|Organization and Basis of Reporting
Note 1 Organization and Basis of Presentation
Organization and Line of Business
CelLynx Group, Inc. (the
Company) was originally incorporated under the laws of the State of Minnesota on April 1, 1998.
On July 23, 2008, prior
to the closing of a Share Exchange Agreement (described below), the Company entered into a Regulation S Subscription Agreement
pursuant to which the Company issued 10,500,000 shares of its common stock and warrants to purchase 10,500,000 shares of common
stock at an exercise price of $0.20 per share to non-U.S. persons for an aggregate purchase price of $1,575,000.
On July 24, 2008, the
Company entered into a Share Exchange Agreement, as amended, with CelLynx, Inc., a California corporation ("CelLynx-California"),
and twenty-three CelLynx-California shareholders who, immediately prior to the closing of the transaction, collectively held 100%
of CelLynx-Californias issued and outstanding shares of capital stock. As a result, the CelLynx-California shareholders
were to receive 77,970,956 shares of the Companys common stock in exchange for 100%, or 61,983,580 shares, of CelLynx-Californias
common stock. However, the Company had only 41,402,110 authorized, unissued and unreserved shares of common stock available, after
taking into account the shares of common stock issued in the July 23, 2008, financing described above. Pursuant to the Share Exchange
Agreement, in the event that there was an insufficient number of authorized but unissued and unreserved common stock to complete
the transaction, the Company was to issue all of the available authorized but unissued and unreserved common stock to the CelLynx-California
shareholders in a pro rata manner and then establish a class of Series A Convertible Preferred Stock (Series A Preferred
Stock) and issue that number of shares of Series A Preferred Stock such that the common stock underlying the Series A Preferred
Stock plus the common stock actually issued to the CelLynx-California shareholders would equal the total number of shares of common
stock due to the CelLynx-California shareholders under the Share Exchange Agreement. As a result, the Company issued to the CelLynx-California
shareholders an aggregate of 32,454,922 shares of common stock and 45,516,034 shares of Series A Preferred Stock. The Series A
Preferred Stock automatically would convert into common stock on a one-to-one ratio upon the authorized capital stock of the Company
being increased to include not less than 150,000,000 shares of common stock.
On November 7, 2008, the
Company amended the Articles of Incorporation to increase the number of authorized shares to 400,000,000 and converted the 45,516,034
shares of Series A Preferred Stock into 45,516,034 shares of the Companys common stock.
The exchange of shares
with CelLynx-California was accounted for as a reverse acquisition under the purchase method of accounting because the shareholders
of CelLynx-California obtained control of the Company. On August 5, 2008, NorPac Technologies, Inc., changed its name to CelLynx
Group, Inc. Accordingly, the merger of CelLynx-California into the Company was recorded as a recapitalization of CelLynx-California,
with CelLynx-California being treated as the continuing entity. The historical financial statements presented are the financial
statements of CelLynx-California. The Share Exchange Agreement has been treated as a recapitalization and not as a business combination;
therefore, no pro forma information is disclosed. At the date of the reverse merger transaction, the net assets of the legal acquirer
CelLynx Group, Inc. were $1,248,748.
As a result of the reverse
merger transactions described above, the historical financial statements presented are those of CelLynx-California, the operating
entity. Each CelLynx-California shareholder received 1.2579292 shares of stock in the Company for each share of CelLynx-California
capital stock. All shares and per-share information have been retroactively restated for all periods presented to reflect the reverse
On October 27, 2008, the
Board of Directors approved a change of the Companys fiscal year end from June 30 to September 30 to correspond to the fiscal
year of CelLynx-California. The fiscal year end change was effective for the year ended September 30, 2008.
The Company develops
and manufactures cellular network extenders which enable users to obtain stronger signals and better reception.
Going Concern and Exiting Development Stage
These consolidated financial
statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge
its liabilities in the normal course of business. The Company is unlikely to pay dividends or generate significant earnings in
the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial
support from its stockholders, the ability of the Company to obtain necessary equity and debt financing to continue operations
and to generate sustainable revenue. There is no guarantee that the Company will be able to raise adequate equity or debt financing
or generate profitable operations. For the year ended September 30, 2012, the Company incurred a net loss of $567,082. As of September
30, 2012, the Company had an accumulated deficit of $17,196,353. Further, as of September 30, 2012 and 2011, the Company had negative
working capital of $4,418,370 and $2,376,878, respectively, and had negative cash flows from operations of $310,913 and $691,810
for the years ended September 30, 2012 and 2011, respectively. These consolidated financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. Management intends to raise additional funds through equity or debt financing
and to generate cash from the sale of the Companys products and from license fees as further described below.
The Company was in the
development stage through June 30, 2009. In July 2009, the Company received the first 220 units of the Companys cellular
network extender, The Road Warrior, from its manufacturer. As of July 2009, the Company was fully operational and as such was no
longer considered a development stage company. During the period that the Company was considered a development stage company, the
Company incurred accumulated losses of approximately $10,948,625.