UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q


(Mark One)





xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDEDJune
30, 2009





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





Commission File No. 000-27147





CelLynx Group, Inc.





(Exact name of small business issuer as specified in its charter)





Nevada

95-4705831(State or other jurisdiction of incorporation or

(IRS Employer Identificationorganization)

No.)





25910 Acero, Suite 370


Mission Viejo, California 92691


(Address of principal executive offices)





(949) 305-5290


(Registrant's telephone number, including area code)





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. YesxNoo





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 than the
registrant was required to submit and post such files).  Yes  o No  o





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. (Check one):




Large Accelerated filer  o
Non-Accelerated FileroAccelerated Filer  o
Smaller Reporting Company x


The registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). YesoNox





APPLICABLE ONLY TO CORPORATE ISSUERS:





Indicate the number of shares outstanding of each issuer's classes of common stock, as of the latest practicable date: 134,021,216 issued and outstanding as of August 14, 2009.











TABLE OF CONTENTS





PagePART I
FINANCIAL INFORMATIONItem 1.
Financial Statements
3Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
21Item 3.
Quantitative and Qualitative Disclosures About Market Risk
27Item 4.
Controls and Procedures
27PART II
OTHER INFORMATIONItem 1.
Legal Proceedings
28Item 1A.
Risk Factors
28Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28Item 3.
Defaults Upon Senior Securities
28Item 4.
Submission of Matters to a Vote of Security Holders
28Item 5.
Other Information
28Item 6.
Exhibits
28











2


Part I – FINANCIAL INFORMATION





Item 1.  Financial Statements





CELLYNX GROUP, INC.(A Development Stage Company)CONSOLIDATED BALANCE SHEETSAS OF JUNE 30, 2009 AND SEPTEMBER 30, 2008June 30,


September 30,2009


2008(unaudited)ASSETSCURRENT ASSETS:Cash

$
26,736


$
599,024Other current assets


31,500



6,862TOTAL CURRENT ASSETS


58,236



605,886EQUIPMENT, net


12,688



9,658INTANGIBLE ASSETS, net


94,262



70,776OTHER ASSETS


16,190



11,526TOTAL ASSETS

$
181,376


$
697,846LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIES:Accrued liabilities

$
635,705


$
206,298Accrued interest


23,894



12,507Accrued derivative liabilities


-



5,677,156Convertible stockholder notes, net of debt discount of $5,110 and $28,943as of June 30, 2009 and September 30, 2008, respectively


97,890



11,057Convertible promissory notes, current portion


100,000



-TOTAL CURRENT LIABILITIES


857,489



5,907,018LONG TERM LIABILITIES:Convertible promissory note, net of debt discount of $155,598 and $241,067as of June 30, 2009 and September 30, 2008, respectively


106,758



21,289Convertible stockholder notes, net of debt discount of  $0 and $17,031


-



2,969TOTAL LIABILITIES

$
964,247


$
5,931,276COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' DEFICIT:Series A Preferred Stock, $0.001 par value;100,000,000 shares authorized;nil and 45,516,034  shares issued and outstandingas of June 30, 2009 and September 30, 2008, respectively


-



45,516Common stock, $0.001 par value, 400,000,000 authorized; 134,021,216 and80,552,812 shares issued and outstanding as of June 30, 2009and September 30, 2008, respectively


134,022



80,553Additional paid-in capital


10,031,732



2,335,949Deficit accumulated during the development stage


(10,948,625
)


(7,695,448
)Total stockholders' deficit


(782,871
)


(5,233,430
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
181,376


$
697,846The accompanying notes are an integral part of these consolidated financial statements.


3




CELLYNX GROUP, INC.(A Development Stage Company)CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2009 AND 2008 AND FOR THE PERIODFROM OCTOBER 11, 2005 (DATE OF INCEPTION) TO JUNE 30, 2009For the periodfrom October 11, 2005Three Months Ended


Nine Months Ended


(date of inception)June 30, 2009


June 30, 2008


June 30, 2009


June 30, 2008


to June 30, 2009(unaudited)


(unaudited)


(unaudited)


(unaudited)


(unaudited)Net Revenue

$
-


$
-


$
-


$
-


$
-Cost of Revenue


-



-



-



-



-Gross profit


-



-



-



-



-Operating expensesResearch and development


78,393



65,101



290,492



118,169



890,317General and administrative


1,302,290



346,584



2,653,517



1,015,568



7,786,543Total operating expenses


1,380,683



411,685



2,944,009



1,133,737



8,676,860Loss from operations

$
(1,380,683
)

$
(411,685
)

$
(2,944,009
)

$
(1.133,737
)

$
(8,676,860
)Non-operating income (expense):Interest income


-



33



961



33



7,253Interest and financing costs


(36,841
)


(13,114
)


(141,968
)


(361,827
)


(1,086,553
)Change in fair value of accrued beneficial conversion liability


-



(3,673
)


251,410



33,414



(900,582
)Change in fair value of accrued warrant liability


-



-



(419,571
)


-



(291,883
)Total non-operating expense


(36,841
)


(16,754
)


(309,168
)


(328,380
)


(2,271,765
)Loss before provision for income taxes


(1,417,524
)


(428,439
)


(3,253,177
)


(1,462,117
)


(10,948,625
)Provision for income taxes


-



-



-



-



-Net loss

$
(1,417,524
)

$
(428,439
)

$
(3,253,177
)

$
(1,462,117
)

$
(10,948,625
)Weighted average shares outstanding - Basic and Diluted:


130,965,347



34,204,121



121,491,043



30,822,384



46,351,720Earnings per share - Basic and Diluted:

$
(0.01
)

$
(0.01
)

$
(0.03
)

$
(0.05
)

$
(0.24
)The accompanying notes are an integral part of these consolidated financial statements.


