for a subscription agreement at $0.06 per share for a total of 1,000,000 shares. The Company also issued warrants to purchase up to an additional 1,000,000 shares.

The Company has performed an evaluation of subsequent events through January 13, 2010, which is the date the consolidated financial statements were issued and no additional significant subsequent events warrant disclosure.

F-25

SIGNATURES

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


	CELLYNX GROUP, INC.

Dated: January 13, 2010	By:	/s/ Daniel R. Ash Daniel R. Ash President, Chief Executive Officer and Chief Operating Officer

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

Name	Position	Date

/s/ Daniel R. Ash Daniel R. Ash	Director and Principal Executive Officer	January 13, 2010

/s/ Kevin Pickard Kevin Pickard	Consultant providing services commonly provided by a Chief Financial Officer, Principal Financing and Accounting Officer	January 13, 2010

/s/ Tareq Risheq Tareq Risheq	Director	January 13, 2010

/s/ Donald A Wright Donald A Wright	Chairman of the Board	January 13, 2010

/s/ Norman W. Collins Norman W. Collins	Director	January 13, 2010

/s/ Dwayne Yaretz Dwayne Yaretz	Director	January 13, 2010

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Avg

CelLynx Inactive 10-K2009 FY Annual report

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