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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
[X]
Quarterly Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
For the quarterly period ended November 30, 2012

Or
 
[   ]
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 000-50480
 
LYYNKS INC.
(Exact name of registrant as specified in its charter)
 
Nevada
98-0389557
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
   
644-1812 W. Burbank Blvd, Burbank, CA
91506
(Address of principal executive offices)
(Zip Code)

(818) 478-2260
(Registrant’s Telephone Number, Including Area Code)


 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
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 [X]  No [  ]

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [  ]  No [  ]
 
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,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
[   ]
Accelerated filer
[    ]
Non-accelerated filer
[   ] (Do not check if a smaller reporting company)
Smaller reporting company
[X]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [  ]  No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 66,580,913 shares of $0.00001 par value common stock issued and outstanding as of January 14, 2013.
 
(formerly En2go International, Inc.)
(a development stage company)
INDEX
 
        Page
Part I.  Financial Information    
       
  Item 1. Financial Statements   1
         
    Consolidated Balance Sheets as of November 30, 2012 and August 31, 2012  (unaudited)   2
         
    Consolidated Statements of Operations for the three Months Ended November 30, 2012 and November 30, 2011 and the period from inception (January 31 , 2007) through November 30, 2012 (unaudited)  
 
3
         
    Consolidated Statements of Stockholders' Deficiency for the Period Ended November 30, 2012 (unaudited)   4
         
    Consolidated Statements of Cash Flows for the three months ended November 30, 2012 and November 30, 2011 and the period from inception (January 31, 2007) through November 30, 2012 (unaudited)  
6
 
         
    Notes to Unaudited Consolidated Financial Statements   7
         
  Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations   18
         
  Item 3.  Quantitative and Qualitative Disclosures About Market Risk   21
         
  Item 4.  Controls and Procedures   21
         
Part II.  Other Information    
         
  Item 1.  Legal Proceedings   21
         
  Item 6.  Exhibits   22
         
  Signatures    

 
PART I.  Financial Information
 
ITEM 1.  FINANCIAL STATEMENTS (Unaudited)
 
Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.  The following condensed consolidated financial statements should be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended August 31, 2012.
 
The results of operations for the three months ended November 30, 2012 are not necessarily indicative of the results for the entire fiscal year or for any other period.

 
LYYNKS INC. AND SUBSIDIARY
(a development stage company)
Consolidated Balance Sheets
(Unaudited)

   
November 30,
   
August 31,
 
   
2012
   
2012
 
             
ASSETS
           
Current Assets:
           
Cash
  $ 161,556     $ 237,165  
                 
Property and equipment - net
    35,949       38,372  
Total Assets
  $ 197,505     $ 275,537  
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
               
Current Liabilities:
               
  Accounts payable
  $ 486,841     $ 500,211  
  Accrued expenses
    24,605       19,493  
  Due to related parties
    100,510       761,510  
Total Current Liabilities
    611,956       1,281,214  
                 
                 
Commitments and Contingencies
               
                 
Stockholders' Deficiency:
               
Common stock, $.00001 par value, 1,000,000,000 shares authorized, 66,580,912 and 54,256,626 shares issued and outstanding at November 30, 2012 and August 31, 2012, respectively
    666       544  
  Capital in excess of par value
    16,777,500       15,716,622  
Deficit accumulated during the development stage
    (17,192,617 )     (16,722,843 )
Total Stockholders' Deficiency
    (414,451 )     (1,005,677 )
                 
Total Liabilities and Stockholders' Deficiency
  $ 197,505     $ 275,537  
 
See notes to unaudited consolidated financial statements.

 
LYYNKS INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Operations
(Unaudited)

               
Period from
 
               
inception
 
               
(January 31, 2007)
 
   
For the Three Months Ended
   
through
 
   
November 30,
         
November 30,
 
   
2012
   
2011
   
2012
 
Revenues
  $ -     $ -     $ -  
Costs and Expenses:
                       
   General and administrative expenses
    469,774       344,902       9,064,224  
   Stock issued for services
    -       -       1,762,617  
   Non-cash compensation
    -       -       3,990,692  
Impairment loss
    -       -       1,104,914  
Total operating expenses
    469,774       344,902       15,922,447  
                         
Loss from operations
    (469,774 )     (344,902 )     (15,922,447 )
                         
                         
Other Income (Expense):
                       
Other income (primarily from the settlement of prior liabiltities)     -       -       538,277  
Interest expense
    -       -       (212,314 )
    Interest expense on amortization of note discount
    -       -       (1,605,133 )
   Gain on sale of equipment
    -       -       9,000  
  Total other income (expense)
    -       -       (1,270,170 )
                         
Loss before provision for income taxes
    (469,774 )     (344,902 )     (17,192,617 )
                         
Provision for income taxes
    -       -       -  
                         
Net loss
  $ (469,774 )   $ (344,902 )   $ (17,192,617 )
                         
Net loss per share of common stock -
                       
  Basic and diluted
  $ (0.01 )   $ (0.01 )        
                         
Weighted Average Shares Outstanding -
                       
  Basic and diluted
    61,372,717       41,536,602          
 
See notes to unaudited consolidated financial statements.

LYYNKS INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Stockholders' Deficiency
(Unaudited)
                     
 
   
Deficit
       
                     
 
   
Accumulated
   
Total
 
               
Capital in
   
 
   
During
   
Stockholders'
 
   
Common
   
Stock
   
Excess of
   
Subscription
   
Development
   
Equity
 
   
Shares
   
Amount
   
Par Value
   
Receivable
   
Stage
   
(Deficiency)
 
Balance - August 31, 2007
    4,980,460       50     $ 999,950     $ -     $ (602,659 )   $ 397,341  
                                                 
Issuance of options and warrants
                                         
issued for services rendered
    -       -       3,686,768       -       -       3,686,768  
                                                 
Common stock issued for $10.00
                                               
per share in January 2008
    135,000       1       1,349,999       -       -       1,350,000  
                                                 
Offering costs on issuance of
                                               
common stock
    -       -       (91,401 )     -       -       (91,401 )
                                                 
Issuance of common stock
                                               
for services rendered
    100,000       1       1,849,999       -       -       1,850,000  
                                                 