4





CELLYNX GROUP, INC.(A Development Stage Company)CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICITFOR THE PERIOD FROM OCTOBER 11, 2005 (DATE OF INCEPTION) TO JUNE 30, 2009DeficitAccumulatedAdditional


During the


TotalPreferred Stock


Common Stock


Paid-in


Development


Stockholders'Shares


Amount


Shares


Amount


Capital


Stage


DeficitBalance, October 11, 2005 (Date of Inception)


-


$
-



-


$
-


$
-


$
-


$
-Shares issued for cash


28,120,280



28,120



18,800,734



18,801



215,043



-



261,964Shares issued for services


2,222,540



2,223



1,523,576



1,523



294,054



-



297,800Options issues to employees and non employees


-



-



-



-



16,652



-



16,652Net loss


-



-



-



-



-



(690,669
)


(690,669
)Balance, September 30, 2006


30,342,820


$
30,343



20,324,310


$
20,324


$
525,749


$
(690,669
)

$
(114,253
)Shares issued for services


10,764,576



10,764



6,829,678



6,830



122,273



-



139,867Net loss


-



-



-



-



-



(346,243
)


(346,243
)Balance, September 30, 2007


41,107,396


$
41,107



27,153,988


$
27,154


$
648,022


$
(1,036,912
)

$
(320,629
)Shares issued for cash


-



-



938,897



939



745,345



-



746,284Shares issued for services


4,408,638



4,409



4,362,037



4,362



563,231



-



572,002Fair value of stock options reclassified to share-based compensation liability


-



-



-



-



(89,618
)


-



(89,618
)Shares issued in merger with Norpac Technologies, Inc.


-



-



48,097,890



48,098



1,200,650







1,248,748Fair value of warrants transferred to liability


-



-



-



-



(731,681
)


-



(731,681
)Net loss


-



-



-



-



-



(6,658,536
)


(6,658,536
)Balance, September 30, 2008


45,516,034


$
45,516



80,552,812


$
80,553


$
2,335,949


$
(7,695,448
)

$
(5,233,430
)Conversion of preferred stock to common stock upon the increase of authorized shares.


(45,516,034
)


(45,516
)


45,516,034



45,516



-



-



-Reclassification of share based compensation liability to equity


-



-



-



-



2,701,572



-



2,701,572Fair value of share based compensation for employees and consultants


-



-



-



-



604,089



-



604,089Reclassification of beneficial conversion liability to equity


-



-



-



-



2,120,181



-



2,120,181Reclassification of warrant liability to equity


-



-



-



-



1,023,564



-



1,023,564Issuance of common stock for the purchase of licensing rights


-



-



57,143



57



7,372



-



7,429Issuance of common stock for promissory note


-



-



37,500



38



4,208



-



4,246Issuance of warrants for consulting services


-



-



-



-



111,155



-



111,155Issuance of common stock for accounting services


-



-



350,000



350



62,650



-



63,000Issuance of common stock for consulting services


-



-



3,722,727



3,723



686,277



-



690,000Issuance of common stock for cash


-



-



3,785,000



3,785



374,715



-



378,500Net loss


-



-



-



-



-



(3,253,177
)


(3,253,177
)Balance, June 30, 2009 (unaudited)


-


$
-



134,021,216


$
134,022


$
10,031,732


$
(10,948,625
)

$
(782,871
)
  Effective July 24, 2008, the Company effected a 1.2579 for 1 forward stock split of the authorized, issued and outstanding common stock, without change to par value. All share  amounts have been retroactively adjusted for all periods presented.
  Effective July 24, 2008, the Company issued Series A Preferred Stock on a pro rata basis to the shareholders of CelLynx, Inc.  All share amounts have been retroactively adjusted for all periods presented.
  The accompanying notes are an integral part of these consolidated financial statements.


5


CELLYNX GROUP, INC.(A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED JUNE 30, 2009 AND 2008 AND FOR THE PERIODFROM OCTOBER 11, 2005 (DATE OF INCEPTION) TO JUNE 30, 2009For the period fromNine Months


Nine Months


October 11,
2005
(date of inception)Ended


Ended


toJune 30, 2009


June 30, 2008


June 30, 2009(unaudited)


(unaudited)


(unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(3,253,177
)

$
(1,462,117
)

$
(10,948,625
)Adjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortization


4,968



1,157



8,065Warrants issued for services


111,155



-



111,155Stock issued for services


721,500



114,882



1,731,169Stock compensation expense for options issued to employees and consultants


604,089



394,896



3,245,847Change in fair value of accrued beneficial conversion liability


(251,410
)


(37,087
)


900,582Change in fair value of accrued warrant liability


419,571



-



291,883Non cash financing costs


-



328,630



833,321Amortization of debt discount


130,579



39,807



216,664Changes in operating assets and liabilities:Change in other assets


2,198



(2,198
)


(16,190
)Change in accrued liabilities and accrued interest


439,794



5,388



669,589Net cash used in operating activities

$
(1,070,733
)

$
(616,642
)

$
(2,956,540
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of equipment


(6,663
)


(4,259
)


(18,809
)Purchase of intangible assets


(16,392
)


(32,384
)


(87,777
)Net cash acquired in merger with Norpac Technologies, Inc.


