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EXCEL - IDEA: XBRL DOCUMENT - CelLynx Group, Inc.Financial_Report.xls
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EX-31.2 - SECTION 302 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - CelLynx Group, Inc.exhibit_31-2.htm
EX-31.1 - SECTION 302 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - CelLynx Group, Inc.exhibit_31-1.htm
EX-23.1 - REGISTERED AUDITOR'S CONSENT - CelLynx Group, Inc.exhibit_23-1.htm
EX-32.1 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - CelLynx Group, Inc.exhibit_32-1.htm
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10-K - SEPTEMBER 30, 2012 ANNUAL REPORT - CelLynx Group, Inc.cellynx_2012sept30-10k.htm
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EX-32.2 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - CelLynx Group, Inc.exhibit_32-2.htm
v2.4.0.6
Convertible Promissary Note
12 Months Ended
Sep. 30, 2012
Notes to Financial Statements  
Convertible Promissary Note

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of the completion of the reverse merger, the Company and the Holder reached an agreement whereby this Amended Note superseded the August 2006 Note and canceled the August 2006 Warrant.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 was 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 amendment, 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. The Company did not pay the note per the terms of the agreement and as of September 30, 2011, the total unpaid principal balance and accrued interest is $262,356 and $51,321, respectively.

 

Asher Convertible Promissory Note Issued July 22, 2010

On July 22, 2010, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher Note”).

 

Pursuant to the Asher Note, Asher loaned to the Company the principal amount of $55,000. The Asher Note bears interest at a rate of 8%, and was due on April 21, 2011. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion.  

 

Asher converted the $55,000 note for 3,763,967 shares of the Company’s common stock, and settled the note in full on March 10, 2011.

 

Asher Convertible Promissory Note Issued February 22, 2011

On February 22, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher February 2011 Note”).

 

Pursuant to the Asher February 2011 Note, Asher loaned to the Company the principal amount of $40,000. The Asher February 2011 Note bears interest at a rate of 8%, and is due on November 17, 2011. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Asher February 2011 Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Asher Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

 

Pursuant to the terms of the Asher February 2011 Note, while there remains any unpaid amounts owing on the Asher February 2011 Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Asher Note.

 

The Company has the right to pre-pay the Asher February 2011 Note during the first 120 days following the date of the Asher February 2011 Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

 

The Company determined that the Asher February 2011 Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance.  The Company recorded a $23,492 debt discount on the note.  

 

Asher converted the $40,000 note for 25,326,008 shares of the Company’s common stock, completing on November 17, 2011.

 

Asher Convertible Promissory Note Issued March 10, 2011

On March 10, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher March 2011 Note”).

 

Pursuant to the Asher March 2011 Note, Asher loaned to the Company the principal amount of $42,500. The Asher March 2011 Note bears interest at a rate of 8%, and is due on December 7, 2011. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Asher March 2011 Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock.  No registration rights were granted in connection with the purchase of the Asher March 2011 Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

 

Pursuant to the terms of the Asher March 2011 Note, while there remains any unpaid amounts owing on the Asher March 2011 Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Asher March 2011 Note.

 

The Company has the right to pre-pay the Asher March 2011 Note during the first 120 days following the date of the Asher March 2011 Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

The Company determined that the Asher March 2011 Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance.  The Company recorded a $24,960 debt discount related to the note.

 

The note was paid by the conversion into 225,942,808 common shares over various days completing April 12, 2012  

 

Asher Convertible Promissory Note Issued May 18, 2011

On May 18, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), in connection with the purchase by Asher of a Convertible Promissory Note (the “Asher May 2011 Note”).

 

Pursuant to the Asher May 2011 Note, Asher loaned to the Company the principal amount of $32,500. The Asher May 2011 Note bears interest at a rate of 8%, and is due on February 23, 2012. Asher may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Asher is prohibited under the Asher May 2011 Note from converting amounts if principal and interest that would result in Asher receiving shares, which when combined with shares of the Company’s common stock held by Asher, would result in Asher holding more than 4.99% of the Company’s then-outstanding common stock.  No registration rights were granted in connection with the purchase of the Asher May 2011 Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

 

Pursuant to the terms of the Asher May 2011 Note, while there remains any unpaid amounts owing on the Asher May 2011 Note, the Company may not incur additional debt without Asher’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Asher; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Asher May 2011 Note.