Issuance of common stock as
                                               
consideration for debt financing
    16,600       -       144,600       (6,400 )     -       138,200  
                                                 
Net loss for the year ended
                                               
August 31, 2008
    -       -       -       -       (7,830,062 )     (7,830,062 )
                                                 
Balance - August 31, 2008
    5,232,060       52       7,939,915       (6,400 )     (8,432,721 )     (499,154 )
                                                 
Common stock and warrants
                                               
issued for $1.50 per unit in
                                               
October 2008
    100,000       1       149,999       -       -       150,000  
                                                 
Common stock issued for services
                                         
rendered in October 2008
    30,000       -       63,000       -       -       63,000  
                                                 
Common stock issued for services
                                         
in November 2008
    5,000       -       14,000       -       -       14,000  
                                                 
Common stock issued in
                                               
consideration of debt financing -
                                               
Sept - April 2009
    71,940       1       174,999       -       -       175,000  
                                                 
Common stock issued for $2.00
                                               
per share in May 2009
    75,000       1       149,999       -       -       150,000  
                                                 
Discount on notes payable net of
                                               
amortization
    -       -       1,593,729       -       -       1,593,729  
                                                 
Interest and stock based
                                               
compensation
    -       -       133,141       6,400       -       139,541  
                                                 
Net loss for the year ended
                                               
August 31, 2009
    -       -       -       -       (2,983,660 )     (2,983,660 )
                                                 
Balance - August 31, 2009
    5,514,000       55       10,218,782       -       (11,416,381 )     (1,197,544 )
 
See notes to unaudited consolidated financial statements.
LYYNKS INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Stockholders' Deficiency
(Unaudited)
(Continued)
                           
Deficit
       
                           
Accumulated
   
Total
 
               
Capital in
         
During
   
Stockholders'
 
   
Common
   
Stock
   
Excess of
   
Subscription
   
Development
   
Equity
 
   
Shares
   
Amount
   
Par Value
   
Receivable
   
Stage
   
(Deficiency)
 
Issuance of common stock upon
                               
conversion of convertible debt
    17,500,000       175       1,749,825                   1,750,000  
                                             
Sale of common stock
    1,000,002       10       349,990                   350,000  
                                             
Issuance of common stock as
                                     
consideration for payment of
                                     
accounts payable
    202,000       2       96,201                   96,203  
                                             
Net loss for the year ended
                                           
August 31, 2010
    -       -       -       -       (3,089,142 )     (3,089,142 )
                                                 
Balance - August 31, 2010
    24,216,002       242       12,414,798       -       (14,505,523 )     (2,090,483 )
                                                 
Issuance of common stock upon
                                         
conversion of convertible debt
    11,090,625       111       897,232                       897,343  
                                                 
Sale of common stock
    3,350,000       34       353,465                       353,499  
                                                 
Allocation of sale of common stock
                                         
and conversion of debt to warrants
                                         
issued
                    536,284                       536,284  
                                                 
Net loss for the year ended
                                               
August 31, 2011
    -       -       -       -       (529,706 )     (529,706 )
                                                 
Balance - August 31, 2011
    38,656,627       387       14,201,779       -       (15,035,229 )     (833,063 )
                                                 
Issuance of common stock upon
                                         
conversion of convertible debt
    7,933,333       79       594,921                       595,000  
                                                 
Sale of common stock
    7,666,666       78       855,722                       855,800  
                                                 
Allocation of sale of common
                                         
stock to warrants issued
                    64,200                       64,200  
                                                 
Net loss for the year ended
                                               
August 31, 2012
    -       -       -       -       (1,687,614 )     (1,687,614 )
                                                 
Balance - August 31, 2012
    54,256,626       544       15,716,622       -       (16,722,843 )     (1,005,677 )
                                                 
Issuance of common stock upon
                                         
conversion of convertible debt
    6,610,000       65       660,935                       661,000  
                                                 
Sale of common stock
    5,714,286       57       399,943                       400,000  
                                                 
Net loss for the three months ended
                                         
November 30, 2012
    -       -       -       -       (469,774 )     (469,774 )
                                                 
Balance - November 30, 2012
    66,580,912     $ 666     $ 16,777,500     $ -     $ (17,192,617 )   $ (414,451 )
 
See notes to unaudited consolidated financial statements.
LYYNKS INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Cash Flows
(Unaudited)
               
Period from
 
               
inception
 
               
(January 31, 2007)
 
   
For the Three Months Ended
   
through
 
   
November 30,
   
November 30,
 
   
2012
   
2011
   
2012
 
Cash Flows From Operating Activities:
                 
Net loss
  $ (469,774 )   $ (344,902 )   $ (17,192,617 )
                         
Adjustments to reconcile net loss to net cash used in operating activities:
                 
Debt financing costs
    -       -       1,906,933  
 Depreciation expense
    5,538       4,631       176,858  
Impairment loss
    -       -       1,104,917  
     Options, warrants and common stock issued for services rendered
    -       -       5,753,309  
  Gain on settlement of prior liabilties
    -       -       (508,457 )
Gain on sale of equipment
    -       -       (9,000 )
                         
Changes in operating assets and liabilities:
                       
Accounts payable
    (13,370 )     (10,398 )     1,095,999  
Accrued expense
    5,112       3,274       94,730  
Net cash used in operating activities
    (472,494 )     (347,395 )     (7,577,328 )
                         
Cash Flows From Investing Activities:
                       
  Purchase of property and equipment
    (3,115 )     (19,953 )     (250,505 )
Software development
    -       -       (1,109,417 )
                         
Net cash used in investing activities
    (3,115 )     (19,953 )     (1,359,922 )
                         
Cash Flows From Financing Activities:
                       
Proceeds from related parties
    -       265,000       2,618,510  
  Proceeds from sale of equipment
    -       -       46,697  
   Proceeds from issuance of notes payable
    -       -       2,600,000  
Repayment of notes payable
    -       -       (500,000 )
    Proceeds from issuance of common stock and warrants, net of offering costs
    400,000       100,000       4,333,599  
Net cash provided by financing acitivities
    400,000       365,000       9,098,806  
                         
Net increase (decrease) in cash
    (75,609 )     (2,348 )     161,556  
Cash beginning of period
    237,165       33,648       -  
Cash end of period
  $ 161,556     $ 31,300     $ 161,556  
                         
                         
                         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
                       
INFORMATION:
                       
Cash paid during the period for:
                       
Interest
  $ -     $ -          
Income taxes
    -       -          
                         
Common stock and warrants issued for payment of accounts payable
  $ -     $ -     $ -  
                         
Common stock and warrants issued upon conversion of covertible debt
                 
and related party debt
  $ 661,000     $ 595,000     $ 4,168,000  
 
See notes to unaudited consolidated financial statements.
 