-



-



1,250,114Net cash provided by (used in) investing activities

$
(23,055
)

$
(36,643
)

$
1,143,528CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from convertible promissory notes


75,000



7,000



325,000Proceeds from related parties


68,000



-



68,000Proceeds from issuance of common stock


378,500



716,904



1,386,748Proceeds from stockholders notes


-



-



60,000Net cash provided by financing activities

$
521,500


$
723,904


$
1,839,748NET (DECREASE) INCREASE IN CASH


(572,288
)


70,619



26,736CASH, BEGINNING OF PERIOD


599,024



2,371



-CASH, END OF PERIOD

$
26,736


$
72,990


$
26,736SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest

$
11,389


$
9,419


$
11,389Cash paid for income taxes

$
-


$
-


$
-SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING:Issuance of stock for licensing agreement

$
7,429


$
-


$
-Increase in convertible promissory note for interest payable

$
-


$
-


$
12,356Reclassification of share-based compensation liability to additional paid-in capital

$
2,701,572


$
-


$
2,701,572Reclassification of accrued beneficial conversion liability to additional paid-in capital

$
2,120,181


$
-


$
2,120,181Reclassification of accrued warrant liability to additional paid-in capital

$
1,023,564


$
-


$
1,023,564The accompanying notes are an integral part of these consolidated financial statements.


6




CELLYNX GROUP, INC.
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 (Unaudited)





Note 1 - Organization





The unaudited consolidated financial statements have been prepared by CelLynx Group, Inc. (the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which
are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included
in the Company’s Annual Report on Form 10-K. The results for the three months and nine months ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending September 30, 2009.





Organization and Line of Business





CelLynx Group, Inc., formerly known as NorPac Technologies, Inc. (hereinafter referred to as “CelLynx” or the “Company”), was originally incorporated under the laws of the State of Minnesota on April 1, 1998.





On July 23, 2008, prior to the closing of the Share Exchange Agreement (described below), the Company entered into a Regulation S Subscription Agreement pursuant to which the Company issued 10,500,000 shares of its common stock and warrants to purchase 10,500,000 shares of common stock at an exercise price of $0.20 per share
to non-U.S. persons for an aggregate purchase price of $1,575,000.





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





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





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





7


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





On October 27, 2008, the Board of Directors approved a change of the Company’s fiscal year end from June 30 to September 30 to agree with the fiscal year of CelLynx-California.  The fiscal year end change was effective for the year ended September 30, 2008.





The Company develops and manufactures a cell phone signal amplifier. As of June 30, 2009, the Company has not commenced planned operations.





Development Stage Company and Going Concern





The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (“SFAS”) No. 7, "Accounting and Reporting by Development Stage Enterprises." The Company is in the development stage since planned principal activities have not commenced and the Company has not
generated any revenue. In a development stage company, management devotes most of its activities to developing a market for its products and services. 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 and the ability of the Company to emerge from the development stage 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 three and nine months ended June 30, 2009 and for the period from October 11, 2005 (Date of Inception)
to June 30, 2009, the Company incurred net losses of $1,417,524, $3,253,177, and $10,948,625, respectively.  For the three and nine months ended June 30, 2008, the Company incurred net losses of $428,439 and $1,462,117, respectively.  As of June 30, 2009 and September 30, 2008, the Company has a deficit accumulated during the development stage of $10,948,625 and $7,695,448, 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.





Note 2 - Summary of Significant Accounting Policies





Basis of Presentation





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





8


Use of Estimates





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





Concentration of Credit Risk





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





Equipment





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





Intangible Assets





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





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





Impairment or Disposal of Long-lived Assets





The Company applies the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  SFAS No. 144 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines
of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair values based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly
from such estimates.  Based on its review, the Company believes that as of June 30, 2009 and September 30, 2008, there were no significant impairments of its long-lived assets.





9


Revenue Recognition





The Company's financial statements are prepared under the accrual method of accounting.  Revenues will be recognized in the period the products are shipped.





Accrued Warrant Liability and Accrued Beneficial Conversion Liability





Pursuant to Emerging Issues Task Force (“EITF”) No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the Company recorded the fair value of all outstanding options, warrants, and beneficial conversion features as accrued
liabilities at September 30, 2008, since the Company did not have enough authorized shares to satisfy the exercise of its outstanding, options, warrants, and the conversion of the convertible promissory notes.  The Company reclassified the liabilities into additional paid-in capital on November 7, 2008 when the Company increased the number of authorized shares to 400,000,000.





Fair Value of Financial Instruments





SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial instruments held by the Company. SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), adopted in January 1, 2008, defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the consolidated balance sheets for other current assets and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation
hierarchy are defined as follows:





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





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





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





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





SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115,” became effective for the Company on October 1, 2008. SFAS No. 159 provides the Company with the irrevocable option to elect fair value for the initial and subsequent
measurement for certain financial assets and liabilities on a contract-by-contract basis with the difference between the carrying value before election of the fair value option and the fair value recorded upon election as an adjustment to beginning retained earnings. The Company chose not to elect the fair value option.





10


Income Taxes





The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”) and FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). SFAS 109 requires a company to use the asset and liability method of accounting
for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized.  Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.





Under FIN 48, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.





Earnings Per Share





The Company reports earnings per share in accordance with SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires presentation of basic and diluted losses per share in conjunction with the disclosure of the methodology used in computing such losses per share. Basic net loss per share is computed by dividing
the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period, plus the potential dilutive effect of common shares issuable upon exercise or conversion of outstanding stock options and warrants during the period.  Due to the net loss, none of the potential dilutive securities have been included in the
calculation of dilutive earning per share since their effect would be anti-dilutive.





Stock-Based Compensation





The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s
requisite service period. Under SFAS 123R, the Company’s volatility is based on the historical volatility of the Company’s stock or the expected volatility of similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.