 

 

The Company has the right to pre-pay the Asher May 2011 Note during the first 120 days following the date of the Asher May 2011 Note by paying to Asher 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

The Company determined that the Asher May 2011 Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance.  The Company recorded a $19,087 debt discount related to the note.

 

The note was paid in full by conversion into 180,000,000 shares, over various days completing May 4, 2012.  

 

Yaretz Convertible Promissory Note Issued April 5, 2011 – Related Party

On April 5, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with one of its directors, Dwayne Yaretz (“Yaretz”), in connection with the purchase by Yaretz of a Convertible Promissory Note (the “Yaretz Note”).

 

Pursuant to the Yaretz Note, Yaretz loaned to the Company the principal amount of $50,000.  The Yaretz Note bears interest at a rate of 8%, and is due on January 5, 2012.  Yaretz may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined by dividing the amount to be converted by the conversion price which is equal to 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion.  Yaretz is prohibited under the Yaretz Note from converting amounts if principal and interest that would result in Yaretz receiving shares, which when combined with shares of the Company’s common stock held by Yaretz, would result in Yaretz holding more than 4.99% of the Company’s then-outstanding common stock.  No registration rights were granted in connection with the purchase of the Yaretz Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

 

Pursuant to the terms of the Yaretz Note, while there remains any unpaid amounts owing on the Yaretz Note, the Company may not incur additional debt without Yaretz’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Yaretz; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Yaretz Note.

 

The Company has the right to pre-pay the Yaretz Note during the first 120 days following the date of the Yaretz Note by paying to Yaretz 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

The Company determined that the Yaretz Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance.  The Company recorded a $29,365 debt discount related to the beneficial conversion feature.  

 

Financing Arrangements

During the fiscal year ended September 30, 2012 the Company entered into a number of financings, pursuant to certain convertible promissory note arrangements. Those arrangements are as follows;

 

Date Holder Amount Terms
January 5, 2012 Pickard & Green, CPA’s $50,000 Footnote (1)
January 10, 2012 Asher Enterprises Inc. $15,000 Footnote (2)
May 24, 2012 Asher Enterprises Inc. $37,500 Footnote (3)
September 4, 2012 Asher Enterprises Inc. $12,500 Footnote (4)

 

 

(1)Pursuant to the Note agreement dated January 5, 2012, the Company received the principal amount of $50,000, by way of settlement of certain debts owed by the Company to Holder. The Note bears interest at a rate of 8%, and is due on July 3, 2012. Holder may convert principal and unpaid interest on the note into shares of the Company’s common stock, with the number of shares issuable determined to be the amount obtained by dividing the amount to be converted by the conversion price which is the lesser of $0.0013 per share or 63% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. Holder is prohibited under the Note from converting amounts if principal and interest that would result in Holder receiving shares, which when combined with shares of the Company’s common stock held, would result in Holder owning more than 4.99% of the Company’s then-outstanding common stock. No registration rights were granted in connection with the purchase of the Note, and the shares of common stock, if any, issued upon conversion, will be restricted securities as defined pursuant to the terms of Rule 144.

 

Pursuant to the terms of the Note, while there remains any unpaid amounts owing on the Note, the Company may not incur additional debt without Holder’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed Holder; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Note.

 

The Company has the right to pre-pay the Note during the first 180 days following the date of the Note by paying to Holder 150% of the then-outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

The Company determined that the Note contained a beneficial conversion feature because the conversion rate was less than the share price at the date of issuance.

 

(2)On January 10, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, in connection with the purchase by Holder of a Convertible Promissory Note in the principle amount of $15,000. The January 2012 note bears interest at a rate of 8%, and is due on October 10, 2012. Pursuant to the terms of the note, the principle and accrued interest may be converted into shares of the Company’s common stock, with the number of shares issuable determined to be the lesser of a fixed rate of $0.00015 per share or a variable rate calculated by dividing the amount to be converted by the conversion price which is equal to 25% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. The Holder is prohibited under the note from converting amounts if principal and interest that would result in Holder receiving shares, which when combined with shares of the Company’s common stock held at the time, would result in Holder owning more than 4.99% of the Company’s then- outstanding common stock.

 

Pursuant to the terms of the Note, while there remains any unpaid amounts owing on the Note, the Company may not incur additional debt without Holder’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed holder; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Note.

 

 

 

The Company has the right to pre-pay the Note during the first 180 days following the date of the Note by paying to Holder 150% of the then- outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing. On July 9, 2012, subsequent to the balance sheet date, the Company paid $31,582 in full settlement of the note principle, accrued interest and prepayment penalty.