Lyynks Inc. and Subsidiary
(a development stage company)
Notes to Unaudited Consolidated Financial Statements
As of and for the Three Months Ended November 30, 2012
 
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
 
The consolidated balance sheet as of November 30, 2012 and the consolidated statements of operations, stockholders' deficiency and cash flows for the periods presented have been prepared by Lyynks Inc. (the "Company" or "Lyynks") and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders' equity and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of August 31, 2012 was derived from audited financial statements.
 
The accompanying consolidated financial statements represent the accounts of Lyynks Inc. incorporated in the State of Nevada on August 23, 2002 (formerly En2go International, Inc.) and En2Go, Inc. (“Subsidiary”), incorporated in the State of Nevada on January 31, 2007 (collectively the Parent and the Subsidiary are referred to as the “Company”, “Lyynks” “we” or “our”).
 
On July 17, 2007, Parent completed an exchange agreement with Subsidiary wherein Parent issued 2,780,000 shares of its common stock in exchange for all the issued and outstanding common stock of Subsidiary. The acquisition was accounted for as a recapitalization of Subsidiary in a manner similar to a reverse purchase as the former shareholders of Subsidiary controlled the combined Company after the acquisition. Following the acquisition and the transfer of an additional 1,075,000 shares from the shareholders of parent to the former shareholders of the subsidiary, the former shareholders of Subsidiary controlled approximately 77% of the total outstanding stock of the combined entity. There was no adjustment to the carrying values of the assets or the liabilities of Parent or Subsidiary as a result of the recapitalization.
 
The operations of Parent are included only from the date of recapitalization. Accordingly, the previous operations and retained deficits of Parent prior to the date of recapitalization have been eliminated. The financial history prior to the recapitalization is that of the Subsidiary.
 
On February 22, 2012 the Company filed a Certificate of Dissolution of Subsidiary En2go Inc. with the Nevada Secretary of State.
 
On March 8, 2012, the Company filed in Nevada Articles of Merger providing for the merger of its wholly-owned subsidiary, Lyynks, Inc., into the Company, as the surviving corporation, and in the merger changing the Company’s name to Lyynks Inc., In the merger, which was for the sole purpose of changing the Company’s name, there were no other changes to the Articles of Incorporation or any changes to the capital stock of the Company, or to its By-Laws or its officers and directors. Pursuant to FINRA approval, the name change was effective for trading purposes on May 14, 2012.
 
General
 
We are developing software products for the online distribution of audio and video content. We would intend to capitalize on the worldwide growth of digital media. We believe our planned programs and applications will enhance the user’s experience with internet content. We plan to provide a service that users can use to deliver their content with a potential global reach. Additionally end users would be able to use our social network integration to share content links to promote content or content providers.

 
Basis of Presentation and Going Concern
 
Our consolidated financial statements have been prepared assuming that we will continue as a going concern. However, we have sustained losses and as of November 30, 2012, we have no revenues and have a net working capital deficiency and a negative cash flow from operations. These conditions, among others, give rise to substantial doubt about our ability to continue as a going concern. Management is continuing to seek additional equity capital. Until such time as we are operating profitably, we anticipate our working capital needs will be funded with proceeds from equity and debt financing. Management believes these steps will provide us with adequate funds to sustain our continued existence. There is, however, no assurance that the steps taken by management will meet all of our needs or that we will continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Development Stage Activities
 
Since inception the Company has not yet generated significant revenues and has been defining its business operations and raising capital. All of our operating results and cash flows reported in the accompanying consolidated financial statements from January 31, 2007 through November 30, 2012 are considered to be those related to development stage activities and represent the cumulative from inception amounts from our development stage activities required to be reported pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, “Development Stage Enterprises”.
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The Company’s significant accounting policies are summarized in Note 2 of the Company’s Annual Report on Form 10-K for the year ended August 31, 2012. There were no significant changes to these accounting policies during the three months ended November 30, 2012 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
 
NOTE 3 – SETTLEMENT OF PRIOR LIABILITIES
 
We have settled certain payables to reflect the acceptance by these creditors of lesser amounts. Accordingly, amounts accrued with respect to these account holders have been reduced to $-0- from $538,457, and we have recognized other income in that amount in the consolidated statement of operations for the period from inception (January 31, 2007) through November 30, 2012. No settlements were recognized for the three months ended November 30, 2012 and 2011.
 
NOTE 4 –FAIR VALUE MEASUREMENTS
 
The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
 
Level 1 – Observable inputs such as quoted market prices in active markets
 
Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable
 
Level 3 – Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions

 
As of November 30, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The Company does not have any financial assets measured at fair value on a recurring basis as Level 2 or Level 3.
 
The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of November 30, 2012 and August 31, 2012.
 
   
Fair Value Measurements Using
 
   
 
       
   
Quoted Prices
   
Significant Other
   
Significant Other
 
   
in
Active Market
   
Observable Inputs
   
Unobservable Inputs
 
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
November 30, 2012
                 
Cash and cash equivalents
  $ 161,556     $ -     $ -  
Total
  $ 161,556     $ -     $ -  
                         
August 31, 2012
                       
Cash and cash equivalents
  $ 237,165     $ -     $ -  
Total
  $ 237,165     $ -     $ -  
 
The Company had no financial assets accounted for on a non-recurring basis as of November 30, 2012.
 
There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the three months ended November 30, 2012 and the Company did not have any financial liabilities as of November 30, 2012. The Company has other financial instruments, such as advances and other receivables, accounts payable and other liabilities, notes payable and other assets, which have been excluded from the table above. Due to the short-term nature of these instruments, the carrying value of advances and other receivables, accounts payable and other liabilities, notes payable and other assets approximate their fair values.
 