The Company uses the Black-Scholes option-pricing model which was developed for use in estimating the fair value of options. Option-pricing models require the input of highly complex and subjective variables including the expected life of options granted and the Company’s expected stock price volatility over a period
equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect the estimated value of the Company’s employee stock options, it is management’s opinion that the Black-Scholes option-pricing model may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with SFAS 123R using an option-pricing model, that value may not
be indicative of the fair value observed in a willing buyer/willing seller market transaction.





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





11


Recent Accounting Pronouncements





In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. It is intended to eliminate the diversity in practice regarding the accounting for transactions between equity and noncontrolling interests by requiring that they be treated as equity transactions. Further, it requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. SFAS 160 also establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result
in deconsolidation, requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated, and requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the noncontrolling owners of a subsidiary, among others.  The Company has determined the adoption of SFAS will not have a material impact to the Company’s consolidated financial position or consolidated
results of operations.





In April 2009, the FASB issued three related FASB Staff Positions: (i) FSP FAS No. 115-2 and FAS No. 124-2, “Recognition of Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”), (ii) FSP FAS No. 107-1 and APB No. 28-1, “Interim Disclosures about Fair Value of Financial
Instruments” (“FSP FAS 107-1 and APB 28-1”), and (iii) FSP FAS No. 157-4, “Determining the Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”), which are effective for interim and annual reporting periods ending after June 15, 2009. FSP FAS 115-2 and FAS 124-2 modifies the requirement for recognizing other-than-temporary impairments, changes the existing
impairment model, and modifies the presentation and frequency of related disclosures. FSP FAS 107-1 and APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157. The adoption of these FASB Staff Positions did not have a material impact on the Company’s consolidated financial statements.





In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”) [ASC 855-10-05], which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be
issued. SFAS 165 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS 165 is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted this Standard during the second quarter of 2009. SFAS 165 requires that public entities evaluate subsequent events through the date that the financial statements are issued. The Company has evaluated subsequent events through the time
of filing these financial statements with the SEC.





In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”) [ASC 860], which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly
if the entity has continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company has not completed its assessment of the impact SFAS 166 will have on its consolidated financial statements.





In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”) [ASC 810-10], which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS 167 clarifies
that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also requires additional disclosures about a company’s involvement in variable interest
entities and any significant changes in risk exposure due to that involvement. SFAS 167 is effective for fiscal years beginning after November 15, 2009. The Company has not completed its assessment of the impact SFAS 167 will have on its consolidated financial statements.


12





In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles a Replacement of FASB Statement No. 162” (“SFAS 168”). This Standard establishes the FASB Accounting Standards CodificationTM (the “Codification”)
as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective
date, all existing accounting standard documents will be superseded. The Codification is effective for the Company in the third quarter of 2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature.





Note 3 - Equipment





Equipment consists of the following:





June 30,


September 30,2009


2008Office furniture & equipment

$
9,879


$
4,211Computer equipment


8,930



7,93518,809



12,146Less: accumulated depreciation


(6,121
)


(2,488
)Equipment, net

$
12,688


$
9,658





The Company recorded depreciation expense of $1,314 and $3,633, for the three and nine months ended June 30, 2009, respectively, $446 and $852, for the three and nine months ended June 30, 2008, respectively, and $6,121 for the period from October 11, 2005 (date of inception) to June 30, 2009.





Note 4 - Intangible Assets





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





June 30,


September 30,2009


2008Patents

$
75,590


$
59,198Trademarks


12,187



12,187License rights


8,429



-96,206



71,385Less: accumulated amortization


(1,944
)


(609
)Intangibles, net

$
94,262


$
70,776





The Company recorded amortization expense related to trademarks of $515 and $1,335 for the three and nine months ended June 30, 2009, $305 and $305 for the three and nine months ended June 30, 2008, respectively, and $1,944 for the period from October 11, 2005 (date of inception) to June 30, 2009.  No amortization
has been recorded for the patents as of June 30, 2009, as the patents have not been issued to the Company.


13





Note 5 - Convertible Promissory Notes





Convertible Promissory Note Issued August 15, 2006





On August 15, 2006, the Company issued a secured promissory note (the “August 2006 Note”) for $250,000 to an unrelated entity (the “Holder”).  On November 10, 2007, the August 15, 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 any then accrued but unpaid interest, shall be due and payable upon the earlier of (i) November 9, 2010 at the written request of the holder to the Company, or (ii) when, upon or after the occurrence of an event of default.  At
the date of conversion, the Company determined that the Amended note had a beneficial conversion feature with a fair value of $767,047. The Company recorded a debt discount of $262,356 and expensed as financing costs the $504,691 of the beneficial conversion feature that exceeded the principal balance.





Convertible Promissory Note Issued February 19, 2009





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





Convertible Promissory Note Issued March 3, 2009





On March 3, 2009, the Company issued an unsecured convertible promissory note to an unrelated third party for an aggregate principal balance of $25,000 with a conversion price of $0.20.  The convertible promissory note was due on April 30, 2009 and is non-interest bearing.  However, the note was subsequently
amended to extend the due date to May 31, 2009.  As of June 30, 2009, the promissory note is in default for non-payment and due immediately.  As of the date these consolidated financial statements are issued, the Company is working with the unrelated third party to extend the maturity date.





The Company recorded interest expense relating to the convertible promissory notes of $3,706 and $9,255 for the three and nine months ended June 30, 2009, respectively, $1,670 and $6,670 for the three and nine months ended June 30, 2008, respectively, and $30,311 for the period ended October 11, 2005 (date of inception)
to June 30, 2009.