 

In conjunction with the issuance of the January 10, 2012 Convertible Note, the Company and the Holder entered into a January 6, 2012 amending agreement to the discount terms of two previous convertible notes between the parties as follows;

 

 

·Convertible Note dated May 18, 2011 in the principle amount of $32,500 was amended such that the conversion price was adjusted from a conversion price of 69% to market, as defined above (a 31% discount to market) to a conversion calculated to be the lesser of (i) A variable conversion price equal to 25% of market (a 75% discount to market) or (ii) A fixed conversion price defined to be $0.00015 per share.
·Convertible Note dated March 3, 2011 in the principle amount of $42,500 and with a remaining unpaid balance of $30,000 was amended such that the conversion price was adjusted from a conversion price of 69% to market, as defined above (a 31% discount to market) to a conversion calculated to be the lesser of (i) A variable conversion price equal to 25% of market (a 75% discount to market) or (ii) A fixed conversion price defined to be $0.00015 per share.

 

(3)On May 24, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, in connection with the purchase by Holder of a Convertible Promissory Note in the principle amount of $37,500. The May 2012 note bears interest at a rate of 8%, and is due on February 7, 2013. Pursuant to the terms of the note, the principle and accrued interest may be converted into shares of the Company’s common stock, with the number of shares issuable calculated at a variable rate calculated by dividing the amount to be converted by the conversion price which is equal to 51% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. The Holder is prohibited under the note from converting amounts if principal and interest that would result in Holder receiving shares, which when combined with shares of the Company’s common stock held at the time, would result in Holder owning more than 4.99% of the Company’s then- outstanding common stock.

 

Pursuant to the terms of the Note, while there remains any unpaid amounts owing on the Note, the Company may not incur additional debt without Holder’s approval except for (i) debt that was owed or committed as of the date of the SPA and of which the Company had informed holder; (ii) indebtedness to trade creditors or financial institutions in the ordinary course of business; (c) debt which in the aggregate does not exceed $250,000; or (d) debt the proceeds of which are used to repay the Note.

 

The Company has the right to pre-pay the Note during the first 180 days following the date of the Note by paying to Holder 150% of the then- outstanding principal amount and any accrued and unpaid interest, penalties, or other amounts owing.

 

On September 4, 2012, the Company entered into a Securities Purchase Agreement (the “SPA”) with an unrelated holder, in connection with the purchase by Holder of a Convertible Promissory Note in the principle amount of $12,500. The September 2012 note bears interest at a rate of 8%, and is due on June 4, 2013. Pursuant to the terms of the note, the principle and accrued interest may be converted into shares of the Company’s common stock, with the number of shares issuable calculated at a variable rate calculated by dividing the amount to be converted by the conversion price which is equal to 51% of the average of the three lowest trading prices of the Company’s common stock over the ten trading days prior to the date of the conversion. The Holder is prohibited under the note from converting amounts if principal and interest that would result in Holder receiving shares, which when combined with shares of the Company’s common stock held at the time, would result in Holder owning more than 4.99% of the Company’s then- outstanding common stock.

 

In the above transactions, the Notes were issued to accredited investors pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and rules promulgated pursuant thereto. Additionally, the underlying shares of common stock, if any, issued upon conversion of the Note will be issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and rules promulgated pursuant thereto. All certificates for such shares will contain the appropriate legends restricting their transferability absent registration or applicable exemption. The accredited investor received information concerning the Company and had the ability to ask questions about the Company.

 

 

 

The Company recorded interest expense relating to the convertible promissory notes of $35,063 and $25,049 for the years ended September 30, 2012 and 2011, respectively.

 

The Company amortized $114,897 and $101,730 of the debt discount for the years ended September 30, 2012 and 2011, respectively.

 

 

The following table summarizes the convertible promissory notes at September 30, 2012 and September 30, 2011:

 

    September 30,     September 30,  
    2012     2011  
Issued August 2006,
amended November 2007
  $ 262,356     $ 262,356  
Issued through September 30, 2011     220,000       220,000  
Issued during fiscal year 2012     115,000          
Less principle amounts converted     (170,000 )     (73,000  )
Less principle amount paid off       (15,000)          
Less: Debt discount     (21,868 )     (29,533 )
Convertible promissory notes, net   $ 390,488     $ 379,823