NOTE 5 - PROPERTY AND EQUIPMENT
 
Property and equipment consists of the following:
 
   
November 30, 2012
   
August 31,
2012
 
Equipment
  $ 68,003     $ 64,888  
Accumulated depreciation
    32,054       26,516  
    $ 35,949     $ 38,372  
 
Depreciation expense for the three months ended November 30, 2012 and 2011 was $5,538 and $4,631, respectively.

 
NOTE 6 – RELATED PARTY TRANSACTIONS
 
During the three months ended November 30, 2012, Richard Genovese, a Director of the Company ("Genovese" ), converted $661,000 of debt owed to him into 6,610,000 common shares at a conversion price per share of $0.10.
 
During the three months ended November 30, 2012, Janst Limited, an affiliate of the Company (“Janst”), entered into a subscription agreement to purchase 5,714,286 shares of our common stock at $0.07 per share for an aggregate investment in the Company of $400,000.
 
As of November 30, 2012 and August 31, 2012, the amount due Genovese was $510 and $661,510 respectively. The advances are non-interest bearing.
 
As of November 30, 2012 and August 31, 2012, the amount due Clayoquot Wilderness Resort, a company which Genovese is a principal, was $100,000 and $-0-, respectively. The advance is non-interest bearing.
 
NOTE 7 – CONVERTIBLE DEBT
 
NSC Investments
 
In August 2008, we issued a promissory note to NSC Investments Ltd. (“NSC”) in the principal amount of $250,000. Under the terms of this promissory note (the “NSC 2008 Note”), interest is to be prepaid at the commencement of each quarter by us issuing 1,600 shares of our common stock. The unpaid principal balance of the promissory note was due and payable in full on the sale of any assets of the Company or November 1, 2008. Further consideration for the loan consisted of 15,000 shares of our common stock at the funding, 5,000 shares of our common stock at the beginning of the next month, and 10,000 shares at the beginning of the next month. This promissory note was extended until February 1, 2009. We agreed to pay 3,900 shares of our common stock as interest and additional issuance of 10,000 shares of our common stock for additional compensation. The promissory note was further extended to May 1, 2009 and we agreed to make payments on the principal of $50,000 by February 15, 2009; repay a further $100,000 by May 1, 2009; issue 3,000 shares of our common stock as interest and additional issuance of 20,040 shares of our common stock for additional compensation. All the terms of the amended agreement were complied with. The remaining $100,000 plus accrued interest was convertible at NSC’s option at $2.00 per share on or before May 1, 2010. Pursuant to ASC 470-25-20, the modification of the Note agreement was not treated as an extinguishment but rather reduced the carrying amount of the debt through an adjustment to the note discounts, with a corresponding increase in additional paid-in capital.
In November 2010, the Company entered into an agreement with NSC Investments Ltd. to issue 585,000 units (“Units”), at a price per Unit of $.20, each Unit consisting of one share of common stock and a common stock purchase warrant to purchase one share of common stock at an exercise price of $.30 per share, to settle the remaining balance of the $100,000 of principal debt and $17,500 of accrued interest. The fair value of the warrants issued was $90,938.
 
2009 Convertible Debentures
 
On January 15, 2009 we entered into an agreement with Genovese whereby Genovese and/or his affiliates (collectively “Genovese”) advanced to the Company $250,000 for a convertible debenture or debentures (“the 2008 Genovese Convertible Debenture”) for the aggregate principal amount of $250,000. The 2008 Genovese Convertible Debenture was non-interest bearing and matured on December 5, 2010. At the holder’s sole discretion, the holder could elect to convert the 2008 Genovese Convertible Debenture, in whole or in part into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, Genovese was issued a share purchase warrant certificate for 2,500,000 warrants, with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate. The Company and Genovese further agreed to establish five (5) mutually agreed upon milestones to be attained no later than September 2009 with each milestone generally occurring approximately every forty five (45) days. In conjunction with the attainment of each individual milestone, Genovese agreed to advance to the Company an additional $250,000. In connection with each $250,000 advance, Genovese would be issued an additional $250,000 Debenture. The 2008 Genovese Convertible Debentures were non interest bearing and mature two years from the date of issuance of each subsequent debenture (“2009 Convertible Debentures”). At the holders’ sole discretion, the holder could elect to convert the 2009 Convertible Debentures, in whole or in part, at any time prior to maturity, into common shares of the Company at a conversion price of $0.10 per share.
 
 
As additional compensation, Genovese was issued a share purchase warrant certificate for 2,500,000 warrants with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate for each Convertible Debenture issued. The 2008 Genovese Convertible Debenture was subsequently amended for an aggregate principal amount of $545,000. Additional 2008 Convertible Debentures for $455,000, $250,000, and $50,000 and $195,000 were issued during the year ended August 31, 2009. In April 2009, the amount of 2009 Convertible Debentures available to be issued was increased by $255,000 for an aggregate of $1,750,000.
 
As of August 31, 2009 a total of $1,750,000 principal amount of 2009 Convertible Debentures had been issued. The amount of the Debentures outstanding at August 31, 2009 was classified as “permanent equity” as capital in excess of par value and a corresponding amount was recorded as a discount against the note payable. This discount was amortized over 24 months on a straight-line basis as interest expense. On September 25, 2009, all issued 2009 Convertible Debentures were converted into 17,500,000 shares of common stock.
 
Janst Limited
 
In April 2009, we entered into a loan agreement with Janst Limited for $250,000. The terms of the loan were that the loan bears interest at 15% per annum, matured on May1, 2010, and that the principal and accrued interest is convertible into common stock at the rate of $0.35 per share.
 
In November 2010, the Company entered into an agreement with Janst Limited to issue 1,515,625 units (“Units”), at a price per Unit of $.20, each Unit consisting of one share of common stock and a common stock purchase warrant to purchase one share of common stock at an exercise price of $.30 per share, to settle the $250,000 of principal debt and $53,125 of accrued interest. The fair value of the warrants issued was $35,250. The fair value of the warrants was estimated using the Black-Scholes pricing method.
 