The Company amortized $28,489 and $89,715 of the debt discount for the three and nine months ended June 30, 2009, respectively, and $106,758 for the period ended October 11, 2005 (date of inception) to June 30, 2009.  The Company did not amortize any debt discount for the three and nine months ended June 30, 2008,
as there were no such debt discounts during the period.  As of June 30, 2009 and September 30, 2008, the unamortized debt discount is $155,598 and $241,067, respectively.


14





The following table summarized the convertible promissory notes:





Description

BalanceBalance, September 30, 2008, net

$
21,289Issue convertible note, February 19, 2009


75,000Issue convertible note, March 3, 2009


25,000Additional debt discounts


(4,246
)Amortization of debt discounts


89,715Balance, June 30, 2009, net (unaudited)


206,758Less, current portion (unaudited)


(100,000
)Convertible note, long term (unaudited)

$
106,758





Note 6 - Convertible Stockholder Notes





Stockholder Notes Issued March 27, 2007





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





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





On October 25, 2007, the Company issued convertible promissory notes to the above stockholders.  Each note was for $10,000 which included the $6,200 that was previously advanced and an additional $3,800.  The combined total for the two convertible promissory notes was $20,000.  The promissory
notes bear interest at 4% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days, and mature on October 25, 2009.





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


15





The Company recorded interest expense related to the notes of $597 and $1,796 for the three and nine months ended June 30, 2009, respectively, $326 and $1,744, for the three and nine months ended June 30, 2008, and $5,222 for the period from October 11, 2005 (date of inception) to June 30, 2009.





The Company amortized $3,974 and $40,864 of the debt discount for the three and nine months ended June 30, 2009, and $54,890 for the period from October 11, 2008 (date of inception) to June 30, 2009.  The Company did not amortize any debt discount for the three and nine months ended June 30, 2008, as there were
no such debt discounts during the period.  As of June 30, 2009 and September 30, 2008 the unamortized debt discount is $5,110 and $45,974, respectively.





Stockholder Note Issued February 4, 2009





On February 4, 2009, the Company issued an unsecured convertible promissory note to a related party for an aggregate principal amount of $43,000.  The convertible promissory note has a conversion price of $0.20.  The convertible promissory note was due on March 31, 2009 and was non-interest bearing.  However,
the note was subsequently amended to extend the due date to May 31, 2009 and accrue interest from the inception of the note at a rate of 4.0%.  As of June 30, 2009, the promissory note is in default for non-payment and due immediately.  As of the date these consolidated financial statements are issued, the Company is working with the related party to extend the maturity date.








The Company recorded interest expense related to the note of $693 and $957 for the three and nine months ended June 30, 2009, respectively, and $957 for the period from October 11, 2005 (date of inception) to June 30, 2009.





Note 7 - License Agreement





On January 12, 2009, the Company entered into a License Agreement with an unrelated party.  The License Agreement gave the Company the right to manufacture, have manufactured, use, import, and offer to sell, lease, distribute or otherwise exploit the technology rights and intellectual rights.  The License
Agreement has a term of ten years.  As consideration for the License Agreement, the Company issued 57,143 shares of its common stock and paid $1,000 in cash.  The Company determined the fair value of the License Agreement to be $7,429 based on the market value of its common stock on the date of the agreement plus the $1,000, for a total acquisition cost of $8,429, which is included in the accompanying consolidated balance sheets and is being amortized over ten years.





The Company recorded amortization expense related to the licensing agreement of $211 and $422 for the three and nine months ended June 30, 2009, and $422 for the period from October 11, 2005 (date of inception) to June 30, 2009.





Note 8 - Consulting Agreement





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


16





Number ofwarrants issued

Exercise Price300,000

$0.10 per share500,000

$0.15 per share600,000

$0.20 per share600,000

$0.25 per share2,000,000





The vesting schedule is as follows:





Number ofwarrants issued

Exercise Price

Vesting dates300,000

$0.10 per share

Immediately500,000

$0.15 per share

Immediately50,000

$0.20 per share

Immediately550,000

$0.20 per share

At time of extension600,000

$0.25 per share

12 months after the execution of consulting agreement2,000,000





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





At June 30, 2009, the Company determined the fair value of the 600,000 warrants to be $92,472.  The fair value was computed using the Black-Scholes option pricing model under the following assumptions: (1) expected life of 2.75 years; (2) volatility of 110%; (3) risk free interest of 2.22% and (4) dividend rate
of 0%.   The shares vest at 12 months after the execution of the consulting agreement; therefore, the Company will amortize the expense over the vesting period of one year.  The Company recorded $23,118 as consulting expense which represents 25% of the fair value at June 30, 2009.  Each quarter, the Company will determine the fair value of the warrants and record the expense related to the vested warrants.





Note 9 - Stockholders’ Equity





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





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


17





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





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





Stock Options





On December 3, 2007, the Board of Directors adopted the 2007 Stock Incentive Plan (the “Plan”) of CelLynx, Inc.  All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock awards, or other stock-based awards under the Plan.  The
Plan is administered by the Board.  The Board shall have authority to grant awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable.  Subject to certain adjustments, awards may be made under the Plan for up to 25,000,000 shares of common stock of the Company.  The Board shall establish the exercise price at the time each option is granted.  In July 2008, the Company amended to increase the
number of awards from 25,000,000 to 75,000,000.