NOTE 8 - COMMON STOCK
 
Effective December 7, 2011 the Company filed an amendment to its Articles of Incorporation (1) to increase our authorized Common Stock from 90,000,000 shares to 1,000,000,000 shares and (2) to authorize a new class of 10,000,000 shares of Preferred Stock with authority for our Board of Directors to issue one or more series of the preferred stock with such designations, rights, preferences, limitations and/or restrictions as it should determine by vote of a majority of such directors. As of May 31, 2012, no shares of preferred stock have been issued.
 
The Company has authorized 1,000,000,000 shares of common stock with a par value of $.00001. At May 31, 2012 and August 31, 2011, the Company had 51,256,627 and 38,656,627 shares of common stock issued and outstanding, respectively.
 
On April 10, 2007, the Company completed a forward stock split by issuing two additional shares of common stock for every one share previously issued.
 
On July 17, 2007, in connection with its Exchange Agreement with the Subsidiary, Parent issued 2,780,000 shares of its previously authorized but unissued common stock in exchange for all the issued and outstanding common stock of Subsidiary. The 2,780,000 shares have been reflected as though they were issued at the inception of the Subsidiary, with a reverse merger adjustment that represents the shareholders of the public shell at the time of the recapitalization.
 
During July, 2007, in connection with its Exchange Agreement with Subsidiary, Parent issued 100,000 shares of common stock to private placement subscribers at $10.00 per share.
 
 
On October 31, 2007 the Board of Directors approved the issuance of a private placement memorandum for 135,000 shares of common stock at $10.00 per share. On January 22, 2008, we completed a private placement of 135,000 shares of our common stock at a purchase price of $10.00 per share to persons who were not “U.S. Persons” within the meaning of Regulation S (“Regulation S”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Also, stock offering costs of $91,401 have been recorded against capital in excess of par value.
 
During November 2007, the Board of Directors authorized the granting of options to purchase 200,000 shares of common stock at $10.00 per share. The fair value of each option granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted-average assumptions; risk-free interest rates of 4.4%, expected dividend yields of zero, expected life of 10 years, and expected volatility of 147.95%. The options vested immediately and were valued in total at $2,366,186. Options granted under the Plan are subject to the Plan being approved by the stockholders of the Company within one year from the date the Plan was adopted.
 
On January 22, 2008, the Company completed a private placement of 135,000 shares of its common stock at a purchase price of $10.00 per share to persons who were not “U.S. Persons” within the meaning of Regulation S (“Regulation S”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Company received gross proceeds from the placement of $1,350,000 and net proceeds of approximately $1,258,600 after deducting $30,000 in placement fees paid to registered investment dealers in Canada and other offering costs.
In August 2008, we issued the NSC 2008 Note in the principal amount of $250,000. In November 2010, the Company entered into an agreement with NSC Investments Ltd. to issue 585,000 units (“Units”), at a conversion price per Unit of $.20, each Unit consisting of one share of common stock and a common stock purchase warrant to purchase one share of common stock at an exercise price of $.30 per share, to settle the remaining balance of the $100,000 of principal debt and $17,500 of accrued interest on the NSC 2008 Note.
 
During August 2008, the Company issued 45,000 warrants valued at approximately $338,000 to purchase stock for services rendered. The warrants vest over various terms. During the year ended August 31, 2009, the Company recognized compensation expense of $216,479. The fair value of each warrant granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rates of 3.74% to 3.97%, expected dividend yields of zero, expected life of 10 years and expected volatility of 136.94% to 140.60%.
 
During the fiscal year ended August 31, 2008, the Company authorized the issuance of 100,000 shares of common stock to Mr. Steve Wozniak. The shares were valued at $1,850,000 based on the fair market value of the stock on the date the shares were issued.
 
In September 2008, we entered into a subscription agreement with Richard Genovese and/or his affiliates (collectively “Genovese”), pursuant to which Genovese purchased 100,000 shares or our common stock and 100,000 warrants with an exercise price of $1.50 for $150,000.
 
In October 2008, we entered into an agreement with Euro Trend Trader, Inc. (“ETT”) to provide investor relations and public relations. We agreed to pay ETT $5,000 start up fees and $3,000 per month thereafter. Additionally, we paid ETT 20,000 shares of our common stock for coverage of the Company by a registered market maker and an additional 10,000 for investor relations services.
 
In November 2008, we borrowed $5,000 from a consultant to the Company which was payable by December 6, 2008. The lender was to receive 200 shares of our common stock per month as interest and an additional consideration of 25,000 warrants with an exercise price of $0.25. In February 2009 we repaid the principal and interest in full and did not issue any shares or warrants.
 
In November 2008 we issued 5,000 shares of our common stock to Howard Family Trust as a bonus in consideration of the Company’s failure to pay rent on a timely basis. The shares were valued at $14,000 based on the fair market value of the stock on the date the shares were issued.
 
 
In May 2009, we entered into a subscription agreement with Robert Kolson, pursuant to which Mr. Kolson purchased 75,000 shares of our common stock and 37,500 warrants with an exercise price of $3.00 for $150,000.
 
During the year ended August 31, 2009, the Company issued an aggregate of $1,750,000 in 2009 Convertible Debentures. At the holder's sole discretion, the holder was entitled to convert the Debentures, in whole or in part into common shares of the Company at a conversion price of $0.10 per share. As additional compensation, in conjunction with the issuance of the 2009 Convertible Debentures, the Company issued 17,500,000 share purchase warrant certificates with each warrant exercisable into one common share at $0.15 per share for a period of three years commencing from the date of the issuance of the warrant certificate. On September 25, 2009 all of the $1,750,000 of 2009 Convertible Debentures were converted into 17,500,000 common shares and 17,500,000 share purchase warrants exercisable at $0.15 per share remained outstanding.
 
On September 15 2009, the Company completed a reverse stock split on a one to ten (1:10) basis, such that each shareholder now holds one new share for every ten shares previously held. The Company’s share transactions disclosed in the financial statements have been restated retroactively to reflect the reverse stock split for all periods presented.
 
On October 30, 2009 we entered into a subscription agreement with Janspec Holdings Limited ("Janspec"), pursuant to which Janspec purchased 428,572 common shares and 428,572 warrants with an exercise price of $0.60 for $150,000.
 
On November 7, 2009 we entered into a subscription agreement with Peninsula Merchant Syndications Corp. ("Peninsula"), pursuant to which Peninsula purchased 285,715 shares of our common stock and 285,715 warrants with an exercise price of $0.60 for $100,000.
 
On November 9, 2009, we issued 32,000 common shares to Weintraub Genshlea Chediak in lieu of outstanding legal services provided to the Company. The shares were valued at $11,200 based on the fair market value of the stock on the date that the shares were issued.
 
On November 13, 2009 we entered into a subscription agreement with Robert Kolson, pursuant to which Mr. Kolson purchased 285,715 shares of our common stock and 285,715 warrants with an exercise price of $0.60 for $100,000.
 
On January 20, 2010 we issued 170,000 common shares to Howard Family Trust in lieu of outstanding rent, property taxes and insurance. The shares were valued at $85,000 reflective of the fair market value of the stock on the date the shares were issued.
 
On November 8, 2010, we entered into a subscription agreement with Janst Limited, pursuant to which Janst purchased 1,250,000 shares of our common stock and 1,250,000 warrants with an exercise price of $.30 for $250,000.
 
On November 8, 2010, we entered into a subscription agreement with NSC Investments Ltd., pursuant to which NSC purchased 250,000 shares of our common stock and 250,000 warrants with an exercise price of $.30 for $50,000.
 
On November 8, 2010, we entered into a subscription agreement with Richard Genovese., pursuant to which Mr. Genovese purchased 250,000 shares of our common stock and 250,000 warrants with an exercise price of $.30 for $50,000.
 
On December 13, 2010, we entered into a subscription agreement with Musgrave Investments Ltd., pursuant to which Musgrave purchased 500,000 shares of our common stock and 500,000 warrants with an exercise price of $.30 for $100,000.
 
On May 6, 2011, we entered into a subscription agreement with Richard Genovese, pursuant to which Mr. Genovese purchased 600,000 shares of our common stock and 600,000 warrants with an exercise price of $.10 for $30,000.
 
 
On July 26, 2011, we entered into a subscription agreement with a private investor. The investor purchased 500,000 shares of our common stock and 500,000 warrants with an exercise price of $.10 for $25,000.
 
The fair value of the warrants issued in connection with the sale of common stock during the year ended August 31, 2011 was $151,496. The fair value of the warrants was estimated using the Black Scholes pricing method.
 
On November 22, 2011, we entered into a subscription agreement with a private investor. The investor purchased 2,666,667 shares of our common stock for an aggregate investment in the Company of $200,000.
 
On December 5, 2011, the Company entered into a subscription agreement with a private investor. The investor purchased 400,000 shares of our common stock and 400,000 warrants with an exercise price of $0.25 per share for an aggregate investment in the Company of $100,000.
 
On May 1, 2012, we entered into a subscription agreement with a private investor. The investor purchased 100,000 shares of our common stock for an aggregate investment in the Company of $20,000.
 
On May 2, 2012, we entered into subscription agreements with two private investors. The investors purchased 1,500,000 shares of our common stock for an aggregate investment in the Company of $300,000.
 
On August 8, 2012, we entered into a subscription agreement with a private investor. The investor purchased 3,000,000 shares of our common stock for an aggregate investment in the Company of $300,000. The fair value of the warrants issued in connection with the sale of common stock during the year ended August 31, 2012 was $64,200. The fair value of the warrants was estimated using the Black Scholes pricing method.
 
On October 16, 2012, the Company issued 5,714,286 shares to Janst Limited at a purchase price of $0.07 per share for an investment of $400,000.
 
NOTE 9 – OPTIONS AND WARRANTS
 
Stock Options
 
During November, 2007 the Board of Directors of the Company adopted and the stockholders at that time approved the 2007 Stock Plan (“the Plan”). The Plan provides both for the direct award or sale of shares and for the granting of options to purchase shares. Options granted under the plan may include qualified and non-qualified stock options. The aggregate number of shares that may be issued under the plan shall not exceed 750,000 shares of common stock, and are issuable to directors, officers, and employees of the Company. Awards under the plan will be granted as determined by Committees of the Board of Directors or by the Board of Directors. The options will expire after 10 years or 5 years if the option holder owns at least 10% of the common stock of the Company. The exercise price of a non-qualified option must be at least 85% of the market price on the date of issue. The exercise price of a qualified option must be at least equal to the market price or 110% of the market price on the date of issue if the option holder owns at least 10% of the common stock of the Company.
 
In November 2007, 200,000 stock options were granted with an exercise price equal to fair value at the date of grant. The term of the options granted under the Plan could not exceed 10 years and the stock options granted were vested immediately.
 
On August 1, 2008, we agreed to issue 30,000 stock options to certain board members for their services to the board.
 
 
On September 1, 2008 we granted 15,000 stock options to a certain officer and board member for his services performed as Chair of the Audit Committee and Chair of the Compensation Committee. The estimated value of the compensatory common stock purchase options granted to non-employees in exchange for services and financing expenses was determined using the Black-Scholes pricing model and the following assumptions: expected term of 10 years, a risk free interest rate of 3.97% to 4.40%, a dividend yield of 0% and volatility of 136.94% to 147.95%.
 
During the three months ended November 30, 2012 and 2011, the amount of the expense charged to operations for compensatory options granted in exchange for services was $-0- and $-0-, respectively.
 
The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees and non-employees of the Company. These options were granted in lieu of cash compensation for services performed.
 
   
Shares
   
Weighted Average
Exercise Price
 
                 
Outstanding, September 1, 2012
   
-0-
    $
-0-
 
                 
Granted
   
-
     
-
 
                 
Expired/Cancelled
   
-
     
-
 
                 
Exercised
   
-
     
-
 
                 
Outstanding, period ended November 30, 2012
   
-0-
    $
-0-
 
                 
Exercisable at November 30, 2012
   
-0-
    $
-0-
 
 
Stock Warrants
 
During the three months ended November 30, 2012, the Company issued no warrants in connection with the sales of common stock and conversion of debt into common stock.
 