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





Number of


Weighted Average


AggregateShares


Exercise Price


Intrinsic ValueOutstanding, October 11, 2005 (date of inception)


-Granted


5,660,682


$
0.015Forfeited


(4,245,512
)Exercised


-Outstanding, September 30, 2006


1,415,170


$
0.015Granted


-Canceled


-Exercised


-Outstanding at September 30, 2007


1,415,170


$
0.015Granted


52,486,693


$
0.075Canceled


-Exercised


-Outstanding at September 30, 2008


53,901,863


$
0.072Granted


5,146,081


$
0.135Canceled


(31,669,617
)

$
0.074Exercised


-Outstanding at June 30, 2009


27,378,327


$
0.044Exercisable at June 30, 2009


13,299,484


$
0.071


$
4,265,709





18


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





Options outstandingWeightedWeighted

AverageNumber


Average

RemainingRange of


Outstanding


Exercise

Contractual LifeExercise Price


June 30, 2009


Price

(Years)$
0.014



943,447


$
0.014

6.33$
0.016



471,723


$
0.016

6.51$
0.072



7,404,438


$
0.072

3.68$
0.079



13,412,638


$
0.079

2.56$
0.110



1,414,960


$
0.110

4.60$
0.120



2,032,520


$
0.120

4.54$
0.160



1,408,961


$
0.160

4.85$
0.180



48,000


$
0.180

4.45$
0.260



241,640


$
0.260

4.9327,378,327


$
0.043

4.00


The Company recognized $258,253 and $604,089 in stock-based compensation expense for the three months and nine months ended June 30, 2009, respectively.  For the three months and nine months ended June 30, 2008, the Company recognized $188,247 and $394,896 in stock-based compensation expense, respectively.  For
the period from October 11, 2005 (date of inception) to June 30, 2009, the Company recognized $2,641,758 in stock-based compensation expense.  The stock-based compensation expense related to the unvested options as of June 30, 2009, is $2,641,758, which will be recognized over the weighted average period of 4 years.





Warrants





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





The following table summarizes the warrant activity for the nine months ended June 30, 2009:





Number of
warrants issuedOutstanding, September 30, 2008


10,500,000Granted


5,785,000Cancelled


(10,500,000
)Exercised


-Outstanding, June 30,2009


5,785,000





19


Note 10 - Commitments and Contingencies





Operating Leases





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





The Company recorded rent expense of $13,724 and $57,325, for the three and nine months ended June 30, 2009, respectively.  The Company recorded $6,594 and $8,792, for the three and nine months ended June 30, 2008, respectively, and $70,513, for the period from October 11, 2005 (date of inception) to June 30, 2009.





Litigation





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





Note 11 - Subsequent Events





On July 1, 2009, the Company received $10,000 from an unrelated party for a subscription agreement at $0.20 per share for a total of 50,000 shares.





On July 1, 2009, the Company received $7,000 from an unrelated party for a subscription agreement at $0.20 per share for a total of 35,000 shares.





On July 3, 2009 the Company received $50,000 from an unrelated party for a subscription agreement at  $0.10 per share for a total of 500,000 shares.





On July 3, 2009 the Company received $40,000 from an unrelated party for a subscription agreement at  $0.20 per share for a total of 200,000 shares.  The un-related party can purchase up to 2.5 million shares.





The Company has performed an evaluation of subsequent events through August 14, 2009, which is the date the consolidated financial statements were issued.








20


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





Forward Looking Statements





Certain statements in the Management’s Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements
are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,”
“should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events, or otherwise.





As used in this Form 10-Q, unless the context requires otherwise, “we” or “us” or the “Company” or “CelLynx” means CelLynx Group, Inc. and our subsidiary.





Overview





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





Just prior to the closing of the share exchange transaction, on July 23, 2008, we raised $1,575,000 in a private placement by issuing 10,500,000 shares of our common stock and warrants to purchase 10,500,000 shares of our common stock to investors at an exercise price of $0.20 per share.   These warrants were
subsequently canceled in the 2nd fiscal quarter of 2009.





We have not generated any revenue since the commencement of our operations on October 11, 2005.  We have financed our operations primarily through proceeds from the issuance of common stock and convertible promissory notes.  At this time, we believe that our current cash position will not be sufficient
to meet our anticipated cash needs.  We will need to raise additional capital in order to remain operational beyond this point.





If we are unable to raise additional capital, we will be required to severely reduce, or even cease, our operations.





Critical Accounting Policies and Estimates





Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these consolidated financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.





21


While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements attached hereto as Exhibit 99.1, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis:





Fair Value of Financial Instruments





SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial instruments held by us. SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), adopted on January 1, 2008, defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the consolidated balance sheets for other current assets and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy
are defined as follows:





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





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





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





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





Use of Estimates





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





Income Taxes





Income taxes are provided based upon the liability method of accounting in accordance with SFAS No. 109, “Accounting for Income Taxes” and Financial Accounting Standards Board (“FASB”) Interpretation No. 48, (“FIN 48”) “Accounting for Uncertainty in Income Taxes.”  ,Deferred
income taxes are recognized for the tax effect of temporary differences between the basis of assets and liabilities for financial statement and income tax purposes.  Pursuant to SFAS No. 109, we are required to compute deferred income tax assets for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried
forward in future years.


22





Under FIN 48 a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on our consolidated financial statements.





Stock-Based Compensation





We account for our stock-based compensation for employees in accordance with SFAS No. 123R, "Share-Based Payment, an Amendment of Financial Accounting Standards Board Statement No. 123." We recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees
and non-employees.  We use the Black-Scholes option pricing model to determine the fair value of the options issued.





Shares Issued for Services





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





Intangible Assets





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





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





Plan of Operations





Overview





We are an early-stage producer of the next generation of cell phone boosters (also known as repeaters or amplifiers) for the small office, home office (SOHO) and vehicle.  This next generation product line, CelLynx 5BARzTM , uses our patent pending technology to create a single-piece plug ‘n
play unit that strengthens weak cellular signals to deliver higher quality signals for voice, data and video reception on cell phones and other cellular devices being used indoors or in vehicles.





We have developed a mobile “Universal Unit” designed primarily for use in vehicles, or for single-room coverage in the home or office that is presently going into commercialization with the initial mass production run scheduled for completion in July.  The Company recently received an order for 10,000 units
from a leading e-commerce marketer of cellular accessories. The Unit will produce up to 45 dB of gain offering higher performance than the competition within the interior of a vehicle cabin or single room, while minimizing the signal degrading effects of cabling.  Initially envisioned as a plug ‘n play mobile unit to be used in vehicles with a 12 volt cigarette lighter power adapter, the 5BARz Universal Unit has also proven highly effective for single-room coverage in a home or office. Accordingly,
we plan to introduce the 5BARz Universal Unit with a 110 volt power cord for indoor single-room use, as well as with an accessory portable battery pack that can be used virtually anywhere a weak signal exists. Using the 5BARz Universal Unit with Bluetooth® extends the effective coverage range to that of the Bluetooth® signal.    The Universal Unit is an adaptation of the SOHO Unit described below.





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We have recently completed a prototype SOHO Unit which delivers 45 decibel (dB) of gain in a Single Band PCS environment providing up to 1,500 square feet of indoor coverage.  We plan to commercialize this technology, with production and distribution scheduled to begin, in the first quarter of 2010. This unit measures
6.5 X 7.5 X 2.5 inches, weighs approximately one pound and does not require the installation of antennas or cables in order to function.  Most SOHO cellular amplifiers currently on the market require a receiving tower or antenna, usually placed in an attic or on a rooftop, and a transmitting tower or antenna to be placed at least 35 feet from the other antenna with each connected to the amplifier by cable.  Our patent pending technology is designed to eliminate the need to distance the receiving
and transmitting towers, allowing the two towers to be placed directly inside the amplifier, resulting in a more affordable, one piece unit sometimes referred to as ‘plug ‘n play’, i.e., requiring no installation other than plugging the unit into a power source. In order to optimize marketability, we are developing an improved model which is expected to operate in a dual band, PCS and Cellular, environment delivering 65 dB of gain thereby allowing for coverage of 2,500 to 3,000 square feet.
 This dual-band unit would work with all current wireless carriers except Nextel which operates on its own frequency. The PCS network is generally used by the older carriers such as AT&T at 850MHz while the newer carriers such as T-Mobile operate on the Cellular network at 1900 MHz.  Management is confident that all of the critical functions required for this dual-band unit have been identified and that their engineering team has the capability to complete development leading to commercialization.





Our product line is being manufactured by contract manufacturers located in Philippines, with whom CelLynx has established manufacturing and supply chain relationships.   These manufacturers allow us to capitalize on the full advantages of multiple manufacturing locations with a trained and experienced technical
work force, state of the art facilities and knowledge of all aspects of supply chain management, operational execution, global logistics and reverse logistics. The marketing and sales functions will be handled in house incorporating a multi-channel strategy that includes distribution partners, wireless service providers, retail outlets and international joint ventures.





Material Impact of Known Events on Liquidity





In July 2008, we entered into a distribution agreement with a distributor whereby the distributor proposed to establish a distribution network of our line of products in the territories, as defined, as well as to assist the international dealers in the promotion and marketing of our products.  Upon us delivering 200
units in the initial pilot run to the distributor pursuant to the distribution agreement ("Initial Roll Out") the distributor agreed to contribute $1 million in capital to us in order to maintain its distribution rights for our products.  In July 2009, we completed the shipment of the 200 units, which reflected the beginning of the commercialization process of supply chain efficiency and superior quality control during this initial pilot run, prior to ramping up to higher levels of production.  An
additional payment of $4 million is due and payable 90 days from commencement of Initial Roll Out.  Another $5 million is due and payable 180 days from commencement of Initial Roll Out.  There can be no assurance that the distributor will contribute the payments as described in the distribution agreement.





Results of Operations





Results of Operations for the Three Months Ended June 30, 2009 and 2008, respectively.





The following table sets forth our expenses (income) for the periods indicated:





Three months ended June 30,


Increase2009


2008


(Decrease)Research and development

$
78,393


$
65,101


$
13,292General and administrative

$
1,302,290


$
346,584


$
955,706Interest and financing costs

$
36,841


$
13,114


$
23,727Change in fair value of accrued beneficial conversion liability

$
-


$
3,673


$
(3,673
)


24





During the three months ended June 30, 2009, we incurred $78,393 of research and development expenses compared to $65,101 for the three months ended June 30, 2008.  Research and development expenses relate to our ongoing development and testing of our cell phone boosters.  Our research and development
costs were higher in 2009 compared to 2008 due to increase in personnel costs, consultant costs and materials.  We expect our research and development costs to increase as we continue to grow and develop our products.





During the three months ended June 30, 2009, we incurred $1,302,290 of general and administrative expenses, compared to $346,584 incurred during the three months ended June 30, 2008.  The increase is primarily due to an increase in professional fees and legal fees as a result of the Company going public in July
of 2008.  In addition, more options have been issued resulting in increased share based compensation expenses.





During the three months ended June 30, 2009, we incurred $36,841 of non-operating expense, compared to $16,754 of non-operating income during the three months ended June 30, 2008.  The increase in interest and financing costs was due to an increase in convertible notes and amortization of debt discounts.  During
the three months ended June 30, 2009, we did not recognized a change in the accrued beneficial conversion liability as it was subsequently reclassified to equity in November 2008.