   
Warrants
   
Weighted Average Exercise Price
             
Outstanding, September 1, 2012
   
32,440,625
  $
0.18
             
Granted
   
-0-
  $
-0-
             
Expired/Cancelled
   
-0-
  $
-0-
             
Exercised
           
             
Outstanding, period ended November 30, 2012
   
32,440,625
  $
0.18
             
Exercisable, period ended November 30, 2012
   
32,440,625
  $
0.18
 
   
Warrants Outstanding
   
Warrants Exercisable
 
Year
 
Exercise
Price
   
Number of
Warrants Outstanding
   
Weighted Average Contractual Life (Years)
   
Number Exercisable
   
Weighted Average Exercise Price
 
2008
  $ 2.00       100,000       0.40       100,000       2.00  
2009
    0.15       *10,000,000       0.17       10,000,000       0.15  
2009
    0.15       *2,500,000       0.23       2,500,000       0.15  
2009
    0.15       *500,000       0.25       500,000       0.15  
2009
    0.15       *1,700,000       0.39       1,700,000       0.15  
2009
    0.15       *150,000       0.41       150,000       0.15  
2009
    0.15       *50,000       0.43       50,000       0.15  
2009
    0.15       *50,000       0.50       50,000       0.15  
2009
    0.15       *500,000       0.72       500,000       0.15  
2009
    0.15       *2,050,000       0.72       2,050,000       0.15  
2011
    0.30       6,600,625       3.00       6,600,625       0.30  
2011
    0.30       500,000       3.10       500,000       0.30  
2011
    0.10       6,840,000       3.50       6,840,000       0.10  
2011
    0.10       500,000       3.61       500,000       0.10  
2012
    0.25       400,000       3.96       400,000       0.25  
Total
            32,440,625               32,440,625          
 
* The 17,500,000 warrants (“2009 Warrants”) issued in conjunction with the 2009 Convertible Debentures contain an anti-dilution provision that states it is specifically agreed that in the event that the Company shall reduce the number of outstanding shares of Common Stock by combining such shares into a smaller number of shares, then, in such case, the then applicable Exercise Price per Warrant Share purchasable pursuant to the Warrant Certificate in effect at the time of such action will not be changed. On January 30, 2012, the Company extended respective exercise dates of the 2009 Warrants for one additional year from their original expiry dates.
 
NOTE 10 - INCOME TAXES
 
The Company followed the provisions of ASC 740, “Income Taxes” (“ASC 740”). As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits. The Company believes there are no potential uncertain tax positions and all tax returns are correct as filed. Should the Company recognize a liability for uncertain tax positions; the Company will separately recognize the liability for uncertain tax positions on its balance sheet. Included in any liability for uncertain tax positions, the Company will also record a liability for interest and penalties. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes.
 
Substantial changes in the company’s ownership have occurred, and therefore there is an annual limitation of the amount of Parent’s pre-acquisition net operating loss carryforward which can be utilized. Accordingly, only the post-acquisition net operating loss carryforward has been included for Parent.
 
The Company has not made provision for income taxes in the three months ended November 30, 2012 and 2011, respectively, since the Company has the benefit of net operating losses carried forward in these periods.
 
 
NOTE 11 – COMMITMENTS AND CONTINGENCIES
 
Consulting Agreement
 
Effective September 1, 2010, the Company entered into a consulting agreement with, L.A. Dreamline II, LLC, a marketing consultant (a related party), for a monthly consulting fee of $15,000. The consulting agreement is for a term of 25 months. For the three months ended November 30, 2012 and 2011, the Company paid the related party $45,000 and $45,000, respectively.
 
NOTE 12 – LEGAL PROCEEDINGS
 
We are party to the following litigation matter.
 
Stride & Associates. We are a defendant in a suit filed September 2, 2009 by Stride & Associates, Inc. in the Superior Court of California, Los Angeles Superior Court-North Central District, for the amount of $19,500, plus interest, for services allegedly rendered by the plaintiff to the Company in connection with personnel placement. The plaintiff has filed a judgment in the amount of $21,620 against us in this litigation, and the Company has accrued the full amount. We intend to settle this matter.
 
NOTE 13 – SUBSEQUENT EVENTS
 
On December 24, 2012 the Company entered into a Promissory Note with a private party whereby the Company received a loan for $75,000. The note has a repayment date of December 23, 2013 and bears an interest rate of 10% per annum.

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

The following discussion of our consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto and the other financial information included elsewhere in this report.
 
Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

LYYNKS Overview

We are an entertainment software technology company that is developing media and entertainment related distribution applications for the online distribution of any content, including audio and video content.  Our software application under development is called Lyynks, an application that delivers any content to a user’s computer desktop television set, tablet or smart phone.  Lyynks is being developed as a global Internet content broadcast platform that can facilitate for its customers the online distribution of music, television, movies, graphics, interactive advertising and social media.

On March 8, 2012, the Company filed in Nevada Articles of Merger providing for the merger of its wholly-owned subsidiary, Lyynks, Inc., into the Company, as the surviving corporation, and in the merger changing the Company’s name to Lyynks Inc., effective upon approval for trading purposes by FINRA  In the merger, which was for the sole purpose of changing the Company’s name, there were no other changes to the Articles of Incorporation  or any changes to the capital stock of the Company,  or to its By-Laws or its officers and directors.  Pursuant to FINRA approval, the change of our name to Lyynks Inc. was effective May 14, 2012.

Critical Accounting Policies and Estimates

Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR60") issued by the SEC, suggests that companies provide additional disclosure and commentary on those accounting policies considered most critical. FRR 60 considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations, and requires significant judgment and estimates on the part of management in its application. For a summary of the Company's significant accounting policies, including the critical accounting policies discussed below, see the accompanying notes to the consolidated financial statements.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported  amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions. The following accounting policies require significant management judgments and estimates:

 
The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows expected to be generated by those assets are less than the carrying amount of those items. The Company’s cash flow estimates are based on limited operating history and have been adjusted to reflect management’s best estimate of future market and operating conditions. The net carrying values of assets deemed not recoverable are reduced to fair value. The Company’s estimates of fair value represent management’s best estimates based on industry trends.