Results of Operations for the Nine months Ended June 30, 2009 and 2008, respectively.





The following table sets forth our expenses (income) for the periods indicated:





Nine months ended June 30,


Increase2009


2008


(Decrease)Research and development

$
290,492


$
118,169


$
172,323General and administrative

$
2,653,517


$
1,015,568


$
1,637,949Interest and financing costs

$
141,968


$
361,827


$
(219,859
)Change in fair value of accrued beneficial conversion liability

$
251,410


$
33,414


$
217,996Change in fair value of accrued warrant liability

$
419,571


$
-


$
419,571





During the nine months ended June 30, 2009, we incurred $290,492 of research and development expenses compared to $118,169 for the nine months ended June 30, 2008.  Research and development expenses relate to our ongoing development and testing of our cell phone boosters.  Our research and development
costs were higher in 2009 compared to 2008 due to increase in personnel costs, consultant costs and materials.  We expect our research and development costs to increase as we continue to grow and develop our products.





During the nine months ended June 30, 2009, we incurred $2,653,517 of general and administrative expenses, compared to $1,015,568 incurred during the nine months ended June 30, 2008.  The increase is primarily due professional fees and legal fees related to the Company going public in July of 2008.  In
addition, salaries, payroll taxes and insurance expense had increased as a result of hiring more employees.





During the nine months ended June 30, 2009, we incurred $309,168 of non-operating expense, compared to $328,380 incurred during the nine months ended June 30, 2008.  The decrease in interest and financing costs was due to a non-cash financing costs of $328,630 during the nine months ended June 30, 2008 offset by
an increase in convertible notes and amortization debt discounts for the nine months ended June 30, 2009.  The beneficial conversion liability had a greater increase in value for the nine months ended June 30, 2009 compared to 2008.  The fair value of the warrants that were issued on July 23, 2008 had increased by $419,571 for the nine months ended June 30, 2009.


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Liquidity and Capital Resources





Financial Condition





As of  June 30, 2009, we had a working capital deficit of $799,253, compared to $5,301,132 as of September 30, 2008   The decrease in working capital deficit is due to the reclassification of the share-based compensation liability, accrued beneficial conversion liability and accrued warrant liability
to additional paid-in capital on November 7, 2008, due to the increase of our authorized shares to 400,000,000, which provided sufficient shares to cover the potential conversion of the options, warrants and the convertible promissory notes.





For the three and nine months ended June 30, 2009, we incurred net losses of $1,417,524 and $3,253,177, respectively, and for the three and nine months ended June 30, 2008, we incurred net losses of $428,439 and $1,462,117, respectively.  As of June 30, 2009 and September 30, 2008, we had deficit accumulated during
the development stage of $10,948,625 and $7,695,448, respectively.





The report of our independent registered public accounting firm for the fiscal year ended September 30, 2008 states that due to our net operating cash flow deficits and the deficit accumulated during the development stage,  there is a substantial doubt about our ability to continue as a going concern.





Capital Resources





During the nine months ended June 30, 2009, we received approximately $143,000 from the issuance of convertible promissory notes.  We also entered into a Securities Purchase Agreement on April 23, 2009 with four related parties.  Pursuant to the Securities Agreement, we agreed to sell and issue 2,785,000
shares of our common stock and warrants to purchase 2,785,000 shares of common stock at $0.10 per share for an aggregate purchase price of $278,500 and an additional 100,000 shares at $0.10 per share for $100,000.





We believe that our current cash, anticipated cash flow from operations, and net proceeds from the private placement financing will not be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures. We will need to raise additional capital in order to remain operational
beyond this point.   To the extent it becomes necessary to raise additional cash in the future, we may seek to raise it through the sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or loans, issuance of common stock or a combination of the foregoing. We currently do not have any binding commitments for, or readily available sources of, additional financing. We cannot provide any assurances that we will be able to secure the additional cash or working
capital we may require in order to continue our operations, either now or in the future.





Contractual Obligations and Off-Balance Sheet Arrangements





Contractual Obligations





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





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





Contractual obligation

Total


Less than
1 year


1-3 yearsNote Payable


362,356



100,000



262,356Stockholder notes


103,000



103,000



-Operating lease


82,344



82,344



-547,700



285,344



262,356





Off-Balance Sheet Arrangements





We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our financial statements.  Furthermore,
we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.





ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not Applicable.





ITEM 4.     CONTROLS AND PROCEDURES.





Evaluation of Disclosure Controls and Procedures





Regulations under the Securities Exchange Act of 1934 (the "Exchange Act") require public companies to maintain "disclosure controls and procedures," which are defined to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations, as of the Evaluation Date, our CEO and CFO believe that:





(i) our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated
and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure; and





(ii) our disclosure controls and procedures are not effective.





Changes in Internal Control over Financial Reporting





There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial
reporting.


27





PART II - OTHER INFORMATION





ITEM 1.LEGAL PROCEEDINGS





We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material
interest adverse to our company.





ITEM 1A.       RISK FACTORS





Not applicable.





ITEM 2.         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM 3.         DEFAULTS UPON SENIOR SECURITIES





None.





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


None.





ITEM 5.         OTHER INFORMATION





(a)
None.





(b)
There were no changes to the procedures by which security holders may recommend nominees to our board of directors.





ITEM 6.          EXHIBITS





Exhibit
Number

Description31.1

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

Section 302 Certification by the Corporation’s Chief Financial Officer *32.1

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

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


__________________


* Filed Herewith.





28





SIGNATURES





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





CELLYNX GROUP, INC.(Registrant)Date: August 14, 2009
By:
/s/ Daniel R. AshDaniel R. AshChief Executive Officer