We account for equity instruments issued to consultants and vendors in exchange for goods and services in accordance with the provisions of ASC topic 505-50, “Equity Based Payments to Non-Employees”, (formerly EITF Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services”), and ASC 470-20-25, “Debt with Conversion and Other Options (“ASC 470-20-25”). The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. In accordance with ASC 470-20-25, an asset acquired in exchange for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity on the grantor’s balance sheet once the equity instrument is granted for accounting purposes. Accordingly, the Company records the fair value of the fully vested, non-forfeitable common stock issued for future consulting services as prepaid expenses in its consolidated balance sheet.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There is no assurance that actual results will not differ from these estimates.

See footnotes in the accompanying financial statements regarding recent financial accounting developments.

Results of Operations

Three Months Ended November 30, 2012 and 2011

We had a net loss of $469,774 for the three months ended November 30, 2012 compared to a net loss of $344,902 for the three months ended November 30, 2011.

Operating Expenses:  Operating expenses were $469,774 and $344,902 for the three months ended November 30, 2012 and 2011, respectively.  The increase of $124,872 was primarily due to an increase in salaries and wages.

Other income (expense):  Other income (expense) was $-0- for the three months ended November 30, 2012 and November 30, 2011.

As of the date of this report, we have not generated any revenues.  As a result, we have generated significant operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future as we attempt to expand our infrastructure and development activities. Our ability to continue may prove more expensive than we currently anticipate and we may incur significant additional costs and expenses.

We are a development stage company and are in the early stages of developing our products and services. We have not yet successfully developed any of our products and services to the final completion stage. The diversity of our products, the competitive entertainment industry, lack of liquidity and the current economic downturn, make it difficult for us to project our near-term results of operations. These conditions could further impact our business and have an adverse effect on our financial position, results of operations and/or cash flows.


Liquidity and Capital Resources

As of November 30, 2012, we had a stockholders deficit of $414,451 and a working capital deficit of $414,461. At November 30, 2012, total assets decreased to $197,505, from total assets of $275,537 at August 31, 2012. The decrease is primarily due to the loss from operations resulting in a lower cash position at November 30, 2012.
 
Net cash used in operating activities was $472,494 and $347,395 for the three months ended November 30, 2012 and 2011, respectively. The increase of $125,099 in cash used by operating activities was primarily due to the increase in operating expenditures, including legal and accounting costs. Net cash used in investing activities was $3,115 and $19,953 for the three months ended November 30, 2012 and 2011, respectively.  Investing activities for the three months ended November 30, 2012 were attributable to the purchase of computers and office equipment.  Net cash provided by financing activities was $400,000 and $365,000 for the three months ended November 30, 2012 and 2011, respectively. During the three months ended November 30, 2012, the Company received proceeds of $400,000 from the sale of common stock, and Richard Genovese, a Director of the Company ("Genovese" ), converted $661,000 of debt owed to him into 6,610,000 common shares at a conversion price per share of $0.10 per share.  As of November 30, 2012 and August 31, 2012, the amount due Genovese was $510 and $661,510 respectively. The advances are non-interest bearing.
 
We are a development stage company and are in the early stages of developing our products and services. We have not yet successfully developed any of our products and services to the final completion stage. The diversity of our products, the competitive entertainment industry, lack of liquidity and the current economic downturn, make it difficult for us to project our near-term results of operations. These conditions could further impact our business and have an adverse effect on our financial position, results of operations and/or cash flows.

As of the date of this report, we have not generated any revenues.  As a result, we have generated significant operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future as we attempt to expand our infrastructure and development activities. Our ability to continue may prove more expensive than we currently anticipate and we may incur significant additional costs and expenses.

The Company has suffered recurring losses from operations and has an accumulated deficit of $17,192,167 at November 30, 2012. Primarily as a result of our recurring losses and our lack of liquidity, the Company has received a report from our independent auditors that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. We have delayed payment of a substantial amount of accounts payable and accrued expenses and reduced our expenses to a minimum level. Our existing cash and cash equivalents will not be sufficient to fund our operations. Unless we receive liquidity from new purchase orders, obtain additional capital, loans or sell or license assets, we may be required to seek to reorganize our business or discontinue operations and liquidate our assets. There can be no assurance that the Company will be able to secure sufficient financing or on terms acceptable to the Company. If additional funds are raised through the issuance of equity securities, the percentage ownership of our current stockholders is likely to or will be reduced.

Going Concern Uncertainties

As of the date of this report, there is doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our business operations.  Our future success and viability, therefore, are dependent upon our ability to generate capital financing.  The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders.

Commitments and Contractual Obligations

We did not have any commitments or contingencies as at November 30, 2012.


Off-Balance Sheet Arrangements

As of November 30, 2012, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports 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 our chief executive and financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost- benefit relationship of possible controls and procedures.
 
As of November 30, 2012, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective.
 
Changes in Internal Controls
 
There have been no changes in the Company's internal controls over financial reporting that occurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
 
Limitations on the Effectiveness of Controls
 
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. The Company's chief executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective at that reasonable assurance level.
 
PART II — OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS

We are party to the following litigation matter.

Stride & Associates.  We are a defendant in a suit filed September 2, 2009 by Stride & Associates, Inc. in the Superior Court of California, Los Angeles Superior Court-North Central District, for the amount of $19,500, plus interest, for services allegedly rendered by the plaintiff to the Company in connection with personnel placement.   The plaintiff has filed a judgment  in the amount of $21,620.27 against us in this litigation, and the Company has accrued the full amount.  We intend to settle this matter.
 

ITEM 6.  EXHIBITS

(a)           Exhibits
 
31
 
Certification of Chief Executive and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
     
32
 
 
Certification of Chief Executive and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. **
 
*
 
Filed herewith.
 
**
 
Furnished herewith.
 
 
SEC Ref. No.
 
Title of Document
 
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Label Linkbase Document
101.PRE
XBRL Taxonomy Presentation Linkbase Document

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.
 


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

         
   
LYYNKS INC.
(Registrant)
   
         
 
Date: January 14, 2013
 
By:  /s/ ROBERT ROSNER     
Robert Rosner
   
   
President, Chief Executive and Chief Financial Officer